- Oops!Something went wrong.Please try again later.
A onetime hush-hush mode of shopping is now seeing exponential growth. The secondhand market, as has been well documented, is expected to overtake fast-fashion sales by 2029. Now one of luxury resale’s earliest pioneers is planning to ramp up its efforts after spending the last few years quietly refining artificial intelligence technology that will steer its growth strategy going forward.
Tradesy, founded in 2012 by Tracy DiNunzio, may be less of a household name than The RealReal, Poshmark and ThredUp as its spent the last few years without much of a marketing push. However, DiNunzio — having diverted those funds to pay for programming development — now expects that to change. “This year we are shifting back into growth mode,” she said.
More from WWD
Tradesy, much like Poshmark, is a peer-to-peer platform model — which means that it facilitates direct commerce between buyer and seller. The company does not hold inventory or employ a large fleet of authenticators and stylists, meaning a lower cost-of-business and therefore a lower commission fee for sellers. Over the past few years, Tradesy has been refining artificial intelligence technology that can assess if a luxury good is real or fake with 99.7 percent accuracy.
“We have different business model — we are peer-to-peer. Our thesis is that if we replace the human middleman in a pre-owned transaction with smart technology, we will make the category more scalable. We will deliver more value to buyers and sellers. But it takes a long time to build and perfect that technology,” DiNunzio said.
She admitted that, “Some players are at a larger scale relative to where we are because we have spent these last few years, heads down, working on technology rather than raising more capital.”
Tradesy counts 7 million members who are spread out across 73 percent of U.S. ZIP codes. In 2020, the company saw a 12 percent increase in listings and noted an average order value of $550.
While Tradesy’s luxury space competitor The RealReal takes a commission on sales between 15 and 60 percent, DiNunzio said Tradesy’s commission structure tops out at 19.8 percent, with the average transaction taking about 17 percent. As a result, she said Tradesy has become a platform used by bigger luxury good resale curators including Rebag and Bagriculture — which as volume sellers are given a 15 percent commission structure.
DiNunzio sees this as a point of competition. “The RealReal entered the market and built massive infrastructure of human authenticators and is operationally cost intensive. We are building technology with the same or better accuracy. It takes time to perfect, but it’s scalable at little to no cost,” contended DiNunzio.
Since Tradesy’s founding it has received more than $125 million in funding from investors including Kleiner Perkins, Richard Branson and Tim Ferriss. The company declined to disclose figures relating to its profitability.
Despite its name recognition and high sales volume, The RealReal has remained unprofitable — in November it reported third-quarter losses of $43 million. After rising to $28.90 a share during its 2019 initial public offering for a $2.39 billion market cap, The RealReal has since slid to $24.50 a share.
By contrast, peer-to-peer platform Poshmark debuted on the market with an astounding $7.4 billion IPO value (or $101.50 a share), although the stock has since slid to about $70 a share — still double initial financial industry estimates. In December, the company said 2020 was the first year it made a profit.
ThredUp is now said to have an IPO in its sights for 2021. All in all, these platforms have debunked former taboos about old clothes — once considered trash, they are now seen as big business.
DiNunzio sees secondhand’s many players as a healthy ecosystem reminiscent of the department store landscape in its heyday. “There is room for many multimillion-dollar businesses in this category, mirroring traditional retail. There was room for Macy’s and Saks and Nordstrom — all are a little different and have a little overlap. They offer different experiences and what we see in resale is similar. For us, we are a luxury and peer-to-peer platform and we are the largest one doing that,” she said.
While the pandemic initially concerned the Tradesy boardroom in relation to the site’s sales, DiNunzio said activity on the site has accelerated. By her estimate, the crisis has advanced the culture of online secondhand shopping by three to five years.
“With The RealReal public and doing well and with the Poshmark IPO that continues to accelerate — as these companies attract more capital and more competition it is sending a message to consumers about adopting resale. There is this massive rising tide of acceleration. We are just entering the middle zone of how resale will become a really legitimate and permanent part of the shopping landscape,” DiNunzio said.
Tradesy is seeing sales of Louis Vuitton accelerate on an unexpected scale. Sales of the Pochette bag, which Vuitton is currently sold out of, are trading at nearly two times their value on Tradesy. The Speedy bag is selling on Tradesy at full price — demonstrating new demand for classic styles from the French luxury house.
“The Louis Vuitton trend is so interesting because we have seen before a resurgence of a style that had fallen out of favor, like the Dior saddle bag, but Vuitton never became unpopular — it was always reselling at a reasonably high price. For us, it represents this wild petri dish of supply and demand pricing that secondhand creates,” DiNunzio said.
So what has changed in Vuitton’s resale cards? Said DiNunzio: “It’s always remained popular with mainstream luxury audiences and now we have bleeding edge fashionistas who are interested. We usually see this traction when something is back from the dead. Vintage used to be on a 20-year cycle of nostalgia buying but online resale has shrunk that timeline to 10 years or less.”