While the coronavirus pandemic has disrupted much of the traditional retail industry in recent months and dampened apparel sales, resulting in a slew of store closures and bankruptcies, there is one corner of the market that is thriving: secondhand clothing.
The secondhand apparel market, which is currently valued at about $28 billion, is projected to reach $64 billion within the next five years according to an annual report compiled by San Francisco-based consignment company ThredUp in partnership with third-party research firm GlobalData Retail.
Although the resale market initially declined along with the wider industry at the start of the Covid-19 pandemic, it is now recovering as shoppers look for ways to save money while the economy is down. In addition, as consumers, especially young, environmentally-conscious ones, have become more aware of the amount of waste that is prevalent in the fashion industry, more and more have begun supporting sustainable brands and favoring shopping at resale stores to give discarded pieces a second chance at life. ThredUp said the resale market grew 25 times faster than the overall retail market in 2019, with an estimated 64 million people buying secondhand products.
As a result, ThredUp co-founder and CEO James Reinhart said in an interview that “resale is here to stay.”
“The next question is who wins and who loses,” he added.
Several other secondhand retail businesses have also seen success in the past year. Last June, The RealReal Inc. (REAL, Financial), a luxury consignment company, debuted on the Nasdaq exchange. The company said last week its sales are still down compared to a year ago, but are also starting to normalize. Although the stock has gained in recent weeks, GuruFocus data shows it has tumbled around 50% year to date.
Forbes reported that social commerce marketplace Poshmark has also continued to record strong growth, while StockX, Vestiaire Collective and Depop have established themselves as important players in the space.
“Younger people are getting smarter than ever about how wasteful [fast fashion] is,” Reinhart said. “For years, I was trying to convince retailers to care about this.”
It appears some traditional brick-and-mortar retailers are starting to listen, however, as their businesses are likely to be among the most affected by the rise of resale. In May, ThredUp, which calls itself “the world’s largest online thrift store,” inked a deal with Walmart (WMT, Financial) to feature some of its pre-owned merchandise on the retail giant’s website. It has also partnered with department stores like Macy’s (M, Financial) and J.C. Penney (JCPNQ, Financial) to open shops within their stores and forged a relationship with Gap (GPS, Financial) to take secondhand clothes from customers’ closets to its shelves.
Despite these initiatives, GlobalData anticipates secondhand apparel sales will eclipse fast-fashion’s by the end of the decade. Across the broader industry, new clothing sales are forecasted to decline 4% through 2024, while resale is projected to nearly quintuple over that same period. The research firm also reported that secondhand goods will likely make up 17% of a person’s share of closet space by 2029, which is up from 3% in 2009 and 7% in 2019.
In addition, clothing rental and subscription services like Rent the Runway and Stitch Fix (SFIX, Financial) are expected to gain in popularity over the next several years.
Investors are also starting to embrace companies with good environmental, social and governance practices. While gurus like Jerome Dodson (Trades, Portfolio) and Al Gore (Trades, Portfolio)'s Generation Investment Management have favored environmentally-friendly stocks for a while now, BlackRock (BLK, Financial) announced earlier this year that it plans to “double its number of ESG exchange-traded fund offerings and make ESG analysis a key component of portfolio construction.” If these trends play out, more investors may also jump on board.
“The ‘normal’ of the past is not working for so many people in this country,” Reinhart said. “It's not working for our planet. It's not working for our economy. We’ve got to work to find another way. We can do better.”
Disclosure: No positions.
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