How Does ThredUp Make Money? The ThredUp Business Model In A Nutshell

  • ThredUp is an online sustainable fashion company founded by James Reinhart in 2009. Reinhart got the idea for ThredUp after realizing he had a closet full of clothes he did not want to wear and could not sell.
  • ThredUp makes money by charging a commission on every piece of clothing sold on its platform. The exact commission depends on the listing price, which the company determines by analyzing the brand, size, seasonality, quality, and age of the item.
  • ThredUp also charges customers a fee if they want to have their old clothing items processed by the company within a week.
Business Model ElementAnalysisImplicationsExamples
Value PropositionThredUp’s value proposition includes: – Sustainable Fashion: Promoting eco-friendly and sustainable shopping by extending the lifecycle of clothing. – Cost Savings: Offering affordable prices on secondhand clothing and fashion items. – Convenience: Providing a convenient online platform for buying and selling pre-owned fashion. – Diverse Selection: Curating a wide range of clothing brands and styles. ThredUp aims to attract eco-conscious consumers looking for sustainable, budget-friendly fashion options.Appeals to consumers interested in sustainable fashion choices. Offers budget-friendly shopping options. Provides a convenient online thrift shopping experience. Diversifies the selection to cater to various tastes and preferences. Promotes eco-friendly values in the fashion industry.– Sustainable and eco-friendly fashion choices. – Affordable prices on secondhand clothing. – Convenient online thrift shopping. – A diverse range of clothing brands and styles.
Customer SegmentsThredUp serves the following customer segments: 1. Eco-Conscious Shoppers: Attracting individuals who prioritize sustainable fashion choices. 2. Budget Shoppers: Appealing to cost-conscious consumers looking for affordable clothing options. 3. Fashion Resellers: Providing a platform for individuals and businesses to sell their gently used fashion items. 4. Online Shoppers: Catering to customers who prefer the convenience of online thrift shopping. ThredUp targets eco-conscious shoppers, budget shoppers, fashion resellers, and online shoppers.Targets customers seeking eco-friendly fashion alternatives. Appeals to those looking for budget-friendly clothing options. Provides a platform for fashion resellers to monetize their pre-owned items. Offers convenience to online shoppers in search of thrifted fashion. Targets diverse customer segments aligned with its mission.– Consumers interested in sustainable fashion. – Budget-conscious shoppers seeking affordability. – Individuals and businesses reselling fashion items. – Customers looking for the convenience of online thrift shopping.
Distribution StrategyThredUp’s distribution strategy includes: – E-commerce Platform: Operating an online thrift store where customers can browse, purchase, and sell secondhand fashion items. – Mobile App: Offering a user-friendly mobile app for shopping and selling on the go. – Partnerships: Collaborating with brands to offer resale programs and expand its inventory. – Marketing and Social Media: Utilizing marketing campaigns and social media to attract and engage customers. ThredUp focuses on e-commerce, mobile apps, brand partnerships, and digital marketing to distribute its products and services.Provides an accessible online platform for thrift shopping. Offers mobile app convenience for on-the-go shoppers. Expands its inventory through brand partnerships and resale programs. Attracts and engages customers through marketing and social media efforts. Implements a comprehensive distribution strategy in the thrift fashion market.– E-commerce platform for online thrift shopping. – User-friendly mobile app for shopping and selling. – Collaborations with brands for resale programs. – Marketing campaigns and social media engagement.
Revenue StreamsThredUp generates revenue through the following channels: 1. Commission Fees: Earning a percentage of the sale price when individuals or businesses sell their items on the platform. 2. Retail Sales: Generating income from the sale of secondhand clothing and accessories. 3. Upfront Fees: Charging fees for certain services, such as expedited processing or listing upgrades. 4. Brand Partnerships: Earning revenue through collaborations with brands and resale programs. ThredUp diversifies its revenue streams through commission fees, retail sales, upfront fees, and brand partnerships.Generates income through commission fees on resale transactions. Earns revenue from retail sales of secondhand fashion items. Collects fees for premium services and listing upgrades. Collaborates with brands for additional income through resale programs. Diversifies revenue within the thrift fashion industry.– Income from commission fees on resale transactions. – Revenue from retail sales of secondhand fashion. – Fees for premium services and listing upgrades. – Income from brand partnerships and resale programs.
Marketing StrategyThredUp’s marketing strategy involves: – Sustainability Focus: Emphasizing the eco-friendly and sustainable aspect of buying secondhand clothing. – Social Responsibility: Promoting the importance of reducing fashion waste and supporting a circular economy. – User-Generated Content: Encouraging customers to share their thrifted finds on social media, creating a sense of community. – Email Marketing: Sending personalized recommendations and offers to engage and retain customers. ThredUp focuses on sustainability, social responsibility, user-generated content, and email marketing to market its brand and mission.Attracts customers interested in sustainable fashion choices. Raises awareness about reducing fashion waste and supporting a circular economy. Builds a community of customers sharing thrifted finds. Engages and retains customers through personalized email marketing. Implements a multifaceted marketing strategy aligned with its sustainability mission.– Emphasis on sustainable and eco-friendly fashion. – Promotion of reducing fashion waste and circular economy. – User-generated content on social media. – Personalized email marketing to engage and retain customers.
Organization StructureThredUp’s organizational structure includes: – Executive Leadership: Comprising executives responsible for strategic direction and decision-making. – Technology and Operations Teams: Managing the platform’s technology, logistics, and operations for processing and shipping items. – Merchandising and Brand Partnerships: Overseeing the curation of inventory and collaborations with brands. – Marketing and Customer Engagement: Handling marketing campaigns, social media, and customer interactions. – Customer Support: Providing assistance and support to customers using the platform. ThredUp maintains an organized structure to support its online thrift store operations, technology, logistics, inventory curation, brand partnerships, marketing, and customer service.Led by executive leadership for strategic direction. Manages technology, logistics, and operations. Curates inventory and collaborates with brands. Handles marketing campaigns and customer engagement. Provides customer support for platform users. Maintains an organized structure aligned with its online thrift store mission.– Executive leadership for strategic direction. – Teams for technology, logistics, and operations. – Departments for inventory curation and brand collaborations. – Marketing and customer engagement teams. – Customer support for platform users.



ThredUp origin story

ThredUp is an online sustainable fashion company founded by James Reinhart in 2009.

While Reinhart was a business school student at Harvard University, he realized that he had a closet full of clothes he never wore.

At the same time, he was averse to purchasing new clothes out of a desire to save money.

To make some extra cash, Reinhart took his used clothes to a thrift shop where he was informed that they didn’t want the brands he was selling. What’s more, they didn’t even accept men’s clothing.

Ultimately, this predicament gave Reinhart the idea for an online platform where men could exchange dress shirts.

The pilot peer-to-peer platform was called ThredUp, which he launched in September 2009 after partnering with friends Oliver Lubin and Chris Homer.

Less than twelve months after the GFC, the trio believed ThredUp would be an instant success among businessmen looking to save money. However, initial performance was lackluster.

The platform initially connected buyers with sellers without handling physical inventory, but customers told the co-founders they wanted the company to do all the work.

Taking this feedback on board, ThredUp changed its strategy in 2010 and began handling warehousing, inspection, shipping, and pricing.

The company sent prepaid Clean Out Bags to customers who would then mail their old and unwanted clothes in return. The pivot was extremely successful since consumers could make money with very little effort.

Two years later, Reinhart hired Netflix engineering and operations gurus John Voris and Andy Rendich to build software and hardware systems that could process millions of clothing items each day.

Today, the ThredUp platform carries more than 35,000 brands with many used clothing items selling for up to 90% below the estimated retail value.

In addition to being the world’s largest fashion resale marketplace, the company promotes sustainable clothing and seeks to educate consumers about the global fashion waste crisis.

ThredUp revenue generation

ThredUp makes money by charging a commission on every piece of clothing sold on its platform.

Commission rates are based on the listing price and are set by a team of company pricing specialists. Pricing is based on seasonality, item age, quality, style, and existing inventory levels in the same size or brand.

In general, ThredUp collects a higher commission on lower-priced items than it does on more premium items.

The commission scale the company currently uses is as follows:

  • For items priced at $5.00-$19.99, Thredup takes a commission of 85-95%.
  • For items priced at $20.00-$49.99, Thredup takes 70-85%.
  • For items priced at $50.00-$99.99, Thredup takes 40-70%.
  • For items priced at $100.00-$199.99, Thredup takes 20-40%.
  • For items above $200.000, the company takes a 20% commission.

Expedited Clean Out Bags

Customers can order Clean Out Bags from ThredUp when they want to sell or donate unloved clothing items.

A standard Clean Out Bag is free, but the company does charge $16 for consumers who want the bag of clothes they send back to be processed within a week.

Read Next: ASOS, SHEINZaraFast FashionUltra-Fast FashionReal-Time Retail, Slow Fashion.

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Fast Fashion

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Inditex Empire

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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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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 or a maximum of one week.

SHEIN Business Model

SHEIN is an international B2C fast fashion eCommerce platform founded in 2008 by Chris Xu. The company improved 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.

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