The Next Shakeup in Resale

The already cutthroat US resale market is about to get even more crowded.

By early next year, Vestiaire Collective plans to shut down Tradesy, a US rival it acquired in March, the company told BoF. That’s part of a major American push for the Paris-based Vestiaire, which is betting lower commission rates and a global inventory will help it make inroads in a market it has repeatedly tried and failed to crack for nearly a decade.

“We’re thinking very very big in terms of the market,” said Tracy DiNunzio, founder and chief executive of Tradesy, who is now the CEO of Vestiaire Collective, North America. “We’re in a sky-is-the-limit mode.”

The move comes at a time when the US resale market is in flux. The RealReal is America’s biggest luxury-focussed resale platform but it has struggled to narrow losses. Earlier this week, the company reported $53 million in losses, or 34 percent of its total revenue, in its most recent quarter. Leading competitors, including ThredUp, also operate in the red, while eBay is profitable but has struggled to brand itself as a destination for fashion lovers. DiNunzio said Vestiaire is on a “clear path to profitability.” The company did not offer a timeframe or provide details of its current finances.

All of these resellers are competing for a limited pool of customers. While resale has rapidly entered the mainstream, a divide is forming between the enthusiastic buyers and sellers and everyone else. More than 40 percent of consumers have never purchased anything in the resale fashion market, according to a 2021 survey conducted by BoF Insights.

Vestiaire believes its global footprint gives it a vital edge over its competitors. By connecting listings from all over the world, buyers have access to a wider supply while sellers can reach a bigger pool of potential secondhand shoppers. It also mostly operates via a peer-to-peer model — sellers photograph, package and ship their own items rather than shipping them to a central warehouse — which it says allows it to charge lower transaction fees. Vestiaire charges a 15 percent in the US for items over $100, compared to The RealReal’s tiered system that ranges from 80 percent commission on clothing under $50 to 20 percent on handbags over $5,000.

Many of those potential new clients are difficult to acquire, either because they view resale as too cumbersome or have concerns about counterfeits.

“There’s a chunk of the market that we’re never going to tap, unfortunately,” said Graham Wetzbarger, an authentication expert and luxury-resale consultant. But he added that Vestiaire’s global footprint brought something new to the table.

“This is the first shakeup of the US territory in a while,” he said. “The businesses that will win this category are those that will scale internationally first.”

An Authentic Experience

The downside of peer-to-peer resale is it requires more work for customers. The RealReal, for instance, offers pickup and drop-off service for sellers and authenticates every listing to reassure buyers they’re buying the genuine article.

But taking possession of secondhand goods is expensive for the platforms, which must pay for storage and typically authenticate and photograph each item themselves. The RealReal pointed to labour shortages in its earnings report Tuesday.

Vestiaire authenticates all international transactions and purchases over $1,000. For under $1,000 listings within one market, buyers can pay $15 for authentication, or get their purchase shipped directly from the seller.

These options were implemented under CEO Max Bittner, who took Vestiaire’s helm in 2019. Back then, the platform operated more like The RealReal. Bittner pivoted to a more asset-light model in order to boost margins.

“We have this big global market that has different regions with different tolerances for fee structures,” DiNunzio said. “We have a lot of ways to optimise for profitability.”

Coming to America

Vestiaire’s acquisition of Tradesy cements its presence in the US, which has been tenuous in the past, said Wetzbarger. Vestiaire announced its entry into the country as early as 2014 but failed to seriously compete with other players in the market.

In another survey conducted by BoF Insights, Vestiaire Collective was not in the top 10 resale platforms of which US consumers were aware, though it was on the list for shoppers in the UK, Germany and France. Even so, the company said the US is its biggest market.

Vestiaire is well-capitalised to invest in growth. To date, it has raised more than $600 million in funding, according to Crunchbase, including $209 million from the SoftBank Vision Fund 2 last fall, which valued the company at $1.7 billion, and a $215 million round in 2021 that included Kering as a lead investor.

Vestiaire is exploring other ways to grow. Partnerships with brands, for instance, could one day be a significant revenue driver for the company, DiNunzio said. And to more effectively court buyers, white-glove pickup or dropoff services like that of The RealReal could be a possibility in the future too.

Going global, ultimately, is a high-risk, high-reward play.

“There’s incredibly high potential for this company … but in order to get there, we’re going to have to successfully work across the globe, and that brings with it all these little rabbit holes of complexities,” DiNunzio said.