The booming secondhand economy presents challenges for resale businesses seeking profitability. While platforms like Vinted are thriving, others like Etsy's Depop and RealReal struggle to reach sustainable profitability despite high valuations.
The second-hand economy is booming. A growing number of businesses allow thrifty, eco-friendly consumers to trade vintage or recycled clothing online. But profiting from the shift to thrift is hard. Lithuanian start-up Vinted is an exception. It swung from a net loss in 2022 of €20.4mn to a net profit of €17.8mn last year. The rare distinction of being a reseller that is both profitable and growing — with revenues up 61 per cent to €596.3mn last year — underpinned a €1.
5bn increase in its valuation to €5bn over the past three years. One reason for Vinted’s success is that it does not charge sellers’ fees. Increasingly, rivals are following suit. Ebay UK recently removed fees for most private sellers, in the hope of unlocking a significantly larger market. Etsy removed US selling fees for its Depop customers in July. It says the move has paid off, by increasing listings and expanding the selection available to buyers. Yet even the recent pick-up in Depop’s performance does not justify the steep price Etsy paid for the British fashion app, which reported a net loss of £49mn last year. Etsy spent $1.6bn on the business in 2021, in a bid to deepen its relationship with Gen Z consumers. It had to write down its value the following year by $898mn. This is not the only case where enthusiastic shareholders have lost money after putting an excessive valuation on a resale business. Other examples include luxury resale company RealReal and California-based ThredUp. RealReal shares have rallied this year after a debt exchange transaction that reduced its indebtedness and extended maturities. It reported an 11 per cent increase in revenues for the third quarter to September. But analysts do not expect it to turn a net profit until 2028, according to Visible Alpha. Business models differ. Some like RealReal and ThredUp offer convenience — at a price — to sellers
SECONDHAND ECONOMY RESALE BUSINESSES PROFITABILITY VINTED ETSY DEPOP REALREAL
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