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ThredUp, whose second-hand goods will start appearing at Macys and JCPenney, just raised a bundle

ThredUp, the 10-year-old fashion resale marketplace, has a lot of big news to boast about lately. For starters, the company just closed on $100 million in fresh funding from an investor syndicate that includes Park West Asset Management, Irving Investors and earlier backers Goldman Sachs Investment Partners, Upfront Ventures, Highland Capital Partners and Redpoint Ventures.
The round brings thredUPs total capital raised to more than $300 million, including a previously undisclosed $75 million investment that it sewed up last year.
A bigger deal for the company, literally and figuratively, is a new resale platform that both Macys and JCPenney are beginning to test out, wherein ThedUp will be sending the stores clothing that they will process through their own point-of-sale systems, while trying to up-sell customers on jewelry, shoes, and other accessories.
It says a lot that traditional retailers are coming to see gently used items as a potential revenue stream for themselves, and little wonder given the size of the resale market, estimated to be a $24 billion market currently and projected to become a $51 billion market by 2023.
We talked yesterday with ThredUp founder and CEO James Reinhart to learn more about its tie-up with the two brands and to find out what else the startup is stitching together.
TC: Youve partnering with Macys and JCPenney. Did they approach you or is ThredUp out there pitching traditional retailers?
JR: I think [the two companies] have been thinking about resale for some time. Theyre trying to figure out how to best serve their customers. Meanwhile, weve been thinking about how we power resale for a broader set of partners, and there was a meeting of the minds six months ago
Were positioned now where we can do this really effectively in-store, so were starting with a pilot program in 30 to 40 stores, but we could scale to 300 or 400 stores if we wanted.
TC: How is this going to work, exactly, with these partners?
JR: We have the [software and logistics] architecture and the selection to put together carefully curated selections of clothing for particular stores, including the right assortment of brands and sizes, depending on where a Macys is located, for example. Macys then wraps a high-quality experience around [those goods]. Maybe its a dress, but they wrap a handbag and scarves and jewelry around the dress purchase. We feel [certain] that future consumers will buy new and used at the same time.
TC: Who is your demographic, and please dont say everyone.
JR: It is everyone. Its not a satisfying answer, but we sell 30,000 brands. We serve lots of luxury customers with brands like Louis Vuitton, but we also sell Old Navy. What unites customers across all brands is they want to find brands that they couldnt have afforded new; theyre trading up to brands that, full price, would have been too much, so Old Navy shoppers are [buying] Gap [whose shopper are buying] J. Crew and Theory and all the way up. Consistently, what we hear is [our marketplace] allows customers to swap out their wardrobes at higher rates than would be possible otherwise, and it feels to them like theyre doing in a more [environmentally] responsible way.
TC: What percentage of your shoppers are also consigning goods?
JR: We dont track that closely, but its typically about a third.
TC: Do you think your customers are buying higher-end goods with a mind toward selling them, to defray their overall cost? I know thats the thinking of CEO Julie Wainwright at [rival] The RealReal. Its all supposed to be a kind of virtuous circle of shopping.
JR: We like to talk about buying the handbag, then selling it, but plenty of people will also buy a second-hand Banana Republic sweater because its a value [and because] fashion is the second-most polluting industry on the planet.
TC: How far are you going to combat that pollution? Im just curious if youre in any way try to bolster the sale of hemp, versus maybe nylon, clothes for example.
JR: We arent driving material selection. Our thesis is: we want to stay out of the fashion business and instead ensure theres a responsible way for people to buy second hand.
TC: For people who havent used ThredUp, walk through the economics. How much of each sale does someone keep?
JR: On ThredUp, it isnt a uniform payment; it depends instead on the brand. On the luxury end, we pay [sellers] more than anyone else we pay up to 80 percent when we resell it. If its Gap or Banana Republic, you get maybe 10 or 15 or 20 percent based on the original price of the item.
TC: How would you describe your standards? What goes into the reject pile?
JR:We have high standards. Items have to be in like-new or gently used condition, and we reject more than half of what people send us. But i think theres probably more leeway for the Theorys and J.Crews of the world than if youre buying a Chanel dress.
TC: Unlike some of your rivals, you dont sell to men. Why not?
JR: Mens is a small market in secondhand. Men wear the same four colors blue, black, gray and brown so its not a big resale market. We do sell kids clothing, and thats a big part of our market.
TC: When Macys now sells a dress from ThredUp, how much will you see from that transaction?
JR: We cant share the details of the economics.
TC: How many people are now working for ThredUp?
JR: We have less than 200 in our corporate office in San Francisco, and 50 in Kiev, and then across four distribution centers in Phoenix; Mechanicsburg [Pa.]; Atlanta; and Chicago we have another 1,200 employees.
TC: Youve now raised a lot of money in the last year. How will it be used?
JR: On our resale platform [used by retailers like Macys] and on building our tech and operations and building new distribution centers to process more clothing. We cant get people to stop sending us stuff. [Laughs.]
TC: Before you go, whats the most under-appreciated aspect of your business?
JR: The logistics behind the scenes. I think for every great e-commerce business, there are incredible logistics [challenges to overcome] behind the scenes. People dont appreciate how hard that piece is, alongside the data. Were going to process our 100 millionth item by the end of this year. Thats a lot of data.
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