Clothing resale site ThredUp Inc. launched its initial public offering at the top end of the projected range Friday, a funding injection that CEO James Reinhart wants to leverage to challenge competitor Amazon.com on the speedy retail giant’s environmental reputation.
Sustainability is inherent in secondhand shopping, but ThredUp wants to amp up both the cultural and practical campaigns around the trend.
Reinhart, in an interview with MarketWatch, said he sees a ThredUp role in keeping the fashion industry, and the e-commerce companies that sell clothes and accessories, including Amazon
accountable for their water, energy and other resource use. ThredUp is taking cues from its mostly young shoppers who increasingly care about their carbon footprint. In 2019, 40% of resale shoppers were Gen Z, the largest demographic group to shop the category.
“Our goal is not to optimize for same-day delivery. That’s not who we are and not what our customer wants,” said Reinhart. “Maybe you don’t actually need that thing from Amazon tomorrow. And even Amazon has seen some pushback. The speed trend might go the other way.”
Reinhart said ThredUp promotes bundled orders, using fewer packages and higher density within packages. The site discerns where a potential customer logs on from and offers inventory from a distribution facility located as close as possible to that user, not shipping from a central hub.
Still, there’s little denying the power of might. Amazon emerged in early 2021 as the top seller of clothes in the U.S., according to data from Wells Fargo, as the e-commerce giant made further gains during the COVID-19 pandemic. Wells Fargo expects sales of clothes and shoes on Amazon to top $45 billion in 2021.
Oakland, Calif.-based ThredUp, which will use ticker TDUP
said its initial public offering priced at $14 a share, the high end of its $12-to-$14 range. The company offered 12 million shares to raise $168 million.
Reinhart, who is also co-founder, detailed ThredUp’s plan to use $500,000 of its new cash on what it calls its “environmental policy function.” The company will use that money to push for government relief in eliminating the taxing of second-hand goods. Those items were already taxed at their initial sale and currently, are taxed again. Reinhart equated this assistance to the help that renewable energy and electric vehicle subsidies historically offered those markets.
A World Bank report says the fashion industry is responsible for roughly 10% of annual global carbon emissions, more than all international flights and maritime shipping combined. Without policy changes, emissions from the industry will expand some 50% by 2030, the report said.
ThredUp’s classification as an “emerging growth company” means it’s not required to be as thorough with disclosures as bigger public companies.
But Reinhart says its game plan is to be forthcoming on sustainability initiatives.
“We were very deliberate to have a standalone section on Environmental, Social and Governance [ESG] issues in our S-1 [to register for the IPO],” he told MarktWatch. “I can count on one hand the firms that I believe have done that. We want to lead with our sustainability disclosures… and we’ll use science-based targets [on resource use and emissions]. Our core DNA is to do good and we’ll take every opportunity to do that in the public market.”
Broadly, investors filed at least 140 climate-related shareholder proposals at U.S. companies during the 2020 proxy season, a number that has gained each year. The proposals averaged an approval vote of 30.7%, up from the average approval vote of 26.3% in 2019, according to sustainable-investing advocate Ceres.
As for shopping habits, Reinhart said the company can draw a connection between the resale trend from the 2008-09 recession and what ThredUp predicts will be a boost to customer retention post-COVID 19. Souring economic conditions pushed shoppers to consider resale over new purchases and quarantine confinement prompted many to clean out their closets for resale. ThredUp’s prospectus estimates resale market growth to $36 billion by 2024 from $7 billion in 2019.
“In my view, not since the advent of off-price stores has a new model so structurally disruptive come to pass in retail,” Reinhart wrote in a letter and hand-drawn graphic he’s called the “Do Good Flywheel,” which was included in the ThredUp prospectus.
Additional reporting by Tonya Garcia.