Trivia question: What’s the fastest growing segment of the retail sector?
The answer may surprise you…
It’s the resale market – where consumers buy used clothes that are selectively sorted, processed, and curated for sale by third-party platforms.
According to research from GlobalData Market, the resale market is expected to grow from $7 billion in 2019, to $36 billion by 2024, representing a compound annual growth rate of 39%.
Compare that to the historically average compound annual growth rate of all retail sales (about 4%), and you’re talking about enormous growth out of the resale market.
What’s powering this growth?
A generational shift.
For various reasons, today’s young consumers derive status from their experiences, their lifestyles, and their values – they do not derive status from their material belongings. So, unlike many of their parents, Millennial and Gen Z consumers don’t care about paying top-dollar for a brand-new handbag or pair of jeans.
They actually find it “cool” to go bargain shopping and snag a pair of quality jeans for $10. Frugality has, in a sense, become vogue.
That’s why the resale market is on fire. Young consumers love it!
According to a 2020 GlobalData survey, 30% of Millennials purchased secondhand in 2019. That number jumps to 40% for Gen Z consumers. Both of those rates are far higher than the rate for older generations.
Importantly, these younger cohorts are becoming a bigger and bigger part of the consumer class, and therefore, the overall number of resale shoppers is growing very quickly. The number of women who bought secondhand products in 2019 was 62 million, up more than 10% year-over-year.
This transition will continue to unfold over the next few years until, eventually, the consumer class comprises mostly Gen Z and Millennial shoppers who love resale shopping.
That’s why the time to invest in the burgeoning resale market is now. The future in this industry is very, very bright.
Today, we will show you how to play this resale retail megatrend. It’s by buying stock in a freshly public e-commerce company that operates the world’s largest used fashion marketplace – the Amazon (AMZN) for used fashion, if you will. If this company can sustain its early leadership in the booming resale market, then the sky is the limit for the brand new stock.
Consolidating a Messy Market and Creating an E-Commerce Behemoth
For a moment, think about how easy it is to buy new clothes. You have entire stores like Nordstrom (JWN) and websites (like Amazon) where clothes are easily sorted, curated, and organized for you, so that you can buy whatever you want, whenever you want, and however you want.
Now, think about how different the used clothes shopping process is from that…
You have thrift stores and discount racks, which are basically just a hodge-podge of clothes that are not sorted, not curated, and not organized in any manner. And forget any e-commerce website – that just doesn’t exist for mass-market used fashion.
Well, actually, it used to not exist… until ThredUp (TDUP) came around and completely changed the game.
ThredUp has created the world’s largest mass-market used apparel e-retail marketplace.
It’s a win-win, two-sided marketplace.
On one side, ThredUp buys used clothes from consumers. If your closet’s anything like mine, it’s full of clothes you haven’t worn in years. ThredUp allows to put all those clothes into a box, send them to the company, and then get paid for the ones that ThredUp deems are “re-sellable.”
That’s a huge win for sellers, because it allows folks to monetize assets that otherwise would go unused or end up in the trash.
On the other side, ThredUp sells those used clothes back to consumers through a centralized e-commerce marketplace that looks like the Amazon for used fashion.
The key here is that one man’s trash is another man’s treasure – which, in practice, means ThredUp can buy a pair of shorts from John for dirt-cheap (because John has new shorts and never wears those old shorts anymore), and then sell those same shorts to Alex for a lot more (because Alex doesn’t have new shorts and, to him, these used shorts are quasi-new).
This creates a winning dynamic for buyers, because it allows consumers to buy things which basically seem new… for hugely discounted prices… all while ThredUp still makes money in the process.
We believe this online marketplace for used clothes has enormous potential.
We are also exceptionally bullish on ThredUp’s durable competitive advantages in this space, including:
- Data (the company has very strong data-driven pricing algorithms to maximize the delta between their buy and sell prices).
- Software (the company has built its software from the ground-up to tackle the unique “single SKU” challenges with used retail).
- Automation (the company has developed technology processes to automate multiple parts of the process, including quality checks).
- Inventory (the company lists more than 280,000 new items per week on its platform).
The company is still its early phases. ThredUp went public just two months ago… is worth just $1.7 billion… and has an unaided brand awareness of merely 13%…
So, the opportunity for growth here is very large.
And, with its durable competitive advantages, ThredUp appears optimally positioned to execute on its huge opportunity, and one day turn into a retail giant.
Needless to say, if you’re bullish on e-commerce and the resale market, it may be time for you to take a position in ThredUp stock today.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.