In a surprising turn of events, online secondhand fashion giant ThredUp has announced its decision to exit the European market. This comes as a shock to many, considering the rising popularity of sustainable fashion and the thriving secondhand market in Europe. The question on everyone's minds is: Why?
ThredUp's CEO James Reinhart attributed the exit to several factors, primarily the company's inability to achieve profitability in Europe. The European operations have consistently struggled, even with substantial investment and support from the US team. Q2 2024 saw an 18 per cent drop in European revenue, coupled with a negative adjusted EBITDA margin, signalling a challenging business environment.
Is Europe not ready for a secondhand platform?
The short answer is no. The secondhand clothing market in Europe is booming. Consumers are increasingly embracing sustainable fashion choices and seeking affordable alternatives to fast fashion. However, the market dynamics in Europe differ significantly from those in the US, posing unique challenges for ThredUp.
Some of the major challenges include:
Strong competition: Europe has a robust network of local secondhand stores and online platforms. ThredUp faced intense competition from established players, making it difficult to gain a significant market share. Also while the US has embraced secondhand shopping as a trendy and sustainable option, European consumers have been slower to adopt this mindset. Thrifting is often still associated with necessity rather than choice.
Cultural differences: Europeans have distinct shopping habits and preferences. ThredUp's US-centric model might not have fully resonated with the European audience.
Logistics and infrastructure: The fragmented nature of the European market, with its diverse languages and regulations, posed logistical challenges for ThredUp which they may have underestimated.
Table: Comparison of secondhand clothing markets US vs Europe
|
Market |
Market Size (2023) |
CAGR (2023-2028) |
Projected market size (2028) |
Key growth drivers |
Challenges |
|
US |
$30 billion |
12.50% |
$51 billion |
Sustainability concerns, growing acceptance of secondhand, strong online presence |
Price sensitivity, competition from fast fashion |
|
Europe |
$25 billion |
10% |
$40 billion |
Increasing environmental awareness, rising disposable incomes, growth of online resale platforms |
Cultural barriers, logistical complexities, fragmented market |
As the table shows, the European secondhand market is substantial and growing at a healthy pace. The increasing focus on sustainability, coupled with the convenience of online platforms, is driving this growth. However, cultural barriers and logistical complexities remain challenges that businesses need to address.
Key takeaways
• ThredUp's exit highlights the complexities of expanding a successful US-based business model into the European market.
• Despite the setback, the secondhand clothing market in Europe remains promising, driven by increasing consumer awareness about sustainability and the desire for affordable fashion.
• Local players with a deeper understanding of the European market and its unique challenges are likely to thrive.
While ThredUp's departure is a setback, it's not the end of the road for secondhand fashion in Europe. The market is ripe with opportunities for innovative platforms that can adapt to local preferences and navigate the unique challenges. As consumers continue to prioritize sustainability and affordability, the secondhand clothing market in Europe is poised for significant growth in the coming years.
