how-does-vinted-make-money

How Does Vinted Make Money? Vinted Business Model In A Nutshell

Vinted is an online shopping marketplace with a strong secondhand component. The company makes money via its buyer protection service. The buyer pays a fee to Vinted in exchange for services like customer support, insurance, and tracked shipping; Shipping costs; Wardrobe Spotlight (helping users boost the visibility of their items). And Bumping listed items.

Origin Story

Vinted is an online community marketplace headquartered in Vilnius, Lithuania.

The platform was created by Milda Mitkute and Justas Janauskas in 2008 during the prototype testing of a website where women could trade clothing.

The need for a prototype arose after Mitkute found herself with too many clothes while trying to move house.

Over a few drinks in a bar, Mitkute and Janauskas discussed the creation of a website where users could buy and sell their pre-loved fashion items.

Janauskas was initially skeptical that the idea would be successful, but after consulting a few female friends, the software expert agreed to take part in what was then a hobby project.

After launch, Vinted started to grow organically with the co-founders having to do very little marketing

Expansion plans for the platform began one night when Janauskas was coding while hosting a couch-surfing guest in his home.

The guest, a German from Munich named Sophie Utikal, pressed Janauskas for more details about the business.

After becoming passionate about the potential of Vinted, Utikal proposed that it expand into Germany.

Utikal took care of the advertising and promotional efforts, while Janauskas registered a German domain name and worked on platform localization.

The site now operates in Germany as Kleiderkreisel and, like its counterpart in Lithuania, grew organically through word-of-mouth.

Angel investment

After repeating the process in the Czech Republic, Vinted started to attract the attention of investors.

One of these who left a lasting impression on Janauskas was Lithuanian angel investor Mantas Mikuckas.

In an interview with Tech.eu, he noted that “We were really on the same page in terms of wanting to grow Vinted globally – and not just into a local/national platform for classifieds, which most other investors were interested in.”

After securing capital from Mikuckas, Vinted professionalized its activities, employing extra staff and paying more attention to social media and marketing.

In January 2013, the company raised a further €5.2 million from Accel to fund its expansion efforts and product development.

That same year, Mikuckas joined Vinted as its COO.

United States expansion and brush with bankruptcy

In 2015, Vinted announced a €25 million Series C funding round led by German media group Hubert Burda.

This was used to expand into the United States and then into the United Kingdom. By the following year, the platform boasted 12 million users in 11 different countries.

Like many companies that expand too fast, too soon, Vinted burned through most of its cash and faced potential bankruptcy in 2016.

Strategy consultant and eventual Vinted CEO Thomas Plantenga was brought in to steady the ship, with the company reducing its overseas presence and instead choosing to focus on the core markets of France and Germany.

Vinted’s core platform gave users the ability to buy, sell, and swap clothing or accessories in 15 countries. According to the company, it now has a community of around 50 million men and women.

Expansion

In May 2022, Vinted announced that it would be expanding the platform with two additional categories:

  1. Pets – incorporating various subcategories for dog, cat, fish, bird, and reptile accessories. Some of the most popular items include clothing, collars, leads, beds, toys, travel carriers, and aquariums.
  2. Entertainment – featuring movies, musical articles, books, video game consoles, video games, and a “Retrogaming” subcategory with board games, puzzles, skill games, and tile games.

In addition to giving users more opportunities to sell used items, the move was also seen as a way for Vinted to promote sustainable consumption habits and take advantage of the increase in pet ownership in some parts of Europe.

Sales of second-hand items have also increased because of record inflation across much of the world coupled with high energy prices.

Vinted revenue generation

Vinted revenue generation used to be reliant on charging seller fees for every completed transaction.

However, the company has moved away from charging consumers to list or sell their clothing items. It now makes money in a few different ways that are explained below.

Buyer protection/service fee

The buyer pays a buyer protection fee to Vinted in exchange for services that include:

  • Purchase protection – Vinted will refund buyers if an item arrives damaged, differs significantly from the product description, or does not arrive at all. Refunds will be offered provided the buyer informs the company within 2 days of the item being marked as ‘delivered’.
  • Fraud protection – Vinted’s fraud protection ensures no malicious actor can make unauthorized purchase on a buyer’s behalf. In the company’s words, “we put an extra layer of safety to your purchases”, which means Vintedwill check transactions at random with purchase verification measures.
  • Customer support – the company’s customer support team is always available to help buyers with disputes and other issues.

The fee for these services is 5% of the item price (excluding taxes and postage cost) plus an additional fixed amount of $0.70.

It is important to note that this fee is a mandatory charge to protect the integrity of the Vinted payment process.

Shipping costs

The buyer also bears the cost of shipping, with prices dependent upon the size of the package and the type of courier service used.

Vinted passes the freight cost to the buyer and likely makes no money from the arrangement.

However, some believe it turns a profit because it can ship in bulk and receive a discounted price from the courier.

Nevertheless, in Canada for example, home deliveries are handled by Canada Post by default, but buyers can also choose from other options should they so desire.

In addition to increased flexibility, these options may reduce shipping costs in some instances.

Indeed, parcels delivered to a local drop-off shop or locker are likely to be markedly cheaper than home delivery.

Wardrobe Spotlight (UK)

Wardrobe Spotlight is a feature unique to Vinted UK, helping users boost the visibility of their items in the marketplace.

For a full week, Vinted customers can have items from their wardrobe shown in dedicated spots in the news feed of other members. These members will also have easy access to the rest of the seller’s range of items.

This extra visibility is also targeted. In other words, it will be shown to members with similar body sizes and brand preferences.

Vinted charge £6.95 for the service and to be eligible to participate, users must have 5 or more items for sale for the duration of the seven-day period in which Wardrobe Spotlight is enabled.

Bumping listed items

Similar to Wardrobe Spotlight, users can purchase a bumping service to get their items to appear in the news feed or search results of other members.

This feature is well suited to clothes from desirable brands that are in good condition and can attract a premium.

The bumping service occurs once a day or until the item is sold, with users able to choose between a 3-day and 7-day calendar period.

When users bump an item, it is shown to more users in their news feed and also in catalog search results. 

The visibility of the bump itself can be adjusted according to various criteria such as clothing type, size, and the specific brands other Vinted members follow on the platform.

Vinted charges $0.95 per item for a three-day bump in the United States.

Third-party advertising

As the largest online marketplace devoted to online pre-loved fashion, Vinted is attractive to advertisers who want to take advantage of significant levels of unique traffic across the company’s app and web-based presence.

Interested third parties can register for Vinted’s self-serve platform where they can create and organize their ad campaigns.

Those wanting to learn more about ad placements and pricing are encouraged to email the company to discuss their options.

Who owns Vinted?

Vinted’s ownership status is not publicly disclosed. However, various firms have taken equity stakes in the company across a total of seven funding rounds to date.

These include:

  • EQT Growth.
  • Accel.
  • Burda Principal Investments.
  • Insight Partners.
  • Lightspeed Venture Partners, and
  • Sprints Capital Management.

Reports also suggest that co-founder Milda Mitkute owns a significant share of the company.

Vinted vs. Depop

As we saw, Vinted is an online marketplace where users can buy, sell, or even exchange new and second-hand clothing and accessories.

The company became Lithuania’s first tech unicorn in 2019 and is now available in 16 countries such as Spain, France, Germany, Austria, Slovakia, and Poland.

Depop instead, is a P2P social eCommerce company where users buy and sell predominantly used and vintage fashion items.

It was founded in Italy in 2011 and now has a presence in the United States, United Kingdom, Australia, and New Zealand.

how-does-depop-make-money
Depop is a peer-to-peer shopping app founded by Simon Beckerman in 2011 at the Italian technological incubator and start-up center H-FARM. Depop experienced tremendous growth in the following years, thanks largely to word-of-mouth advertising and social sharing. The platform now boasts more than 21 million users. Marketplace giant Etsy has plans to acquire Depop in the third quarter of 2021 for a cash deal worth $1.625 billion.

Understanding the difference between Vinted and Depop

At first glance, it appears there is little difference between Vinted and Depop.

Both provide basically the same services, but the two platforms have an approach that differs in a few key areas.

Revenue generation and fees

Vinted does not charge sellers to list items in its marketplace, with buyers required to pay a buyer protection fee and cover the cost of shipping.

As a consequence, Vinted buyers expect sellers to offer a lower price for items since they are the ones wearing the costs.

Depop sellers, on the other hand, are charged a fee that equates to 10% of each sale.

This money is used to provide buyer and seller protection and pay the company’s employees.

Since Depop payments are handled by PayPal, some sellers are also charged a PayPal fee.

How it works

Depop’s marketplace feels more like a social media app where buyers scroll through a feed as they would on Instagram.

With a high discoverability factor on the platform, sellers have access to a broader audience and buyers will not realize they needed a particular item until stumbling across it.

Depop also encourages sellers to create professional offers and is thus better suited to small businesses.

Vinted’s marketplace is not as aesthetically pleasing or familiar as Depop’s, but this is not to say that it isn’t effective.

The platform has a much smaller list of available categories for sellers and instead focuses on making the buyer experience smooth and efficient.

For these reasons, Vinted is more suited to individual sellers who are less worried about making a profit.

Both Vinted and Depop reward sellers with more sales if they engage with their respective platforms.

In other words, the more sellers like items, follow other users, and list products for sale, the more visible they will become and increase their earning potential.

Strategy

There are also differences in strategy between the two platforms.

Depop is skewed toward vintage fashion items with “cool” or “unique” looks that appeal to its mostly younger and trendier target audience. It is mostly active in the United States.

Conversely, the Vinted marketplace targets consumers who desire a place to sell or swap their preloved items.

As a general rule, Vinted’s audience tends to be older when compared to Depop. Vinted also has more international reach than Depop with a strong European focus.

Connecting the dots on differences between Vinted and Depop

  • At first glance, there appears to be little difference between Vinted and Depop. Both provide basically the same services, but the two platforms do vary in a few key areas.
  • Vinted does not charge sellers to list items in its marketplace, with buyers required to cover shipping and pay a small buyer protection fee. Conversely, Depop charges sellers a fee worth 10% of the total sale.
  • Depop’s marketplace is more akin to a social app such as Instagram where users can scroll through a feed and discover new items. While it is more expensive to sell on Depop, the platform is better suited to small business owners than Vinted because of its broader reach and extra product categories.

Key takeaways:

  • Vinted is an online community marketplace founded in Vilnius, Lithuania, in 2008. The idea for the platform came when founder Milda Mitkute needed to offload excess clothing during the process of moving house.
  • Vinted does not charge its users for listing or even selling their unwanted items. Instead, their revenue generation is dependent on buyers who must pay all of the transaction and shipping costs.
  • Vinted also makes money with its Wardrobe Spotlight service. For a relatively small fee, users can pay to have their listings made more visible in the news feeds or search results of buyers.

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Kering Group Business Model

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Kering Group follows a multi-brand business model strategy, where the central holding helps the brands and Houses part of its portfolio to leverage on economies of scale while creating synergies among them. At the same time, those brands are run independently. Kering is today a global luxury brand which made over €15 billion in 2017 based on this multi-brand strategy. Within Kering group there are brands like Gucci, Bottega Veneta, Saint Laurent, and Puma. The two primary operating segments based on luxury and sport & lifestyle.

Fast Fashion Business Model

fast-fashion
Fash fashion has been a phenomenon that became popular in the late 1990s, early 2000s, as players like Zara and H&M took over the fashion industry by leveraging on shorter and shorter design-manufacturing-distribution cycles. Reducing these cycles from months to a few weeks. With just-in-time logistics, flagship stores in iconic places in the largest cities in the world, these brands offered cheap, fashionable clothes and a wide variety of designs.

Inditex Empire

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With over €27 billion in sales in 2021, the Spanish Fast Fashion Empire, Inditex, which comprises eight sister brands, has grown thanks to a strategy of expanding its flagship stores in exclusive locations around the globe. Its largest brand, Zara, contributed over 70% of the group’s revenue. The country that contributed the most to the fast fashion Empire sales was Spain, with over 15% of its revenues.

Zara Business Model

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Zara is a brand part of the retail empire Inditex. Zara is the leading brand in what has been defined as “fast fashion.” With almost €20 billion in sales in 2021 (comprising Zara Home) and an integrated retail format with quick sales cycles. Zara follows an integrated retail format where customers are free to move from physical to digital experience.

Ultra Fashion Business Model

ultra-fast-fashion
The Ultra Fashion business model is an evolution of fast fashion with a strong online twist. Indeed, where the fast-fashion retailer invests massively in logistics, and warehousing, its costs are still skewed toward operating physical retail stores. While the ultra-fast fashion retailer mainly moves its operations online, thus focusing its cost centers on logistics, warehousing, and a mobile-based digital presence.

ASOS Business Model

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ASOS is a British online fashion retailer founded in 2000 by Nick Robertson, Andrew Regan, Quentin Griffiths, and Deborah Thorpe. As an online fashion retailer, ASOS makes money by purchasing clothes from wholesalers and then selling them for a profit. This includes the sale of private label or own-brand products. ASOS further expanded on the fast fashion business model to create an ultra-fast fashion model driven by short sales cycles and online mobile e-commerce as main drivers.

Boohoo Business Model

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Boohoo – sometimes referred to as Boohoo.com – is an English online fashion retailer founded in 2006 by Mahmud Kamani and Carol Kane in the historic textile district of Manchester. Boohoo makes money by selling fashion items for more than the cost of manufacturing, advertising, marketing, and distributing them.

Slow Fashion Business Model

slow-fashion
Slow fashion is a movement in contraposition with fast fashion. Where in fast fashion, it’s all about speed from design to manufacturing and distribution, in slow fashion instead quality and sustainability of the supply chain are the key elements.

Real-Time Retail Business Model

real-time-retail
Real-time retail involves the instantaneous collection, analysis, and distribution of data to give consumers an integrated and personalized shopping experience. This represents a strong new trend, as a further evolution of fast fashion first (who turned the design into manufacturing in a few weeks), ultra-fast fashion later (which further shortened the cycle of design-manufacturing). Real-time retail turns fashion trends into clothes collections in a few days cycle or a maximum of one week.

SHEIN Business Model

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SHEIN is an international B2C fast fashion eCommerce platform founded in 2008 by Chris Xu. The company improved on the ultra-fast fashion model by leveraging real-time retail, quickly turning fashion trends in clothes collections through its strong digital presence and successful branding campaigns.

Read Next: LVMHKeringPradaFast FashionZaraInditexUltra-Fast FashionASOSBoohooSlow FashionReal-Time RetailSHEIN.

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