Vinted Shows Used Clothes Can Be Worth Billions
(Bloomberg Opinion) -- Vinted, the Lithuanian app that lets users buy and sell pre-owned clothes and accessories, was valued this week at 3.5 billion euros ($4.2 billion), not far below more established European retailers such as Hugo Boss AG and Sports Direct owner Frasers Group Plc.
The Vinted fundraising underlines the current vogue for vintage and secondhand apparel — including anything from bootcut jeans to Gucci loafers. The market has grown with this year’s listings of U.S. resale platforms Poshmark Inc. and ThredUp Inc.
There’s a risk, though, that the trend for buying and selling used clothes ends up being a pandemic flash in the pan, one that will fizzle out alongside wearing sweatpants and gorging on unhealthy snacks once economies reopen. That could leave valuations looking as stretched as a “pre-loved” bandage dress.
Led by Swedish buyout group EQT, Vinted secured 250 million euros of investment. Neither revenue nor gross merchandise value (the value of goods sold) was disclosed. But assuming 2-2.5 billion euros of GMV in 2020, the company’s valuation would be comparable to Etsy and Poshmark. Although Vinted is loss-making overall, it has reached profitability in its mature markets. Poshmark and ThredUp both made net losses in their first quarter.
The multiples commanded by these secondhand marketplaces reflect partly the anticipated growth of the resale market. According to ThredUp, this could be worth $44 billion in 2029, overtaking the “fast fashion” sold by Zara, H&M and the like.
The driver behind this expected shift is younger consumers. Generation Z shoppers are turning to so-called “recommerce” for a variety of reasons, including environmental ones.
The global fashion industry emits about the same quantity of greenhouse gases per year as the economies of France, Germany and the U.K. combined, according to McKinsey & Co. By 2030 it will need to cut emissions by about half, or it will miss the Paris Agreement’s goal of countries limiting global warning to 1.5 degrees Celsius. One way to do this is by promoting secondhand clothes, which can extend the average life of a garment by 1.7 times.
Given young shoppers’ green concerns, it makes sense that the renewed interest in fashion as many countries exit lockdown is benefiting the secondhand sites. Poshmark said sales of pre-owned crop tops were up 101% in March compared with the year earlier. Denim shorts were up 85%.
But the burgeoning industry faces potential hurdles, too. There’s a question over whether any changes to consumer behavior during the pandemic will only be temporary. When everyone was stuck in lockdown, they had lots of time to “Marie Kondo” their closets and resell what they might have tossed. Now people no longer have to stay home, sorting through old clothes and shoes may have less appeal.
Shares in Poshmark fell 22% on Thursday after it said sales growth would slow to about 20% in the second quarter of this year compared with about 40% in the first. Vinted’s revenue doubled in 2020, in line with the secondhand market. But that expansion might not be sustained as the market’s growth slows to 40% — still impressive, but well below the pandemic bump.
Competition is also getting fierce. Even if shoppers do keep throwing out their old styles to make room in their wardrobes, they’ll be spoiled for choice as to which resale platform to use. Serving high-end tastes are sites like The RealReal Inc. and Europe’s Vestiaire Collective SA, in which Gucci-owner Kering SA recently acquired a stake. Meanwhile, Grailed, Goat, StockX and Marrkt appeal to streetwear and specialist collectors. And in the mass market, London-based Gen-Z favorite Depop is a serious competitor.
Established retailers are also getting into the game. Lululemon Athletica Inc., Patagonia and Levi Strauss & Co. are now offering resale options. Even British grocer Asda is selling secondhand clothes in its supermarkets.
Fast-fashion chains are upping their green credentials, too, trying to woo back young shoppers. Hennes & Mauritz AB was leading the way with a “conscious clothing” collection. It has now been joined by Inditex’s Zara. Discounter Primark also boasts using sustainable cotton.
All of this means the new online marketplaces must work hard to stand out, spending more on marketing and advertising. Resale undoubtedly has a huge potential to serve Gen Z. But it’ll have to overcome some growing pains to ensure pre-loved remains chic not shabby.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.
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