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Supply Chain Crisis an opportunity for Second Hand Retailers

Supply Chain Crisis an opportunity for Second Hand Retailers

The change in outlook towards second hand clothing will pave enormous growth opportunity for companies who started operations in the segment.

The Covid era brought substantial changes in the buying pattern.

While on one hand consumers became cautious about overspending on fashion and dumping it later; on the other sustainable clothing has become a big segment.

The holiday season has already started and due to shortage of merchandise and rising consciousness of consumers second hand clothing demand seems to be on rise.

The resale industry is expected to grow 11 times faster than the broader retail clothing sector in the period to 2025, according to Global Data, driven also by a growing awareness of fast fashion’s environmental toll.

Newly listed companies such as Poshmark Inc (POSH.O) and ThredUp Inc (TDUP.O) are starting to scoop up smaller firms to fend off competition from deep-pocketed apparel brands such as Levi Strauss & Co (LEVI.N) and Urban Outfitters Inc (URBN.O), which have launched their own thrifting businesses.

Volume growth is essential for second-hand clothing companies to turn in steady profits in an industry notorious for tight margins and inconsistent inventory, analysts say.

That could make the industry a magnet for deals as companies look to grow quickly to capitalize on a boom that industry estimates suggest could more than double the size of the U.S. second-hand apparel market to $76.4 billion by 2025.

Poshmark, a platform for peer-to-peer sales that takes a 20% cut of each transaction, made its first acquisition earlier this month, of a company that authenticates sneakers.

It is eyeing more takeover deals, especially in overseas markets, as it looks to put more than $500 million in cash on its balance sheet to work.

Rival ThredUp bought European thrift site Remix Global in July in a bid to expand beyond U.S. shores, an acquisition it said would “springboard” further expansion in Europe.

Etsy Inc (ETSY.O) has also bought British secondhand fashion app Depop for $1.6 billion.

Richard Branson-backed resale marketplace Tradesy, which raised $67 million in a funding round earlier this year, expects shortages of new apparel to translate into strong holiday sales.

“I can’t imagine any large clothing or fashion player not either partnering with or investing in or acquiring a successful (second-hand apparel) startup platform,” said Jon Copestake, a senior analyst at EY’s Global Consumer group.

Levi Strauss launched its own thrift website “Levi’s Secondhand” last year where it sells authenticated used denim it sources in large part from its own customers.

Other apparel companies such as Urban Outfitters are opting for a peer-to-peer marketplace, where the company connects buyers and sellers of used clothes and collects a 20% commission on sales.

With margins slim, beefing up sales volume counts.

Urban Outfitters says focusing on a peer-to-peer model, in which a company provides a platform for deals between individuals rather than involving itself directly in sales, is key to making its business model work.

 

 

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