Some Models Thrive While Others Struggle

The fashion resale market has long been described as a disruptor in the retail industry, promising sustainability, affordability, and a second life for luxury goods. Yet despite its appeal, the financial realities of the business have proven challenging for some of its biggest players.

Take ThredUp, the online fashion reseller that has raised over $430 million since its inception in 2009. Since going public in 2021, the company has yet to turn a profit, reporting an EBITDA loss of $37.5 million on $314 million in revenue in its most recent fiscal year. The RealReal, another major player, has raised over $600 million since its founding in 2011. While it posted a rare profit of $5.4 million on $580 million in revenue in its most recent 12-month reporting period, its top executives took home a combined $9.15 million in 2023, not an encouraging sign to the financial market.

If the appeal of this industry eludes you, you are not alone. The RealReal’s stock is heavily shorted—at nearly four times the average rate on NASDAQ. ThredUp, once trading at $31 per share, now hovers at just $2.36.

Both companies were founded during an era when venture capitalists invested in high-growth startups with the expectation that scale would eventually translate into profitability.

It hasn’t worked out that way. The road to profitability in ecommerce resale appears to be different than first thought. But it’s not impossible.

Who’s Doing It Right?

While broad-scale, all-inclusive resale models have struggled, niche players are demonstrating that profitability in fashion resale is possible. Companies like Archive Resale and LePrix are charting a different course—one that prioritizes efficiency, specialization, and strategic sourcing.

Earlier today Archive Resale announced that it secured $30 million in growth equity. Archive is not public but that transaction at this time, when the market is laser-focused on profitability, likely means that Archive is at or near being profitable.

Unlike ThredUp or The RealReal, Archive provides a white-label resale service platform for brands, allowing them to control their own secondhand markets. CEO Emily Gittins told me “Brands are the unlock to making this more value-creating for everyone and it’s starting to be proved out.”

As she explains, having brands involved in the resale of the products they produced has multiple advantages:

• Higher prices: Much like certified pre-owned cars, consumers have higher confidence in secondhand goods sold by the original maker and they command higher values.
• Greater trust: Buyers have confidence in authenticity when purchasing from the brand itself.
• Lower costs: Brands can streamline authentication, product descriptions, and imaging, reducing overhead.
• Stronger customer loyalty: Consumers who resell through a brand’s ecosystem are more likely to remain engaged with that brand and purchase more products.

Major brands including Doc Maartens, The North Face, New Balance, M.M.LaFleur, Sandro, Hanna Andersson, Faherty, ba&sh and others have already partnered with Archive to capitalize on this model.

The Power of Specialization

LePrix, another rising success story, has built its business on sourcing luxury pre-owned goods primarily from Japan’s established auction market for resold products. The company specializes in high-end brands like Chanel, Hermès, and Louis Vuitton and has reportedly turned a profit despite raising just $5.5 million in total capital (per Pitchbook) compared to ThredUp and The RealReal, which have raised over $1 billion combined.

LePrix’s model is a classic case of arbitrage, buying in one market and selling in another. The barriers to entry—navigating Japan’s luxury resale ecosystem and managing cash flow effectively—give it a defensible position and room for growth.

What’s Next for Fashion Resale?

The challenges facing mass-market resale platforms boil down to inefficiencies in scale. Unlike traditional retail, where identical products can be stocked in bulk, resale relies on handling unique, one-off items—each requiring authentication, pricing, and individual marketing. The cost of processing a $100 item can be just as high as a $1,000 item, making high-ticket categories far more viable.

Companies that focus on high-value, narrow product segments are seeing results. Several of them have told me they prioritize:

• Luxury goods: Items that command premium prices can absorb authentication and operational costs.
• Tight product focus: Specialization in select categories enhances efficiency in authentication and marketing.
• Efficient sourcing: Whether through direct brand partnerships or established resale markets like Japan, securing high-value inventory at scale is key.

Unlike traditional retail, where supply is abundant and demand is the challenge, resale operates in reverse: consumer demand is high, but securing desirable inventory is the limiting factor. Industry insiders frequently cite the same constraint—if they could source more of the products customers want, they would sell immediately.

The Future of Resale: Innovation Over Imitation

Anyone who wants to succeed in resale has to deal with fundamental characteristics of the business that are in conflict:

On the plus side, consumers want it because products are cheaper, it allows accumulated things in their closets to get cleared out, it’s a source of cash, and it’s more environmentally sustainable.

On the negative side, there’s a price umbrella on how much most resold products can be sold for because they must be in proportion to new products. And there’s a competitive market for buying the desirable products so the cost of items can’t be beaten down too far.

Operators in the market have to be highly efficient and margins are almost never going to be excessive because outside factors put pressure on both costs and prices.

Despite the difficulties of scaling resale businesses in the traditional retail mold, consumer interest in secondhand fashion is undeniable. The challenge for entrepreneurs and investors is to rethink the model—not to replicate a department store for used goods, but to develop streamlined, profitable approaches that cater to market realities.

Companies that recognize these dynamics and build business models around efficiency, specialization, and strategic partnerships are poised for success. As resale continues to evolve, expect to see more innovation in this space—proof that when done right, the secondhand market isn’t just sustainable for consumers, but for businesses as well.