Thrifting used clothes surged during the pandemic and is likely to keep growing

Annie Karlen loves thrifting — buying and selling gently used clothing. The clothes are less expensive than brand-new ones, and she appreciates the positive environmental impact of recycling and finds it fun to browse through a huge cache of options.

“I love shopping, buying new things and getting packages in the mail,” said Karlen, 28, of Washington Square, who buys about 60% of her clothing on resale sites, mostly from thredUP and The RealReal.

“I’ve been using these sites since I started about five years ago, and they have all the designers and brands I like,” she said, along with packaging that is 100% recycled. “I’m not an impulse shopper. If I like it, I can wait for it.”

Karlen is one of 223 million consumers who, in 2020, say they have or are open to shopping secondhand products, according to thredUP’s 2021 Fashion Resale Market and Trend Report. The secondhand market is projected to double from roughly $36 billion in 2020 to $77 billion by 2025, the report said. And it is projected to grow 11 times faster than clothing retail sector while producing a bounty of jobs.

“For a lot of people, thrifting was a pandemic habit,” said Christina Schultz, director of corporate communications for thredUP. “People learned to do more with less and shopping motivations changed. When people were stuck at home in April and May [2020], they had time to clean out their closets. By the projections we see for secondhand and resale, we believe we are just in the beginning of something big.”

Dozens of companies have gotten into the resale game, from well-established names like Macy’s, Levi Strauss, and Lululemon, which all have a presence in brick-and-mortar stores, to online or app-only sites including thredUp and Shopify. These companies offer varied processes for customers to buy and sell their gently used clothing, ranging from doing all the marketing, pricing, packaging, and selling to guiding the seller through those steps. The more the seller does, the more they earn.

Poshmark, for example, has the seller take the pictures, price the clothing, and mail the packages to the buyer. The site takes a commission, and the seller earns the rest. At thredUp, the site handles the sale from start to finish, offering ready-made kits that can be loaded with apparel, shoes, and accessories and shipped to the company for free. They determine each item’s value, puts them on their site for sale, and then reimburses the seller. Payouts vary by product and price.

The sale price of an item is based on an algorithm that includes brand, category, color, style and material, as well as supply and demand, Schultz said. Items can sell for as low as $2.99 for a necklace and as high as several thousand dollars for a designer dress. Karlen estimates that she saves between 40% and 60% off original prices on most items she purchases.

When thredUP started in 2009, “thrift was still stigmatized, something you might hide or say out of the side of your mouth,” Schultz said. “But that’s largely disappeared, especially among the younger generation. Our 2020 report found that 80% of Gen Z’s said there is no stigma to buying used fashion.”

The resale market has changed the model of buying clothes and has allowed younger consumers access to the designer clothing market, which may make them lifelong customers, said Barbara Kahn, professor of marketing at the Wharton School.

“If you buy something knowing you will potentially resell it, it affects your initial purchase and the reselling affects your subsequent purchases because you might replace what you sold,” she said. “When we start to see some of the big brands participate, they will develop a product line that anticipates the resale model.”

To support other brands and retailers in entering the resale business, thredUp has created a new division, resale-as-a-service. Brands include Gap, Vera Bradley, Cuyana, and Madewell, a division of J. Crew.

“We have different types of partnership structures,” she said. “Some are doing clean-out loyalty programs while others have full-on resale shops where you can purchase secondhand items both online and in stores. All resale is good resale.”

The newest entry into the resale marketplace is Nuuly Thrift, owned by Urban Outfitters, and launching as an iPhone app this fall. The Nuuly brand is hoping to capitalize on the apparel-rental service it launched in 2019. The global online clothing rental market reached a value of $1.26 billion in 2019, according to Business Wire, and is expected to reach more than $2 billion by 2025.

“Retail will pivot to everyone’s closet consisting of some portion of full-price, resale, and rental,” said Simeon Siegel, managing director and senior analyst of BMO Capital Markets. “It’s interesting to see Urban be the first company to offer all three aspects of that ecosystem in one.”

With Nuuly Thrift, Urban is hoping to increase its customer base to consumers who may not have tried the resale market but are loyal to their current brands, which also include Anthropologie, Free People, and Urban Outfitters.

“Ever since the emergence of e-commerce, many retailers and brands have had to face the question: would you rather cannibalize yourself or let someone else do it for you,” Siegel said. “I don’t know that resale is big enough yet where there’s a huge cannibalization factor. Ultimately, if done right, it will bring in two separate customers.”

One incentive in Nuuly’s model is Nuuly Cash, a 10% bonus given to customers who resell product from one of Urban’s brands. thredUP has a similar incentive in its Cashout Marketplace, where customers can use their sales proceeds on specific brands to receive booster credit. Siegel likens the concept to a promotion.

“That only works if the assortment is compelling enough,” he said. “To convince someone to turn around and use that cash back in the same system, you need to convince them that you have what they want to buy.”

Siegel likens the resale market to that of previously used cars. “The success of resale across the next decade will hinge on whether or not the companies have been able to convince people that buying resold clothing is just another way of participating in the ecosystem in the same way that no one flinches at purchasing a certified pre-owned car,” Siegel said.

The Future of Work is produced with support from the William Penn Foundation and the Lenfest Institute for Journalism. Editorial content is created independently of the project’s donors.