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Goldman Sachs sees big money in used clothes

September 10, 2015

Rent The Runway Unlimited is a monthly subscription service to rent everyday clothing items.Rent The Runway Unlimited is a monthly subscription service to rent everyday clothing items.

Investment banking giant Goldman Sachs (GS) is betting on second hand clothing marketplace ThredUP by leading a $81 million funding round in the startup.

ThredUP, which debuted six years ago, is taking on eBay to sell used women’s and children’s clothes and accessories. Instead of customers posting items for sale, as they would on eBay, ThredUP makes it easy for customers to sell their old clothes by managing the sales process for them.

ThredUP sends customers a pre-paid, pre-addressed bag that they can fill with clothing, shoes and handbags, and then drop off at the post office or have picked up at their homes. When the bag reaches one of the startup’s processing centers, ThredUP employees photograph, itemize, list and sell the items on the site. The startup will also handle shipping to the buyer. The company says that it accepts and sells over 25,000 brands ranging from the high end, like Louis Vuitton, to lower end retailers like Old Navy and Gap.

Any item with an initial listing price of $59.99 or less qualifies for an upfront payout to the seller. ThredUP says that sellers generally get 10% to 40% of the anticipated selling price, depending upon the quality of the item. Any item with an initial listing price of $60 or more qualifies for consignment, whereby sellers keep 50% to 80% of the sales price after the item finds a buyer.

ThredUP declined to reveal revenue numbers, but said that to date it has processed (that doesn’t mean sold) 11 million items. At the end of 2015, the company expects to process 1 million items monthly.

James Reinhart, CEO and co-founder of ThredUP, explained that the company was able to generate more sales over the past two years by opening regional processing centers. As a result, customers receive their orders more quickly.

In addition to facing competition from eBay (EBAY), ThredUP goes head to head with other online consignment startups like Poshmark, TheRealReal, and Threadflip. In July, eBay acquired competitor Twice to push into the market.

ThredUp’s latest funding round, which also included Trinity Ventures, Redpoint Ventures, Highland Capital Partners and Upfront Ventures, brings the company’s total funding to $125 million.

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