Resale is messy. If you've ever shoved a pile of old Zara sweaters into a polka-dot bag and hauled it to the post office, you know exactly what I mean. For years, ThredUp was the "easy button" for the circular economy. You send them your clothes, they do the photography, they deal with the annoying buyers, and eventually—hopefully—you get a few bucks in your PayPal account. But lately, the vibe has shifted. Sellers are frustrated. Investors are biting their nails. The question on everyone's mind is simple: What actually happened to ThredUp, and is it still worth your time?
The truth is that ThredUp is currently caught in a brutal tug-of-war between being a tech company and being a literal warehouse operation. They aren't just an app; they are a logistics firm dealing with millions of unique, one-of-a-kind items. That is a nightmare to scale.
The Clean Out Kit Drama
People are mad. If you check Reddit or Trustpilot, the primary grievance involves the "Clean Out Kit." Back in the day, these bags were free, and the payouts felt fair. Now? There's an upfront fee just to get a bag processed, and the payout percentages for lower-tier brands have plummeted. Honestly, it’s a math problem.
ThredUp's CEO, James Reinhart, has been pretty transparent about the fact that processing a $12 Old Navy shirt costs the company almost as much as processing a $200 Reformation dress. When you factor in labor, storage, and shipping, the "cheap" stuff actually loses them money. To survive, they had to stop subsidizing your closet clean-out. This pivot felt like a betrayal to long-time users who felt the platform was becoming "pay-to-play."
It’s a tough pill to swallow. You send in 40 items, 10 get accepted, and after the processing fee, you owe them money or walk away with $1.42.
The Logistics Wall
Most people don't realize that ThredUp operates some of the most complex distribution centers in the world. We're talking about automated "Retrieval Centers" in places like Grapevine, Texas, and Phoenix. Unlike Amazon, which has 50,000 units of the same toaster, ThredUp has 50,000 unique items that all need individual photos, measurements, and descriptions.
They’ve leaned heavily into AI and automation to solve this. They use "automated single-item imaging" to speed up the process. But tech can only do so much when a human still has to check for a tiny coffee stain on the hem of a skirt. This overhead is why the company has struggled to reach consistent profitability despite massive revenue. They are fighting the physical limits of the "unit economic" model.
Why the Stock Price Tanked
Wall Street loved ThredUp during the 2021 IPO frenzy. Everyone was obsessed with ESG (Environmental, Social, and Governance) investing, and "re-commerce" was the darling of the ball. Then, the macro-economy curdled. Inflation hit. Suddenly, investors stopped caring about "growth at all costs" and started demanding "profit right now."
ThredUp’s stock price has taken a beating, often trading well below its $14 IPO price. The market is skeptical. They see the rising cost of labor and the fierce competition from platforms like Poshmark (owned by Naver), Depop (owned by Etsy), and the looming shadow of Shein’s own resale market.
- Poshmark: Requires the seller to do the work, so their margins are better.
- Depop: Owns the Gen Z "cool" factor.
- ThredUp: Stuck with the physical inventory, which is the riskiest place to be.
The Quality Control "Glitch"
Have you noticed more mistakes in listings lately? I have. Because they are pushing for volume, the "human touch" is getting stretched thin. It’s common to see a "silk" blouse listed that is actually 100% polyester, or a size 6 listed as a size 12 because the tag was misinterpreted.
This isn't just an annoyance; it's a structural risk. If buyers lose trust in the descriptions, they stop buying. If they stop buying, the inventory sits in the warehouse, costing ThredUp money every single day. They are walking a tightrope between efficiency and accuracy.
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Is Resale Actually Dying?
Not even close. The secondary market is projected to reach $350 billion by 2028 according to some industry reports (including ThredUp’s own annual Resale Report, which, to be fair, is a bit biased but uses solid GlobalData figures). The problem isn't demand. People want cheap, sustainable clothes more than ever. The problem is the "middleman" tax.
ThredUp is trying to pivot into "Resale-as-a-Service" (RaaS). They manage the resale programs for brands like Madewell, J.Crew, and Gap. This is actually a brilliant move. Instead of just being a thrift store, they become the backbone of the entire industry's circularity efforts. If they can make the RaaS side of the business more dominant, the volatility of individual sellers becomes less of a headache.
What You Should Do Now
If you're a seller, you have to change your strategy. Sending "mall brands" to ThredUp is basically a donation at this point. You won't make money. Save the high-end, designer, or "it-girl" brands for ThredUp if you're too lazy to list them elsewhere. For the mid-tier stuff? You're better off at a local consignment shop or just taking the tax deduction for a donation.
If you're a buyer, the "golden age" is still kind of here, but you have to be savvy. Use the filters. Ignore the "estimated retail price" because it’s often inflated. Look at the photos closely. The deals are still there because the sheer volume of inventory forces them to slash prices on items that don't move within 30 to 60 days.
Actionable Strategy for ThredUp Users
- For Sellers: Only send items with an original retail value of $100+. Anything less will likely be swallowed by the $14.99 processing fee and low payout percentages.
- For Buyers: Use the "Auto-Buy" or "Saved Search" features for specific high-end materials like "Cashmere" or "Leather." The AI often misses the value of these, and you can snag them for pennies.
- Check the "Last Chance" Section: This is where the algorithm aggressively cuts prices to clear warehouse space. You can often find 80-90% discounts here.
- The "Clean Out" Alternative: If you want the convenience of a bag but better payouts, look into specialty sites like The RealReal for luxury or Vestiaire Collective.
The "disappearance" of the old ThredUp is just the reality of a startup growing up and realizing that moving physical boxes of clothes is expensive. They aren't going away, but the days of "free money" for your old fast-fashion hauls are officially over.