Kids clothing resale site thredUP raises $14.5M

The company welcomes new investor Highland Capital Partners

I’m going to get really patronizing for a minute—bear with me.

When you’re expecting your first child, you go out and buy a whole bunch of adorable new baby clothes—all newborn sizes.  Seriously, you buy like, 40 newborn sleepers, onesies, frilly lace dresses, and all the nursery gear, complete with matching glider and cherry wood sleigh crib.  Then your gargantuan baby is born, blasts through the newborn sizes in a month, poops and pukes all over her lace frills, and that super expensive cherry wood crib becomes nothing more than a super expensive laundry hamper. 

End patronizing tone.

One of the greatest discoveries of my life as a first-time parent was baby consignment sale events—except that they work better in theory than they do in real life.  Enter thredUP, an e-commerce platform devoted exclusively to used kids’ clothes.  The company announced Wednesday that it has raised $14.5 million in a Series C round led by Highland Capital Partners, with help from existing investors Trinity Ventures and Redpoint Ventures.  The new round brings thredUP's total raised to more than $23 million.

With more than 400,000 registered users and adding 7,000 new buyers each month, thredUP’s draw is that it does what baby consignment sale events promise to do, but don’t.  The site offers thousands of name-brand clothes for kids and babies, organized by size, brand, category, etc., for a fraction of the new price—and the clothes are still wearable.  If you go to a consignment sale, you might find cute Gymboree clothes, but they’re faded and tattered. 

The clothes that thredUP selects, however, are like-new and vetted before being posted on the site.  And it comes with free shipping for orders over $40.

The company has taken a page right out of Amazon and Quidsi (now owned by Amazon), by developing proprietary technology to automate the management of its inventory.  Specifically, thredUP’s technology automates the process of evaluating the items, itemizing them, and photographing them. 

The company pays customers 20%-40% of an acceptable item’s resale value, and then when another customer purchases the item, thredUP takes the remaining cut.  Unsold inventory is recycled so it doesn’t end up in a landfill.

"We centralize the inventory so customers don’t have to negotiate with buyers or sellers or worry about quality," said CEO James Reinhart.  "All clothing comes to us first, so we can certify quality and provide the best possible customer experience. The service model evolution has landed us in a great position, and the consumer feedback has been truly phenomenal."

The site boasts a customer retention rate of 46%.  To put that into perspective, Amazon—which has more or less written the book on good customer service—has a customer retention rate of approximately 70%.

The San Francisco-based company originally launched in 2009 as a shirt swapping site for men and women, but it found a better niche in kid’s clothing.  It also found more success by ditching peer-to-peer swapping and moving over to more traditional resale.  ThredUP expects to have 25,000 new items on the site each day this time next year. 

The company is advised by Netflix CEO Reed Hastings and former eBay COO Brian Swette.

ThredUP plans to use the funds from this round to ramp up customer acquisition, scale supply, boost operations and distribution, and also expand into other verticals, such as teen, maternity, and adults.