As global fashion brands outsource the “dirty work” of re-commerce sales, circular economy suppliers seek funding and liquidity in public markets.
By Dayna Fields
Listed companies like Waste Management collect our glass, plastic and paper, but there may soon be an opportunity to invest in companies that recycle our clothing and textiles.
Less than 1% of the materials used to make clothing is currently recycled to make new clothing, representing an annual loss of $ 500 billion in used goods, according to the Ellen Macarthur Foundation, noting that about 70% of clothing materials are landfilled or are incinerated.
Meanwhile, the sale of used clothing is expected to grow 11 times faster than new clothing by 2025, according to a report commissioned by online resale company ThredUp, which notes that the coronavirus pandemic has accelerated the trend.
Online second-hand fashion marketplaces are already capitalizing on the thrift movement, which is now back in vogue thanks to young Gen Z and Millennial consumers seeking discounts on designer clothes.
In February, Poshmark, based in California went public and raised $ 277 million at a valuation of over $ 3 billion. ThredUp followed in March, raising $ 168 million. This summer, Rent the Runway, a New York-based online designer dress rental service, filed for public disclosure.
While these companies only connect consumers who want to buy and sell used fashion, a new generation of businesses is emerging that collects, authenticates and repairs used clothing and accessories for resale.
Members of the ‘circular economy’, they are building logistics and infrastructure from scratch and aim to expand globally to continue serving global fashion brands, who hire these resale companies to take care of the “dirty work” that takes place behind the scenes of their re-commerce sites.
Patagonia, for example, has been selling its used and repaired clothing for often half of its original retail value since 2017 through its “Worn Wear” re-commerce site. Lululemon has followed suit more recently with its “Like New” division, as has Levi’s through its “SecondHand” segment.
All of these brands are outsourcing their resale operations to Trove, a California-based company formerly known as Yerdle, which secured $ 77.5 million in Series D funding last month, led by G2 Venture Partners.
According to a recently commissioned ThredUp report, 60% of traditional retail executives plan to capitalize on re-commerce sales through partnerships with outsourced resale companies, while only 8% said they would prefer to acquire one. . The limited number of strategic buyers suggests that IPOs may be their best funding and liquidity option.
For example, California-based Fashionphile, a second-hand luxury handbag seller who buys and authenticates used designer handbags from consumers, sees an IPO as a very attractive exit strategy, recently said founder Sarah Davis. Merger market.
Davis said the company “is achieving economies of scale” and may “100%” go public one day. Poshmark’s IPO this year has been “very exciting and inspiring,” she noted.
Luxury Brand, a California-based business-to-business supplier of pre-owned designer accessories, said Merger market it could consider public listing in the United States or the United Kingdom within five years.
To keep global fashion brands as customers, these companies must develop the capacity to collect, clean and repair clothing on a global scale.
“To get ahead of government intervention, global brands are raising their hands and asking how to do it? The problem is, there is no infrastructure, ”said Scott Kuhlman, CEO of textile recycler ReCircled.
Companies that put in place the infrastructure to prevent clothing from going to landfill may one day be as profitable – and as essential – as those that do the same for paper and plastic.
Dayna Fields is a Chicago-based reporter for Mergermarket covering food, beverage, beauty, and retail. She can be reached at Dayna.Fields@iongroup.com