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Resale market poised to see consolidation

Jun 16, 2022
Illustration of a large blue paper shopping bag laying on its side with two other smaller, identical shopping bags falling out

Illustration: Annelise Capossela/Axios

Public and private resale companies are locking horns to get a piece of an already small market. The winners of this race are bound to swallow up the losers, according to Morningstar.

  • The public players include Poshmark, ThredUP and The RealReal. For private, it's Vinted, StockX and Vestiaire Collective.

Why it matters: With resale companies seeking to expand categories, extend to new geographies and aggregate supplies, "consolidation looks like the natural antidote," Morningstar says in a report.

State of play: Some of this horizontal merger activity has played out already, it notes.

  • Prime examples are Etsy with Depop and Farfetch with Stadium Goods, both deals that give the companies resale exposure and offer "large potential gains as the market matures," Morningstar says.
  • The same can be said with Vestiaire Collective's acquisition of Tradesy and ThredUp's buy of Remix, which expanded the buyers' geographic horizons and gave them quicker inroads into new markets.

What's more: Among some of the luxury goods players, there's been vertical M&A activity as those retailers seek to gain access to alternative sales channels.

  • Gucci's strategic investment in Vestiaire and Richemont's acquisitions of YOOX Net-A-Porter and Watchfinder are the ones Morningstar names.

Of note: Sellers tend to be agnostic when it comes to where their goods are sold and buyers tend to only shop on a handful of websites, trends that are sure to add pressure to these marketplaces.

  • "It makes little sense against this backdrop for three or four marketplaces to target the same demographic and product assortment," Morningstar says.

Yes, but: The cost of funding is already beginning to increase with higher borrowing rates and investors expecting higher returns and having less tolerance for loss-generating operations.

  • Morningstar says some form of price competition will likely occur "as firms compete for more expensive customer occasions (rising buyer acquisition costs)."

The bottom line: Look for the resale industry to coalesce around a handful of winners.

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