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'We’re not suffering' from supply chain challenges: ThredUp CEO

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James Reinhart, ThredUp Co-Founder & CEO, joins Yahoo Finance Live to discuss the online retailer’s record revenue in Q3, lower prices, and outlook for growth.

Video transcript

JULIE HYMAN: Shares of ThredUp are trading higher by almost 5% after the online resale platform came out with numbers that beat estimates. You see there a narrower loss than had been estimated. Sales up to just over $63 million. And the company really on a number of different metrics, reporting increases. Its third quarter gross margin, for example, 73%, as that revenue grew by 35%.

James Reinhart is with us now. He is ThredUp co-founder and CEO. James, thanks for being here. We have obviously seen a real growth in demand for resale apparel and other items. When you look at the platform, across the platform, in terms of geographies and/or types of items, where are you seeing the most growth and the most demand?

JAMES REINHART: You know, I think that the categories that are in demand right now are all the things that, you know, moving into the holiday season. So you're seeing winter coats and puffer jackets and handbags. And, you know, the data shows us that women are ready to go out and party. We're selling lots of heels. And so I think you see these sort of in-demand categories.

And I think what's interesting about ThredUp-- you know, there's been a lot of talk about supply chain challenges-- is, every item that we have is in stock, ready to ship. Everything we have is domestically sourced. And so I think one of the nice parts of our business today is we're not suffering from a lot of those supply chain challenges that I think other retailers are struggling with.

EMILY MCCORMICK: And, James, to that point, when you think about the competition with some other similar companies, like a Poshmark, for example, or a Real Real, what is the value proposition for a seller to turn to ThredUp as opposed to some of these other platforms?

JAMES REINHART: Yeah, we really focus on convenience. And so, you know, I think different than, say, a Poshmark, where you have to do all the work yourself, selling your item one by one, we send you our convenient cleanout kit. You fill it with all the items you're no longer wearing and send it to us, and we do all the work. And so we take 35,000 brands, more than 100 categories. And so, again, I think unlike a Real Real that just focuses on the luxury end, we're really that place to send everything. And so we do everything from Gucci to Gap and try and make it as easy as possible for the seller. And I think that's where our success has been coming from.

JULIE HYMAN: Yeah, and it seems like there's sort of a place for the different parts of the spectrum, judging from some results from some of the competitors, too. Let's talk about pricing because we've been talking to so many companies that have been raising prices, as their own costs are going up. How does that work for you guys in terms of what's coming in, how you price that, how you pay the people who are selling you their clothing, and then the pricing as it goes out?

JAMES REINHART: Yeah, I mean, we're now 125 million pieces of clothing processed. So we have a lot of data. And we use that data to create, you know, pricing opportunity for our buyers and our sellers that makes both of them happy. And so our goal, really, is to figure out what is the right price to delight the buyer and what's the appropriate price to pay the seller. And I think what we're doing, what we've seen lately is, I think, to your point, you know, prices feel higher everywhere, you know, from the pump to groceries.

And we've tried to lower prices on ThredUp. So our prices in Q3 and now heading into Q4 are 15% lower than they were this time last year. And that's by design to really attract buyers to the platform and give them a great deal in a holiday season where I think they're going to be feeling some pain. And I think it's our data and our platform that allows us that type of pricing power.

JULIE HYMAN: Well, give me a little bit more granularity on that if you can because that is rare, as you know, that someone is bringing down prices. So how-- I mean, presumably, your shipment costs, for example, are not going down. So how do you use the data to get that leverage, if you will, to lower prices?

JAMES REINHART: Yeah, it's funny. You know, it's economics 101. You know, it's price times volume. And, you know, because every one of our items is unique, we really use our data to figure out what are the price sensitivity curves that we need to achieve to sell more items in aggregate. And so, what we really focus on is total sellthrough and total items sold on our platform.

And it turns out that, like, there is some elasticity among the American consumer. And so when prices go down, we've been seeing the demand curve go up. And so we're selling more items, right, at modestly lower prices, but ultimately, that creates a lot of leverage in our business. And so, I think the more that we can do that for the consumer, the better off we'll be.

And I think the final note I would say is, it's not as though every price is lower, right? We sell 100 different categories across 35,000 brands. And so, we use our data to really, with a fine scalpel, price everything correctly. But I think at the end of the day, the American resale shopper is doing better on ThredUp than ever before.

BRIAN SOZZI: Do you think, James, there is consolidation coming soon to the resale market? And why not join forces, create even more leverage in your business, and getting more access to data?

JAMES REINHART: You know, I'll let you guys decide on when and where consolidation might happen. I think we're really focused on serving our customers. We have more than a million buyers and sellers across the platform. You know, our repeat rates are very high. So we feel like our positioning is right in the sweet spot of where you want to be, which is serving the vast majority of American consumers with an ever increasing assortment and being really convenient.

We think people don't want to do the work to sell their own things. And we think the market opportunity for the average consumer is much larger, say, than in the luxury space. And so I think that's really our sweet spot. You know, mass consumer convenience, great brands, great prices, and we feel like that's really the winning strategy over time. And so I don't think we're in the market to consolidate.

EMILY MCCORMICK: This is Emily again. I'm wondering just in terms of some of the partnerships that you have with brands like an Adidas or a Crocs and expanded partnership here with Madewell, how has that been impacting your supply and the types of assortment of goods that you're able to offer your customers?

JAMES REINHART: Yeah, these are exciting partnerships for us. We call it resale as a service. We now have more than two dozen of these partners. And what it does is it amplifies all of the competitive advantages that exist in our business. It gives us access to great supply through the Crocs consumer or the Madewell consumer or one of the other 20 partners we have. And it really helps tell our story that these brands are getting involved in resale and the circular economy, but it's powered by ThredUp.

And so, I often joke with the team. It's like we're the Intel Inside guys, right? You know, every computer you bought in the '90s in 2000 said Intel Inside. And I think about ThredUp really being that infrastructure that moves the resale economy forward. And I think we're really excited that we have all of these brands coming to us, saying, we want to have a more circular story. We want a sustainability strategy. How can we help? And I think you're going to see a lot more of that from us over the next few years.

JULIE HYMAN: Yeah, consumer trends definitely driving that. James, great to catch up with you. Thanks so much. James Reinhart is ThredUp co-founder and CEO. Appreciate it.

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