With $175 Million Infusion, Secondhand Fashion Giant ThredUp Plots Its Future

That includes ThredUp, the online consignment store founded 10 years ago that just raised $175 million led by Park West Asset Management and Irving Investors. As part of its funding round, ThredUp plans to officially roll out its resale-as-a-service (RAAS) platform, as well as continue to grow its distribution centers and further invest in its marketplace.

By ThredUp’s assessment, the secondhand market is expected to reach $51 billion in sales over the next four years, and The RealReal’s shares skyrocketed during its IPO debut, making it a burgeoning time for secondhand fashion—even though traditional resale platforms like eBay have been around for years.

“What you’re seeing is a broad trend of consumers shifting their spend [and] some of those dollars going into resale,” said James Reinhart, CEO and founder of ThredUp. “The category’s growing so fast, and it’s growing 20 times faster than traditional resale. The opportunity in resale is so enormous.”

How ThredUp is looking to expand its resale strategy

The first major initiative ThredUp is putting forth will be its RAAS platform, which will allow retailers to sell ThredUp items in their stores and websites, as well as offering the company’s Clean Out Kits, bags that consumers can use to send old clothes to ThredUp in exchange for credit to a store of their choosing.

Currently, Macy’s is working with ThredUp to bring secondhand items to 40 of its stores, while JCPenney plans to stock its products in 30 locations. The Clean Out Kit and store credit will be offered through digitally native brands like Cuyana and Reformation to start, according to ThredUp.

“Every retailer is trying to figure out what their strategy is for secondhand,” Reinhart said.

That includes determining what to do with all that data. Right now, ThredUp gets all the data from these sales and and store credit offerings, but declined to disclose if or how the company shares it with retail partners. And while the RAAS platform currently appears siloed, Reinhart said retailers can use different parts of it and aren’t forced to choose between reselling the clothes in store or having customers send clothes back to ThredUp to receive store credit.

“Our goal was to create a RAAS platform as a solution for brands and retailers to participate in a bunch of different ways,” he said. “We really hope that what we’re building will allow those retailers to do that in an elegant way.”

However, for companies selling secondhand items in-store, Reinhart said it’ll look like a pop-up shop, similar to how Macy’s is approaching its Story experiment and The Market at Macy’s. These collections will be curated to differentiate what users see online on ThredUp’s website or app, according to Reinhart. So far, he said, the initial results are “looking positive,” but declined to share concrete numbers.

“Our job—and Macy’s and JCPenney’s job—is to educate the customer that there’s a fresh new selection all the time, and I think that story really resonates with customers,” he added. “We’ll see how the media plans shake out, but we feel very optimistic that the customer’s going to like it.”

The concept looks like a win for ThredUp, said Forrester analyst Sucharita Kodali. These pop-ups remove the process of trying to sell products online—and gives the company a storefront—but ThredUp will need to present items that are “better value or more aspirational than what is normally at JCPenney or Macy’s.” And sorting through secondhand clothing can be time-consuming.

“There are shoppers who like looking through assorted selections of onesies, and there are those who find it extremely tiresome,” Kodali said. 

In the meantime, ThredUp is adding a fourth processing center and taking a page from Amazon’s playbook to build out more fulfillment centers in order to scale, Reinhart said. And while competitors including Poshmark are rumored to be filing for an IPO soon, Reinhart said there’s plenty of room for everyone—especially as the country readies for a recession and continues to engage in tariff wars with China.