How green conscious young shoppers are boosting the second-hand clothing sellers
Vinted, the Lithuanian app that lets users buy and sell pre-owned clothes and accessories, was valued this week at €3.5bn, not far below established European retailers such as Hugo Boss and Sports Direct owner Frasers Group.
Vinted’s fundraising underlines the vogue for vintage and second-hand apparel — a market that has grown with the listings of US resale platforms Poshmark and ThredUp in 2021.
There is a risk that the trend for buying and selling used clothes ends up being a pandemic flash in the pan, one that will fizzle out alongside wearing sweatpants once economies reopen. That could leave valuations looking as stretched as a “preloved” bandage dress.
Led by Swedish buyout group EQT, Vinted secured €250m of investment. Neither revenue nor gross merchandise value (the value of goods sold) was disclosed. But assuming €2bn-€2.5bn of gross merchandise value in 2020, the company’s valuation would be comparable to Etsy and Poshmark. Though Vinted is lossmaking overall, it has reached profitability in its mature markets. Poshmark and ThredUp both made net losses in their first quarter.
The multiples commanded by these second-hand marketplaces reflect partly the expected growth of the resale market. According to ThredUp, this could be worth $44bn in 2029, overtaking the “fast fashion” sold by Zara, H&M and the like.
The driver behind this expected shift is younger consumers. Generation Z shoppers are turning to “recommerce” for a variety of reasons, including environmental ones.
The global fashion industry emits about the same quantity of greenhouse gases a year as the economies of France, Germany and the UK combined, according to McKinsey & Co. By 2030 it will need to cut emissions by half, or it will miss the Paris Agreement’s goal of countries limiting global warning to 1.5ºC.
One way to do this is by promoting second-hand clothes, which can extend the average life of a garment by 1.7 times. Given young shoppers’ green concerns, it makes sense that the renewed interest in fashion as countries exit lockdown is benefiting second-hand sites. Poshmark said sales of preowned crop tops were up 101% in March compared with the year earlier. Denim shorts were up 85%. But the burgeoning industry faces potential hurdles.
TEMPORARY?
There is a question over whether any changes to consumer behaviour during the pandemic will be only temporary. When everyone was stuck in lockdown, they had lots of time to “Marie Kondo” their closets and resell what they might have tossed. Now people no longer have to stay home, sorting through old clothes and shoes may have less appeal.
Shares in Poshmark fell 22% last week after it said sales growth would slow to 20% in the second quarter compared with about 40% in the first.
Vinted’s revenue doubled in 2020, in line with the secondhand market. But that expansion might not be sustained as the market’s growth slows to 40% — still impressive, but below the pandemic bump.
Competition is also getting fierce. Even if shoppers do keep throwing out their old styles to make room in their wardrobes, they will be spoilt for choice as to which resale platform to use. Serving high-end tastes are sites like The RealReal and Vestiaire Collective, in which Gucci has acquired a stake.
Meanwhile, Grailed, Goat, StockX and Marrkt appeal to streetwear and specialist collectors. In the mass market, London-based Gen-Z favourite Depop is a serious competitor.
Established retailers are getting into the game. Lululemon Athletica, Patagonia and Levi Strauss & Co are offering resale options. Even British grocer Asda is selling second-hand clothes in its supermarkets.
Fast-fashion chains are upping their green credentials, too, trying to woo back young shoppers. Hennes & Mauritz was leading the way with a “conscious clothing” collection. It
has now been joined by Inditex’s Zara. Discounter Primark also boasts using sustainable cotton.
All of this means that the new online marketplaces must work hard to stand out, spending
more on marketing. Resale has a huge potential to serve Gen Z. But it will have to overcome growing pains to ensure preloved remains chic not shabby.