First or Second Hand? The New Emerging Space in Venture Capital

By Matt Oriente ‘23 Director of Membership

If someone asked you to name an emerging space in venture capital, your answer might include popular industries like fintech, cybersecurity, or biotech. While each of these showcase innovations, demonstrate growth, and are capturing rising interest from investors, an answer that probably isn’t considered is one with a relatively simple business model and standard traditional product: the online secondhand apparel market.

By definition, secondhand apparel is any piece of clothing that is resold by the original user. The attire could be high quality, derive from a designer brand, worn numerous times or never at all, or even tell a story. Regardless of origin, secondhand apparel always continues to hold monetary value.

The secondhand apparel market is growing rapidly. In 2021, the global market value of secondhand and resale apparel was estimated to be worth $96 billion. This value is projected to rise rapidly in the coming years, more than doubling in size from 2021 to 2025, before reaching a value of $218 billion in 2026. This growth primarily spurs from online sales, as e-commerce has transformed the entire shopping experience. More consumers now prefer to buy items online by utilizing advantages such as home delivery services, wider array of products, and easy subscription models.

Additionally, the COVID-19 pandemic was a main driver of online secondhand apparel from both a seller and buyer perspective. As people were spending more time indoors, they had the time to go through and organize their wardrobes. Furthermore, shoppers were prevented from traveling to in-person stores and had to resort to online options. According to a McKinsey survey conducted in Germany and the United Kingdom in April 2020, approximately 48 percent of respondents from Gen Z and Millennial generations expressed their intent to buy more secondhand clothing after the coronavirus pandemic.

Online platforms for secondhand apparel have already made significant headwinds in the venture capital ecosystem, as seen in the table below. Furthermore, it is important to note the amount of later stage funding rounds, as well as IPO activity, proving there is real opportunity emerging.

List of Online Secondhand Market Apparel Companies Recent Deal Activity

Source: Pitchbook

This online secondhand apparel market, sometimes referred to as “re-commerce”, is expected to comprise 18% of the total clothing industry by 2031. Over the last couple of years, this recent activity has led to a projected 14.8% CAGR between 2022–2032 in the secondhand apparel market amid technological developments in the fashion industry and surges in start-ups in this field.

These trends translate to general retail beyond clothing and apparel. According to Pitchbook, looking at the largest retail VC deals (by deal size) since 2008, C2C Letgo (an online platform where sellers can post anything for local buyers to purchase) is tied for 4th at $500 million and was recently acquired in 2020 by OfferUp. Marketplace app Depop has over 15 million active users and over 140,000 listings go live every day. These easy-to-use platforms now allow anyone to make money from home on clothing, but also from basic household goods such as furniture, and kitchenware. While e-Bay has been around for decades, new platforms with centered focuses are arising, whether it be more upscale brands or platforms directly targeting women’s clothing.

Andrea Hippeau, a principal at Lerer Hippeau VC Fund in NYC highlights the uniqueness of this emerging space, “you could go straight to a manufacturer and then straight to a consumer and cut out the middleman and offer a superior product at a lower price, with a really great brand and consumer experience.” The interesting aspect of re-commerce is that consumers can still exhibit strong brand loyalty without purchasing directly from the brand. This allows consumers to be attached to their favorite names, but at a much more affordable price. In fact, Tradesy (an online peer-to-peer resale marketplace for buying and selling luxury women’s fashion) recently published an analysis that showed the average household income for a Tradesy customer was $65,000.

Price does has a major influence in these consumer trends, especially in current inflationary times. In a new ThredUp (an online consignment and thrift store for high quality secondhand clothes) survey, the company stated that nearly half of overall consumers said they are reducing their clothing spending, and that 58% of shoppers say that resale has helped them in some way during a time of inflation. That latter figure can come from both the seller perspective (46% of Gen Z and millennial consumer consider the potential resale value of an item before purchasing it) and the buyer perspective (62% of Gen Z and millennial consumers said they look for items secondhand before buying new).

These trends do not just end in the C2C outlet, however. Brick-and-mortar stores and even major retailers have already demonstrated adoption in offering secondhand products. J.C. Penny and Macy’s have announced a pilot program that will reserve sections of their stores for resale giant ThredUp. National thrift giant Goodwill, even capitalizes on an online presence, growing from $216.1 million in sales in 2020 to $302 million in 2021. Additionally, the growing app Thrilling caters directly to smaller independent brick-and-mortar thrift stores as a way of offering their products online. Now, the platform gives over 300 store owners the opportunity to sell their apparel (on average) 1,400 miles away. Founder Shilla Kim-Parker pitches her idea as a solution for local store owners transitioning to e-commerce and as a way for buyers to seek a more sustainable way of shopping.

Whether these trends are backed by conscious consumerism, eco-friendly shopping habits, or even tactics to fight off the pressures of inflation, the online secondhand market vertical is showing no signs of slowing down. In an age of modern consumerism, it makes sense to be able to find a thrift gem in the palm of your hand miles away from a physical store.

Personally, I was first introduced to this topic through the app Depop. One of my friends told me of a recent order they completed, and I instantly became interested. As a consumer, I’m always looking for the lowest prices; secondhand markets provide lower costs and a more sustainable alternative to the fast fashion industry. Like thrifting, finding an attractive investment deal might take time, but once you find one, it’s truly gratifying.

Matt Oriente is studying Information System & Business Analytics with a dual major in Sustainability. On campus, he is a co-founder for the start-up HydroPhos Solutions, Lead Coach in the Changemaker Fellowship, a student member on the Committee for Investor Responsibility, and plays saxophone in the UNH 3:00 Jazz Band. Matt has interned with Impax Asset Management, Lonza Biologics, and Prime Buchholz LLC. Most recently, Matt worked with Ironwood Investment Management in Boston as a Summer Associate assisting with financial and ESG research. Matt joined the Fund to gain a greater insight into the world of private equity and startups.

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