Laying the foundation for modern resale with ThredUp

Retail Gets Real episode 354: ThredUp co-founder and CEO James Reinhart on the outlook for the secondhand industry in America and around the world.
Sheryll Poe
NRF Contributor

What percentage of the clothes in a consumer’s closet do they wear on a regular basis? And what do they do with the clothes they don’t wear?

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James Reinhart, CEO of ThredUp
James Reinhart, CEO of ThredUp

The answers to those two questions are what set James Reinhart on the path of founding ThredUp, an online marketplace for buyers and sellers of used clothes with a focus on kids’ and women’s apparel, in 2009.

“I went to sell my clothes at the local consignment store, and I remember it very vividly,” Reinhart says on this episode of Retail Gets Real. “The woman looked at me and said, ‘We don’t take these things. We just do luxury.’ And at the moment I thought, ‘But this stuff … can’t be worth zero. And it’s got to be worth something. It may not be worth a lot, but it’s got to be worth something.”

That’s when Reinhart realized there was “something broken about the secondhand market.”

Today, the U.S. resale market continues to experience double-digit growth, growing 10 times faster than the traditional retail environment, Reinhart says. It’s glowing even faster globally: By 2028, it’s estimated the global secondhand market will reach $350 billion.

While many consumers might think that resale is being driven by younger generations, that’s not entirely the case, according to Reinhart. “One of the unique things about our data is we can kind of look across the years and see people at every point in their life participating,” he says.

“I think it speaks to this sort of broader trend notion, which is once people start shopping secondhand, they rarely go back the other way.”

Resale is definitely not just a trend, Reinhart says, and retailers need to understand that sustainability and circularity in the retail chain are what consumers expect. “This a way that consumers indicate some preference, some judgment around the retailers that they want to be associated with,” he says.

“It doesn’t mean that, if a retailer has a resale component, that all of a sudden they win the day, but I think it’s one of those things where if you’re a retailer and you’re not paying attention to circularity, to sustainability in some way … I think you’re going to get left behind.”

Listen to the full episode to hear more of the inspiration behind the founding of ThredUp, Reinhart’s leadership and communication philosophy, and his best piece of career advice, courtesy of Netflix founder and Chairman Reed Hastings.

Episode transcript, edited for clarity

Bill Thorne: Welcome to Retail Gets Real, where we hear from retail's most fascinating leaders about the industry that impacts everyone, everywhere, every day. I'm Bill Thorne from the National Retail Federation. And on today's episode, we're talking to James Reinhardt, co-founder and CEO of ThredUp, an online resale platform with over 1.7 million active buyers. We're going to talk to James about the rising demand for resale, the outlook for the secondhand industry and his approach to leadership.

James Reinhardt. Welcome to Retail Gets Real.

James Reinhart: Thanks for having me, Bill. Great to be here with you.

Thorne: It's really fun to have this conversation because ThredUp is, you know, people are talking about it, and they want to know more about it, and you're building a hugely successful business. But we always have to start at the beginning, and it starts with you and your current career background, and how you started ThredUp. I'm really interested … where did you get the idea?

Reinhart: Sure. Yeah. So, my career — I was born and raised in New Jersey. I went to Boston for college, then I moved out west — and I kind of poked around and then I got really interested in education. I ended up doing a joint degree in business and public policy. So, a three-year program (This is getting to the founding of ThredUp). So, you can imagine a guy who comes out of education, goes to get a three-year degree, at some point in that journey realizes he doesn't have any money.

So, I went to sell my clothes at the local consignment store, and I remember it very vividly. It was, like, a cashmere sweater. I had a Brooks Brothers coat. And the woman looked at me and said, “We don't take these things. We just do luxury.” And, at the moment, I thought, “But this stuff, it can't be worth zero. And it's got to be worth something. It may not be worth a lot, but it's got to be worth something.”

And she said, “Yeah, yeah, yeah, not my problem.” So I went home that day, and I thought, you know, there's something broken about the secondhand market when the next thing that I was going to do with these two nice pieces of clothing were just put them in a bag and a bin, and give them away. That was really the founding moment.

The next day, I actually went to class and I became obsessed with this. I would ask people to stop, you know, a ‘man on the street’ style, like, “Hey, what percentage of the clothes in your closet do you wear?” And I never had anybody say more than half, and the average person was like, “I don't know, a third?” And so that was my question for like a couple of weeks.

And then I had a follow up question, which was, “Yeah, and then what do you do with it?” And then people said, “Ah, I don't know. I just kind of give it away. I don't know.” And to me, that was the moment where I was like, OK, there's something here in this market that's not quite right, and that's how we got started.

Thorne: I mean, where were we in the online space at that time? I mean, was it pretty nascent or was it pretty well set?

Reinhart: The internet … we're not that old, Bill. The internet was around. Yes. Yes. The internet. But I say that only jokingly because this was 2009, 2008 …

Thorne: That is old!

Reinhart: It is old and the iPhone had just been invented. And so, you know, at the same time — and it wasn't like right in that Eureka moment — but you know, in the weeks and months after, you know, you had Spotify. People were streaming on Netflix for the first time. People could stay in an Airbnb. This is right after the Democratic Convention in 2008. So, you had all these consumer experiences that were leveraging the mobile phone, that were leveraging new consumer experiences. And I thought, well, look — apparel, retail, secondhand — is not going to be immune to this, and so that was sort of the context. And we thought we could build something that was better.

Thorne: Was eBay pretty strong at that point in time?

Reinhart: Yeah. Your kind of incumbents at the time were eBay and Craigslist. Craigslist was very, very big at that time. And you looked at eBay and, you know, the way that I sort of described at the time, eBay looked very similar (Craigslist, too, in some ways) looked very similar to the way they started back in the mid-90s.

Thorne: Right, right, right,

Reinhart: And it just did not feel like it was going to translate to this, like, changing nature of consumer. But yeah, those were the two big guys.

Thorne: So, you think about the global market for resale items … what’s that growth trajectory?

Reinhart: Yeah, I mean globally … So, we run this big resale report every year, which had been … historically been domestic. The U.S. resale market continues to grow, you know, double-digit kegger and has been for a while. About 10 times faster than the traditional retail environment, which you know better than I do. But growing much, much faster.

Globally, the industry is growing even faster, as you see opportunities in Asia, Africa, the Middle East, Europe, for sure. And so, yeah, it's a big market. It's growing. The way I often describe it is: It's not a fad.

Thorne: Right, right.

Reinhart: Like, we all remember flash sales, right? We remember, remember the Groupon days, right? These were fads, right? And people were like, “Ah, OK, I got my … I did that thing.” This is really like a secular trend, and so we think it's going to continue to grow pretty nicely over the ensuing decades.

Thorne: Well, it's a secular trend, but at the same time generational in its impact. So how do you see that playing out? You know, I'm old … through the clothes in the closet … I'm trying to bring them down because I don't wear them …

Reinhart: You don't need it. Yeah.

Thorne: … and so this obviously has an attraction in concept. What are you seeing as the generational trends in this space?

Reinhart: Young people, Gen Z, Gen Alpha, they're definitely driving the momentum and awareness in the industry. But I'll say there's a peculiar thing about the secondhand market, which is it does actually span generations. So, you still have a lot of Gen Xers. You have a lot of millennials, baby boomers.

I mean, I think one of the unique things about our data is we can kind of look across the years and see people at every point in their life participating, and so I often say, it's not just a young person sport, right? It really is something that people do. And I think it speaks to this sort of broader trend notion, which is once people start shopping secondhand, they rarely go back the other way.

Thorne: Yeah, yeah, yeah.

Reinhart: It’s not one of those things where you wake up when you're 38, and you're like, “You know, that thing I've been doing for 15 years? I'm over it.” It's sort of like I described.

It's like … I describe it, you know, once people have driven electric cars around for a while, you're like, “Ehh, it's pretty good. It's good for the environment. It's a good car.”

Like, once you start recycling, you don't wake up one day and you're like, “Nah, this recycling thing. God, that was so 2000 …”

Thorne: So overrated.

Reinhart: It's so overrated. So, I just think the sustainability arc is real, and I think secondhand fits into that.

Thorne: What do retailers need to know about resale and that market?

Reinhart: I think the biggest thing for retailers to understand is that this is a way that consumers indicate some preference, some judgment around the retailers that they want to be associated with. So, I want — and I want to be precise, that it's ‘be associated with.’ It doesn't mean that, if a retailer has a resale component, all of a sudden, they win the day. But I think it's one of those things where, if you're a retailer and you're not paying attention to circularity, you're not paying attention to sustainability in some way, or at least trying to sort of talk about and show your impact, I think you're going to get left behind.

I think for retailers, it's too often about how it's about maintaining relevance with this younger generation. You know, it's the same thing — like imagine 10 years ago, if you're a retailer, you're like, “We don't do social media. Not for us.” Right? You'd be like, “What are you guys? Dinosaurs?” Right? So, to me, this is like that, which is, it's not an answer. It's not a panacea to all the other challenges that retail deals with. But to not be paying attention to secondhand is, I think it's a bit boorish.

Thorne: We were talking before we started, the last time that I saw you was January of 2020. Beginning of the end. COVID. How did that period of time — the pandemic, the lockdown — how did that impact your business?

Reinhart: So, it impacted in two ways. One is it rapidly accelerated the number of people who cleaned out their closets. Because it turns out when we're stuck at home with not a lot to do, one of the things we do is we clean our closets. So, I'll tell you, I had never seen such a surge. To the point, Bill, where it was it was really too much, honestly.

We were getting so much supply into our facilities at one point (and I'm not proud of this, but this is the reality) at one point, it was it was taking us 20 weeks to process your bag …

Thorne: Whoa.

Reinhart: Right, so five to six months. And that's not because we weren't trying …

Thorne: Right. Right. Right. Right.

Reinhart: We were just inundated with stuff. So, the one hand is, I think it taught people how to clean out their closets in a way to do it online. And the second is: I definitely think you had all the ecommerce pull-forward penetration of people who had to shop online because stores were closed. So, they gave us a try. And so, I think what's that done is, it pulled forward demand a little bit, which I think was positive at the time. But that was the real impact for us.

Thorne: Yeah, you know, it was interesting what you said earlier about retailers getting on board, understanding this is important. I recently had the opportunity to talk to one of the leaders in sustainability at Ikea and they're doing that. They are literally taking product back. They will buy it back, basically, and I'm hearing more and more of that. I don't think it gets the play. I don't think people talk about it as much as they probably should. But it is a growing trend.

Reinhart: Yeah, it's a growing trend, and what’s been tricky about it is — and I appreciate what Ikea is doing, because they're showing that even at a very low accessible price point, you can make this work. And I think it's early enough where retailers across sort of categories, they haven't figured out how to yet to talk about the impact to the bottom line, because it's still tiny, right? I mean, whatever Ikea is buying back is dwarfed by everything else, right? But it's a start.

The same thing is true for all of our resale partners that we work with — whether it's J.Crew or it's Reformation or it's Athleta — it's still tiny, tiny, tiny relative to what they're doing. But these are businesses that were built over decades and they've been in the resale business 18 months. So, it takes a little time.

Thorne: Yeah. A little time and a lot of experience. Yeah. Kind of weird.

You know, you talked about academia …  what are they teaching these days in circularity? I mean, I personally, you know, the whole concept of circularity … I've been with the NRF for 12 years. I was with a retailer for six years prior to that … it never was described in that sense. It was always something else. How did we get to circularity, and how is that being communicated, and how are people being educated about that?

Reinhart: I think there's a couple ways. One is: I think sustainability and circularity are sort of courses that are weaving their ways into curriculums in in lots of places, right? Or it may be a segment within a segment around traditional sales and marketing, right? Or supply chain, right? It's very popular, you know, courses in business schools around operations and supply chain management.

Then you have a whole track where It's becoming an increasingly big part of sort of the broader public policy. There’s a guy named Ken Pucker. Professor at Tufts, who I think is really like the best at this. You can find him on LinkedIn. He’s at the Fletcher School, which is on the sort of public policy part of Tufts. And he is, I think, really at the forefront of all this. Of just, continuing to push on why we need better data, continuing to push on why we need government involved, continuing to push on accountability.

 And so, I think, Bill, there's a couple different ways it's happening, but I think it's increasingly happening at the graduate school level where it is — it's policy, it's public administration, it's business — those are the areas that I see.

Thorne: I think it's growing more important that people understand this concept of circularity, particularly with fast fashion taking such a big chunk of sales these days, and what that means in the long run.

Reinhart: Yeah. It is the great vexing challenge, which is despite the fact that young people are driving the secondhand economy and momentum, they're also purchasing from Shein, and Temu, and fast fashion at ever increasing rates. I think it's a complicated question, so I think, for me, I am less in the “blame Shein” camp, right? A lot of people blame Shein. I think they're part of the problem. But Shein (and you and I were retail guys), Shein doesn't make stuff if people don't want to buy it.

Thorne: Correct. Exactly right.

Reinhart: And so, you are kind of in a bit of a circular reference, no pun intended. It's back to Americans and consumers. If we decided to make better decisions around what we buy, we can really shape that. I think government needs to be involved from a regulatory framework. I think we need to hold Shein responsible for what ends up in landfills, and then we need to hold consumers responsible for what they buy.

Thorne: It's so funny that you say that, James, because we (forever and ever and ever), every year a reporter will call (and multiples really, but it's diminishing) and they will call around October, and they'll say, “Hey. Why are retailers pushing Christmas so early? I mean, we're not even up to Thanksgiving, and you know, it's just, we're in October, and so why are they doing this?” And the answer is: Because consumers are buying it. Retailers are not in a position to do a thing to just do it. They do it because the consumer demands it.

Reinhart: Yep. At some point this really tipped when we were all convinced that we needed the replacement cycle of products, right? And that's not just apparel. That's TVs and phones, and just everything we have has created this zeal to buy the next thing, and I think we all have to take a little bit of responsibility for that.

Thorne: I agree. You've got a great organization. You've got a lot of great people working with you and for you. What is your approach to, to leadership and basically getting the culture right and getting the vision right?

Reinhart: I think culture is one of those things … I often describe it as, culture is either getting better every day or it's getting worse, and I think it's reliant on the leadership. I think being a founder helps me sort of lead a more principled approach to what we're trying to do. But we talk about culture regularly. What our company values are. When we interview, we talk about our company values. When I stand up at our all-hands meeting, I talk about our company values. So, we try and treat them as sort of the oxygen of the organization.

But I do think that the way your leadership (and not just me, but broadly in the company) uses the values to talk about what we're trying to do. So, for example, even just this morning, I was sending an email to some teammates and we were talking about something, you know, fairly pedestrian on the website. And I was like, yeah, but let's think bigger about like how we could communicate this. “Think big” is one of our values. And so, I think as a founder and CEO, I really try and infuse that into everything that I do. So that's number one.

I think on the vision piece, I'm sort of an over-communicator around what we're trying to do and why we're trying to do it. So just last week, I've been doing this more than a decade, I gave a 30-minute company all-hands around the why. Why do I come to work every day? Why do we exist? Why do we deserve to exist?

And, we reread — as a management team — Simon Sinek’s “Start with Why” book, which came out, you know, a decade ago, and I read it a decade ago. It's been on my shelf for a decade. And we reread it and reminded ourself of our why.

Aso I guess the answer is: It's a constant attention, that these things, that if we don't remind ourselves of them and we don't talk about them, they sort of fade away. People don't remember what you said four years ago. You got to keep saying it. And so that's what I try and do.

Thorne: Well, I'll tell you, it is … You said something that is so critically important — and good leaders know this and good leaders apply it and good leaders are successful as a result of it — and that is over-communicating. And you just reinforce and reinforce and reinforce. And what people understand is that in order to be as successful as your leader, you have to embrace it. You have to invest in it. You have to run with it, and you can see succeed as a result of it. And I think that that communicating is so critically important to that.

Reinhart: I think the other piece is, you have to do it in multiple sorts of modalities. So, in my prior life, I was a teacher for a couple of years, and I think this really got burned into me when I was a teacher. I had this wonderful story around … so I walk into the break room with all the teachers (my first year teaching), I walk in and I was saying to one of the other history teachers, I said, “Sam, what am I going to teach today?” You know, I sort of said it jokingly, right? It wasn't like I had no idea what I had to teach today. And, God bless her, Sharon Cadwallader, who was this woman who was like, a veteran 30-year teacher – she passed away about 10 years ago — she looked at me, and she said, “James, it's not what you're going to teach. It's what are they going to learn today?”

Thorne: Ooh …

Reinhart: And it's always stuck with me, which is when I communicate by email or in Slack or a company all-hands or slide deck, I come from the position of, what do I want people to learn from this today? What do I want them to take away? And that just subtle shift of perspective has radically changed the way I communicate. Because I think it's easy (especially as CEOs) to become a bit self-important around, “I'm going to deliver the news today about whatever.” And generally people don't care, right? But if you put yourself, “What do I want so-and-so to take away from this?” It changes the perspective.

Thorne: That is absolutely fantastic. I love that. I'm not going to steal it. I'll give you all the credit in the world …

Reinhart: You can steal it. I'm taking it from Sharon Cadwallader, a wonderful woman.

Thorne: That’s phenomenal. So, you were a history teacher?

Reinhart: I taught history and English for a couple of years, yeah.

Thorne: This is way off subject (and you don't have to go into a lot of detail) but what period of history are you most interested in?

Reinhart: I was a history and philosophy guy. As a history major, and I sort of minored, but without all the credits to get a philosophy degree as well, and so I was very interested in that period of time, in sort of like the 20th century, like modern German, coming out of the romantic era. Right?

I was very much interested in sort of the history of ideas. I was a history of ideas guy. Spent a year at Oxford, I read a bunch of Isaiah Berlin, and so I was much more of a modern history guy. I ended up teaching ancient history because, you know what? It turns out, if you apply for a job teaching ancient history, you got to teach ancient history. And so, you know, I was focused on ancient history and I thought ancient history, and ancient literature at the time. And so, you know, we read “The Odyssey.” We read “The Iliad.” But it was a wonderful time.

And again, at the time, I was really committed to storytelling. And as a history major, I always thought that history in schools was taught so poorly because kids are just kind of bored out of their mind because it was a death march of facts. And history is an incredible story. So, I treated my history class as a one giant story, and I think (you know, kids at least, either they lied to me or they generally enjoyed that year), and it was a wonderful time in my life.

Thorne: That's fantastic. Teachers rule the world.

Reinhart: They do.

Thorne: So, I'm going to ask you two more questions. Best piece of career advice.

Reinhart: Can I tell you like one other funny story? This is a different guy. Reed Hastings, who's a founder, CEO of Netflix. He and I got to know each other more than a decade ago, and I was asking him how he spends his time, and he said, ”James, I really spend my time …” (and this was like the phrase. He probably doesn't remember this. But I always remember this), he’s like, “I think about the future of the internet in Costa Rica.” I was like, what?

The reason I say that is because he was thinking about Netflix as a streaming company. Their ability to sell subscriptions and memberships and stream content is highly reliant on high speed internet, and so, if Costa Rica doesn't have high speed internet, Netflix can't grow there. I always remember that because it was a moment where I was like, as a leader — and the advice I give is — you have to be much further ahead than people even sort of realize. And so, if I'm just a month or a quarter ahead or a year ahead, I'm behind.

Thorne: Right, right, right.

Reinhart: Because there are great leaders out there that are two, three, four years ahead of me, and so that advice from Reed has always stuck with me. And even — I came in this morning and I was like, “God, what am I missing about the next couple of years?” And so, it's been great advice.

Thorne: And then the last question, James, what excites you most about the future of resale retail?

Reinhart: We going to look back (I don't know the time horizon. Is it seven years? Is it 10 years? Is it 15 years?), and I think we're going to get to a point where this is just part of what we do. We make stuff with the idea that it can be recirculated or it can be broken down and recycled.

It's a natural part of the shopping cycle. Retailers enable it. They take back the things you're no longer wearing. They make available things that they may have been made years ago. And so, I think what I'm most excited about is that weaving in of old and new, and having a more sustainable future for fashion.

And I … the thing is, I don't know whether … how long that's going to take. But I'm committed to that journey. And I think it'll be a better place for better place for us, better place for our kids, for sure.

Thorne: Excellent. James Reinhardt. It has been a pleasure talking with you. Thank you for joining us today.

Reinhart: Thanks for having me, Bill. I appreciate it.

Thorne: And thank you all for listening to another episode of Retail Gets Real. You can find more information about this episode at retail gets real dot com. I'm Bill Thorne. This is Retail Gets Real. Thanks again for listening. Until next time.

 

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The retail industry impacts everyone, everywhere, every day.

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