The Rise of Online Fashion Re-Commerce

If I told you there is $1,500 hidden somewhere in your apartment, where would you look for that? In a safety box somewhere in your bedroom? Under your mattress? You probably wouldn’t look in your…closet! And that would be a major mistake! We all have disastrous clothing habits. We buy way too many clothes and wear only a fraction of what we own. We get bored easily with items and don’t give them the attention they deserve. What about this Armani jacket that you wore only once? Don’t you think there is a better place for it that in a dusty bag in your cellar?

Hopefully, this waste is shortly coming to an end. The rise of online clothing re-commerce businesses is about to change forever the way we dress. The stars are now aligned for these businesses to shine, supported by favourable tailwinds. The Y-Generation has realized that we don’t need to own everything. Younger crowds are seeing the benefits of spending more efficiently. You don’t need to own a $500 Herver Leger dress. You can rent it on Rent the Runway for $150 for that one week-end where you need it. You don’t need to own all the songs you listen to. You can just get Spotify for $10 a month and listen to more songs than you would have ever bought for the price of one album.

Collaborative consumption in the clothing space is on the rise. Three types of business models have emerged. On the one hand, companies like Poshmark, Threadflip and 99dresses have rolled out marketplaces. They connect buyers and sellers and charge a transaction fee. They have understood the pain points of Ebay and aim to recreate an “Ebay for fashion”. By focusing solely on this vertical, these startups can propose a unique experience to their customers and create a community. On the other hand, companies like Thredup have adopted a merchant business model. They acquire items from sellers and resell them online. By paying sellers upfront, they can attract those customers who value time and certainty over profit. The third model is a hybrid one. Companies like Vestiaire Collective or The Real Real offer concierge services. While these are still marketplaces, they curate collections very thoroughly. They also take care of photographing items and shipping.

Each model has its pros and cons. Marketplaces have attractive economics but need scale and they can get confusing. Merchant models are greedy in capital and raise logistical complexities, but sellers love them because they save time. Hybrid models do not solve for the uncertainty and target mostly high end luxury. It is not yet clear what model or what companies will win this space. But what is clear though is that whoever you are, there is somewhere an online company that can help you monetize your closet easily and efficiently. So what are you waiting for?

 


2 Comments

  1. Ah have you checked out Twice? Also, Germany's Kleiderkreisel this summer closed $6.5 mm from Accel. I see a lot of these sharing "gently-used" clothes, but am looking forward to one taking off. Twice is interesting in that it takes a bag-full of your clothes, picks off the nicer pieces and professionally photographs them. Costs more to operate that way but perhaps you attract more sellers who can trust the used clothing.

  2. Jillian Tellez

    It will be interesting to see how the power balances between rental services such as Rent the Runway and the services you mentioned above. I imagine that if Rent the Runway continues to be as popular as it is, it would entice people to sell more of their goods, but in the long run, wouldn't this same trend prevent the mentioned business models from selling goods (as people would prefer to rent versus own)?

    Regardless, I'd love to be able to free up closet space and get some extra cash if there is an easy way to do it!