Good morning. My name is Trevor Young. I'm one of the internet analysts here at Barclays. I'm pleased to be hosting the ThredUp team again. Thanks so much for joining us, guys.
Thanks for having us.
I guess to start off, just wanna hit on some of the near-term trends. You know, towards the end of 3Q and into 4Q, it sounded like we're starting to see some diverging dynamics in the U.S. and European businesses. Just wanna hit on that, you know, each of those businesses individually, the various successes and challenges that you're facing in each of those regions today.
Yeah, I mean, I think, Q3 in the U.S. was quite strong, right? I mean, it was first time, EBITDA, you know, breakeven, free cash flow, positive. You know, we joked with an investor earlier this morning that, you know, when we went public in mid-2021, we thought it would take about six quarters to sort of reach that milestone. And so despite all the choppiness, you know, we were just a couple quarters behind-
Right
... achieving that milestone. So I felt good about the U.S. It's still difficult out there-
Right
in the operating environment, but I think we made a lot of progress. I think in Europe, you know, Q4 tends to be their strongest, you know, biggest quarter. About 40-40%.
Mm-hmm
- of their revenue comes in Q4, and so that business is just a little, a little choppier, I think, than we expected. I think some of that is the seasonal, you know, trends, and then some of it just being the more promotional environment in Europe, which we've actually seen other retailers come out and talk about-
Talk about that.
since we had earnings.
Right.
So it kind of validated what we were seeing. But look, I think structurally, we feel good about the U.S. business, and I think the European business will get there. We've only owned it for a couple of years, so.
Yeah. And that's an important distinction, particularly on the U.S. side, being profitable, which I think is frankly being underappreciated.
Right.
Because obviously, the path to reaching EBITDA breakeven consolidated base is very important to you guys and investors. But I think getting the U.S. there as a first step is a huge win.
Yeah, and we expect Q4. You know, we said we expect Q4 to also be, you know, breaking in on an EBITDA basis.
Yeah.
Q4 in the U.S. tends to be our slowest quarter.
Right.
And so the fact that we can do that back-to-back quarters with-
Right
Q4 being slow, I think portends a pretty bright future into 2024.
Yeah.
It's not gonna be, like, it's not gonna be easy-
Right
but we expect to be able to continue on that momentum.
Yeah, and I think it's, like, true validation of the business model itself. And then, I think something we don't show a lot of, but we, we know, is, like, the unit economics in the U.S. If we just, you know, we were sharing everything we possibly could, showing that, it would be like: Okay, you just need to sell more stuff-
Right
- because the unit economics are amazing. Now, Europe's just a little more immature of a business-
Yeah
and needs to catch up to that.
Yeah. And actually sticking with the European business remix for a bit, you know, a few moving parts there as you move more towards the consignment model, comparable to what you've accelerated here in the U.S. with the core business as well as RaaS. Just any structural differences that would make consignment gross margin there materially different than in the U.S.? Is it just scale considerations, you just have to get that scaled up over the coming years? And then also, is there anything structurally in the market that would keep Europe from becoming 100% consignment or close to 100% consignment long term?
Yeah, I mean, I think... Well, I'll start and jump in.
Yeah.
I mean, I don't think there's anything, like, genuinely different, in the European consumer-
Yeah
around why they're going to have appetite for consignment. So we do actually see a similar long-term margin profile. There's obviously differences in the price points.
Yeah
Right, in those markets, as well as the labor costs-
Yeah
- and logistics in those markets. The labor and logistics is actually, like, positive relative-
Right
to the U.S. And labor costs there are 60%-70% lower.
Right.
Yeah.
Right?
Yeah.
And so, like, there are, like, pretty nice tailwinds once we get that engine going. And so I think the question that we are continuing to sort of figure out is, like, what is the right sort of burn-in rate of consignment?
Yeah.
And so we wanna make sure that it's steady and methodical, and we don't, you know, shock the buyers or the sellers.
Yeah.
You know, but we feel good about, like, the progress that business can make in 2024. So-
I think the consignment mix is important to understand, 'cause I think you asked about 100%. I don't think, even in the U.S., we're moving towards-
Not gonna get there.
... almost all consignment, but it's not gonna be 100%.
Right.
I think we'll exit, or we'll get into 2024, it'll be about 90% consignment in the U.S.
Correct.
Europe will be about 20%. We're gonna go from essentially, like, 70-75% to 90%, and 0% to 20-
Right
Between the U.S. and Europe. So it's good to kind of think of how that margin works.
Okay. And back to your point on the unit economics, maybe you have lower, you know, average unit prices in Europe, but you also have commensurate lower costs.
Yeah, exactly.
So there is some degree of-
You expect contribution.
Yeah, you expect contribution dollars, contribution margins to be, to be similar.
Similar. Okay, that's helpful.
Actually, just before we leave consignment, 'cause we're on that, is like just as consignment shift happens, the transition of where we record the cost of sales-
Yeah
it moves from, or the payout moves from cost of sales up to contra revenue.
Contra, right.
It reduces kind of your revenue growth rate.
Mm-hmm.
We always get people to look at gross profit dollar growth-
Dollars, yeah
as kind of a true piece of the business, true growth of the business.
Right. And so that's how kind of you're measuring performance versus the overall industry of, like, those GP dollars versus overall industry growth?
Yes.
Yeah.
Okay.
Yeah.
Makes sense. More of a bigger picture one, you both seem to manage the business with genuine focus on the long term. You know, James, you made comments last quarter, like, you probably could be at a point where total company gets to EBITDA positive-
Yeah
sooner, but that's maybe not what's best for the business. Just talk us through how you think about that path to EBITDA breakeven. How important is it versus balancing those long-term goals? And just overall philosophy of managing the business and, you know, how it may or may not differentiate you from competitors.
Yeah, look, I think it's critical to get to breakeven-
Yeah
- and generate free cash flow, right? So unequivocally, like, that, that, that is the goal. And I don't think you should be stupid-
Yeah
like, in pursuit of that, right?
Yeah.
I think businesses get into trouble when they become so short-term focused on something like that that they really do things that are unnatural.
Yeah.
The philosophy is, I'm just trying to balance to make sure we don't do anything that really will hurt us in an environment. You know, you can imagine a world, Trevor, a year from now where interest rates have come down, and all we're talking about is growth.
Right.
I'm like: Man, we really should have invested in some of those core things-
Right
that would be growing the business right now. And so I'm just trying to balance that. And I think my point of view on 2024 is that I still think it's going to be... I don't think it's gonna be an amazing, like, consumer environment, but I think it's gonna look closer to 2019-
Okay
... than it looks to 2023.
Okay.
In that environment, you know, ThredUp was ripping.
Yeah.
And so what I'm really focused on is, like, buyer momentum.
Yeah.
And I think if, 'cause the unit economics are strong in the business, and I think buyer momentum is what will drive, you know, returns in 2024. And so I'm just trying to make that balance. But I understand we've got to be breakeven, we've got to generate free cash flow, but active buyers are the name of the game.
Yeah. I think just to put, like, the less optimistic view on that a little bit. We're planning the entire 2024 as if there is really no change-
Yeah.
in the consumer environment.
Yeah.
I want James to be right more than anybody. But trust me. Yeah, I know.
Yeah, yeah. No, fair enough. It's-
Well, and to that point, right, it is kind of a murky-
Yeah
outlook right now, right? I mean, we all saw, you know, the Adobe data for Black Friday, Cyber Monday, was actually stronger than people thought. But then we also, at the same time, have worries about the impact from like, you know, Temu and SHEIN-
Yeah
- and how that's impacting e-com broadly. I guess, what are you seeing as we progress through Q4 and into the key holiday shopping window, both from consumer demand and competitive standpoint? I realize holiday is not a key part-
Yeah, yeah
of your business, but you're also cognizant of the ad environment, promo environment, and how you respond to that.
Yeah
as you start to look into 2024 as well.
Yeah, I mean, I saw the Adobe data and, like, you know, my, my sense is that everything in Q4 was pulled forward.
Yeah.
Right? I think October was stronger than people maybe would have thought. I think that the holiday was strong. It was strong for others, it was-
Yeah
... it was good for us. But I do think, actually, when we net it out, Q4 is gonna look kind of what people thought.
Yeah.
It just might be the lumpiness might be a little different.
Lumpiness.
I do think Q4 is always ThredUp's weakest quarter in the U.S.
Yeah.
Right? Because specifically, we have no gift-giving business.
Right.
Nobody really buys secondhand gifts for others. We wanna change that.
Right.
That would be an amazing outcome, but that's not where it is today. So, I think the holiday will be as expected for everyone, and... But I do think it's a little bit of a last gasp around discounts and promos.
Yeah.
I do actually think inventories are in much better shape when you look across retail. I think, companies moving into 2024 recognize they need to get a little sharper-
Yeah
on the promotions. And so we expect that environment to be more normalized than it was in 2023.
Got it. And on that competitive environment, particularly as you look at, like, the fast fashion and deep discount e-commerce players, you've obviously encountered competition before.
Sure.
You know, SHEIN, as well as just deep discounters, is nothing new to you. Just help us understand how it does or doesn't impact demand on the platform, and whether you view these players as more of a threat than traditional apparel players, just doing that heavy discount or getting maybe, like, more surgical on, on promo, like you're saying.
Yeah, I think there's a slightly underappreciated change we made in the business over the last 18 months, which was shifting the buyer segment slightly more premium.
Yeah.
Right? I've said it, like, multiple times on the earnings call, which is, it wasn't that we were moving to a luxury lane, I mean-
Yeah
... but we were kind of moving the stack up. And I think the effect of that is that, you know, the average price points on ThredUp are, are higher than they are on, on a SHEIN or on a, on a Temu. And so, so we certainly have some impact on it, but, but I think it's more the fast fashion, like, and the truly deep discounters, that are probably going to be more impacted. So my guess is it's, it's an Old Navy, right?
Yeah.
That might, like, have to go more head-to-head with SHEIN than ThredUp. We've also, you know, started to try and attack a customer that's slightly older.
Mm-hmm.
So when you would think about, like, premium, those customers, a premium customer who has greater spending power, also tends to be, like, a few years older.
Yeah.
I think both of those things now are putting us in a position that I think is slightly better than where we were probably two years ago. As for the ad rates, I mean, we certainly see some effect. But again, because we're not focused on Gen Z-
Yeah
... specifically, we're not focused on $10 hoodies specifically, I think we have a slightly less impact on others.
Yeah. And just to recap, part of that shift to go more upmarket, more to like the premium consumer, maybe a little bit older demo, was in response to what you were seeing, where that budget consumer was really pulling back with no clear line of sight as to-
Yeah
when they would resume. So-
Yeah
... a proactive move.
It was totally proactive, and I think we've proved to be kind of right with that strategy. But I think what's happened then, is that that has switched a little of the active buyer growth, where we were willing to sort of shed some of those active buyers at that lower price point, as we pursued buyers at higher price points. And so I think that transition has happened successfully so that our buyer population is in better shape.
And as you think, actually, about the buyer population, you know, what are some of the recent developments you're seeing with respect to, like, retention, purchase frequency, basket size? You know, it sounds like average unit price is up, but how about, like, units per order and that sort of thing?
Yeah, I mean, I think, units per customer, I think are relatively flat.
Mm-hmm.
Orders are up. I don't know off the top of my head what the growth in orders year-over-year is, but relative to buyers. But look, I think generally speaking, we feel good about the sort of underlying Unit Economics of the business. I do think there's there are areas where we're gonna experiment with shipping, we're gonna experiment with how we think about returns, and all areas where I think on the margin we can tweak and improve the economics further.
Got it. And just back to the point on kind of the segmentation of your consumers, like, what's happening with those budget shoppers that had pulled back last year? Are they kind of finally coming back in, or are they still out of market? And how does that compare versus the mid-market, and then those higher income consumers that you're going after?
... Yeah, we haven't really seen the budget shopper, like, you know, meaningfully come back to the platform. But also, Trevor, like, we've honestly, because we've shifted the mix slightly more premium-
Yeah.
We've probably created that event.
Right.
Right? But the Unit Economics on that product was not as good.
Yeah.
Right? That budget shopper was less loyal.
Yeah.
Right? And so I think ultimately, it's been the right move for the business, and I think we'll see over time, as we get into 2024, you know, if you think about the stuff on ThredUp that is on that we listed, but then is on sale, I think that probably appealed to the budget shopper a little bit more. But remains to be seen. I don't think chasing budget shoppers in 2024 is gonna be a core part of what we do.
Actually, as we talk about 2024, you know, are there any trends or competitive pressures that are standing out as different from 2023? You mentioned you think 2024 is gonna look maybe more like-
A little better.
- '19.
Yep.
Just, you know, for the benefit of the audience, like, what are those specific things that you're seeing, whether it's promo, competitive pressure, anything like that?
Yeah, I think it is just... I think the promotional environment. I think inventories being cleaner and brands and retailers understanding that, like, they were able to, they were able to sort of explain 2023 as a promotional year, where inventories were heavy. But I think if you were a buyer at the beginning of this year, buying for 2024, I think you were getting much sharper.
Yeah.
So I think that that same story of we had to move stuff, we had to be more promotional, is totally gonna be reset.
Yeah.
And so, I think what will remain to be seen is, like, whether customers are willing to tolerate incrementally higher prices or not.
Yeah.
And we're prepared for either scenario.
Yeah. And we've definitely seen it with inventory to sales growth rates starting to converge, get back to more sensible levels.
More sensible levels, and in a more sensible environment, that's a winning opportunity for us.
Yeah, makes sense. You mentioned early on in your comments about the increased need for promo, in particular to, you know, what you're seeing from competitors, and it does sound like that's a bit unclear how that trend's going forward, since inventories are a bit cleaner. But just help us understand how far you're willing to go, you know, chasing that promo to maintain order growth, momentum, and the buyer growth, versus pulling back to maybe sit out any sort of irrational behavior, if you're seeing that irrational behavior or not.
I don't know if we're seeing irrational behavior, but, like, look, we like, like... I think everybody has had to be like, if you had a panel of a dozen CEOs, everybody's like, "Ah, I wish I could promo just a little less.
Yeah.
Right? Like, so I think we all, like, would agree that it would be better it. And so I wouldn't go to the point of irrational. I think it was more irrational a year ago.
Yeah.
I think it's like every quarter feels like it's gotten a little better.
Yeah.
But the customer has been the winner in all that.
Yeah.
Like, never been a better time to buy stuff.
Right.
But that, I think that's gonna change. And I think, like, where we are positioned is to really deliver great value in 2024.
Yeah.
And I think that's where we're focused.
Makes sense. And I guess more of a bigger picture one: How do you view kind of the health of supply and demand at this point? Do you feel like that's pretty well in balance? How's the backlog of Clean Out Kits trending? And do you feel like you have enough depth of the product that's actually selling through?
Yeah.
'Cause I know obviously shaping the inventory has been important over the last year.
Yeah, yeah. Yes, filters have been strong. Backlog, I think, is under six weeks.
Okay.
5, 5, 6 weeks. You can go to the website and get, like, real-time updates.
Yeah.
We do update it, like, regularly. But look, I think the backlog has never been in better shape. The suppliers are getting a great, you know, buying, processing experience. I think the mix of goods is as good as it's been.
Yeah.
So look, we feel like the engine is in good shape. Again, it's hard. Like, I don't wanna—like, it's hard. And I think the consumer is like it's not in amazing shape, but I do feel like it's getting like a little bit better.
Okay.
I think I think it's always good to remember, like, the supply side, we're not doing much to try to get this supply, and actually we're charging people, right?
Right.
To send us their supply. So I think there's always, we still have a lot of things in our playbook where it's like, "Hey, what if we needed 50% more supply?
Right.
We could go do that.
Right.
As demand ratchets up, and it will-
Yeah
... It's just a matter of when, filling the other side of the marketplace with supply, we got that.
Isn't a worry.
Yeah.
Yeah.
That definitely makes sense. Shifting gears. RaaS, obviously, it's an important area of growth. Can you talk a little bit about how that is performing? Obviously, you have, you know, several dozen partners-
Yeah
... but obviously, in various stages of their ramp, and how this product differs from kind of the core consignment supply. Do you see faster sell-through there? I know much of this business is now actually, you know, on a go forward, gonna be consignment.
Yep.
So.
Yep. Yeah, and I think we have over 50 RaaS clients, right now. Yeah, I would say that the supply coming from those RaaS partners is sort of on par-
Right
... with what we're seeing in the U.S. business. I think one distinction now is that, with fees on the core business, we can actually shape the mix a little better-
Yeah
... on the direct business than we can on the RaaS side. So we're working with our RaaS partners to help them figure out how to, like, you know, shape the mix to be a little bit better. But yeah, it continues. I think in our annual impact report, we talked about close to 25% of our clean-out kits processed last year-
Mm-hmm
... came from RaaS partners, which was something we hadn't disclosed previously.
Yeah.
But, you know, people are always like: "Hey, how big a part of the business is RaaS?" It's like, okay, well, 25% of the supply is coming from RaaS.
Yeah.
So, like, it's a big part. I think what we're trying to figure out right now is, I think we have a really strong stable of clients, and, you know, how do we get each of them to grow their businesses?
Yeah.
So I think we're probably in the optimize phase of the business, where we grew it to 50 clients over a couple of years.
Right.
Okay, let's get those businesses really humming, and then invest more in adding new clients, which I think is the right, right cadence.
Yeah. Makes sense. On the 3Q release, you called out Thrift Promise as improving retention, reducing return rate, and driving logistics savings. So pretty good trifecta there—for any e-com marketplace.
Yeah.
How far along are we in terms of improvements in each of those three areas? Is there still more room to run? And where are return rates today, and where do you actually see that going over time?
Yeah, I mean, returns themselves are, you know, sub 20.
Okay.
And so I think you could probably say prior to that, 'cause we already said, that we had about a 700 BP improvement.
Yeah.
So it kind of peaked up. But with all the focus on Thrift Promise, including Keeper Credit, and really allowing the customer to do things that they normally wouldn't do, where if they wanted to return one item, we would be like: "Great, return it." It would cost us as much to ship it back and ship it out again. Where it wasn't a good financial outcome, but also, I think the experience from the customer itself wasn't great either.
Yeah.
So now we give them credit, they come back, they shop.
Yeah.
It's a much more improved experience, and I think that really helps with retention and just overall customer happiness.
Yeah.
Which is, I think, a big win for us, and it's a huge focus across the board.
Yeah, and remove that pain point for them.
Yes.
Yeah. Yeah, makes sense.
I would add, like, so related to promise, like, stuff work we're doing on delivery.
Mm-hmm.
We're now testing, you know, 2- and 3-day delivery, you know, in a bunch of markets across the Southeast.
Okay.
There's a number of customers now out of our Atlanta hub, where we're getting close to next day-
Wow
... delivery, which is a really, like, powerful thing in secondhand.
Yeah.
So I think, you know, we think about Thrift Promise as an umbrella for what we're trying to do around customer service, returns, and delivery. And on the customer service side, we've built now, like, a really, like, slick interface, where if you've got any issues with ThredUp, you can go into a user interface and either get self-help.
Yeah.
So real time, you know, helping yourself. It's like, I sort of described it to somebody as, like, have you ever had, like, a DoorDash order, where, like, your, like, chicken tikka masala, like, didn't come, right?
Yeah.
You can go right in the DoorDash and be like: "Hey, I didn't get this.
Right.
And instantly-
Credit
... you got your credit, right? That feels so good. So we're sort of taking a page out of that-
Yeah
... and trying to make people feel really good that they should can trust Thrift.
Yeah.
You add that, plus you add on, you know, fixing the unhappiness around anything they wanna return, and then you add speed.
Yeah.
We think, like, those are three really powerful things to lean into as we get into 2024.
On that speed of delivery, since you mentioned it, how do we think about the balance of that? Because, obviously, it's about better customer experience, but also incremental cost there. So how are you balancing that?
Yeah. See, what's great about it is it's really redoing some of the activities in our supply chain-
Okay
... to consolidate orders differently in our DCs, to change our pickup times with our partners. And so it's not actually costing us, like, materially more than what we're doing right now.
Okay.
It's just reordering some of the ways we did. So for example, you know, we may have, like, consolidated an order in Atlanta and put it on the 5:00 P.M., just making this up, right?
Yeah.
The 5 P.M. truck, right? And now it's like, oh, well, as long as that order is in by 6 A.M.-
Right
... we can actually put it on the 6:30 A.M. truck.
Right.
And then asking our partners to pick it up and turn it into their last mile delivery.
Right.
And so it's reordering the value chain, I think, is driving that opportunity.
So your own optimization, not incurring incremental cost necessarily?
Yeah. I mean, it costs like a little bit more-
Yeah
... in this experimental phase, but-
Right
... but we think it, the customer service, the customer experience is so much better.
So much better, yeah.
I mean, some of these things are as simple as we use a variety of shippers.
Yeah.
The same shipper in Atlanta versus Dallas is vastly different. It's, it's very interesting to think about.
Yeah, right.
Like, they're not small.
Right.
But the Atlanta one, amazing!
Yeah.
Dallas, we should use somebody else.
Right. Yeah, yeah, it's very-
Like, I think then there's tiny little companies that are like, they do metro Atlanta.
Right.
Like, if you can take advantage of that, and they're trying to compete with these big guys-
Right
... so it's very competitive, and it's been very helpful in the shipping speed.
Yeah.
We're also optimizing... I think one of the things we've learned over the last year on the customer is, customer is definitely more urban and suburban, right?
Mm-hmm.
Our best customers, like, they live in urban and kind of suburban areas around major metro areas. So really optimizing our customer experience, customer delivery around that customer-
Yep
... has made us change some of the things we do in the supply chain to delight that customer.
Yeah.
And so what that really means is that, if you're a customer who lives in a rural area-
Yeah
... you're probably getting incrementally worse service from us-
Right
... right. But when we look at the data, the density of the customers we're able to serve by switching these things is much improved.
Yeah, kind of like an 80/20-
Yes, exactly right.
Optimized for the 80.
Yeah. Yeah, yeah.
Yeah, totally makes sense. On margin, we look at the long-term guide you put out there. Gross margins get, you know, 75%-78% versus 67% today. That comes predominantly, I think, from consignment mix. That seems pretty straightforward.
Consignment in Europe.
In Europe.
Yep.
Okay. And then on marketing, you know, 15%-18% of revs is the goal, versus 20% today. That also seems fairly straightforward, just kind of optimizing your spend. SG&A, you expect a pretty big jump there. You're targeting 7%-9% of revenues, versus about 14%, and then the ops, and product, and tech, also upwards of a 10-15 point improvement. These latter two, obviously, are the key drivers of-
Mm-hmm
... of getting to your long-term EBITDA goals. How do you drive that? How do you drive those improvements? Is it just further scale in the business, or is there, you know, some actual structural improvements, things that you can control besides just, you know, top line leverage that get you there?
I think there's 2 pieces. I think on the SG&A side, it's scale in the sense that for every extra $1 million, $10 million that we do, we're not adding SG&A dollars at any incremental, you know, closeness at all.
Yeah.
So I think that one, I feel very confident, that's just about natural scale as the business improves. When you get to operations, product, and technology, it's really about operations in the sense that product and technology will scale similar to, like, SG&A, but the operations is really inbound processing.
Yeah.
And all of-
... you know, the opportunities for automation improvement really start to drive from that area. We're really good about automation across the DCs, but it still leans a little heavy on outbound, which is COGS. So the more we can automate on the front end, really starts to drive that inbound processing. And, for example, and I think we've talked about it, is we do things like image capture or photo capture, which basically takes a picture of the garment that we're gonna put online, not for going online, but just so we can cross-check our database of 130+ million items. Have we seen that item before?
Yeah.
If the answer is yes, we can go pull that picture from the first time we saw it or the last time we saw it, and skip the whole manual photo process, where someone's actually take a garment off, putting on a mannequin, taking a picture, flipping the mannequin around, taking a picture, and then putting it back on the hanger and sending it away. So we're talking in the $0.50+ kind of savings per item. When you're doing 20+ million items, it's a big driver-
Right
on the cost efficiency. So that's one of the things as well.
Yeah.
I think you could pull in the European side, too, that business is just further behind in automation and efficiency and pricing improvements and things like that. All that will start to help across the P&L, but in the OPT side, too.
Okay. On the European side, it's basically just taking the same blocking and tackling that you learned in the U.S.-
Yep.
Apply it there as that scales, but in a thoughtful way, without disrupting the business too much.
Yeah, and we probably made, you know, 484 mistakes in the U.S. We don't have to make those right, in Europe. Just one more thing I'd add, Sean, is, like, I think often sometimes people forget, like, we've got a busy marketplace.
Yeah.
Like, we want merchants, we don't make stuff.
Right.
Right? And so, that whole part of, like, what happens in other retail businesses doesn't exist for us, and that's what allows the SG&A and the P&L of OpEx to really scale.
Okay, got it. Just a couple left in our last few minutes. One, shifting back to the competitive environment, but specific to the privates, 'cause there are some privates in this space.
Mm-hmm.
Obviously, you know, a key thing we've seen in recent years is, you know, not getting funding rounds as quickly or at all.
Yeah.
A lot of these companies having to focus on their burn rate. Just what are you seeing in the competitive environment from privates? And also, what are you seeing specific from the, you know, brands and retailers that are bringing resale in-house now that they may be piloted, maybe with you or competitors?
Yeah.
You know, how do you see that trending in the coming years?
Yeah, I mean, most of the competition we see is on the RaaS side.
Okay.
Because I think people attempting to compete with us directly with, you know, building a new supply chain, building, like, distribute, like-
Good luck.
Yeah, I wish you luck, right? But that's like a natural segue into the retailer conversation-
Yeah
- which is, if you're a retailer who wants to take this on yourself, I also wish you, like, a lot of luck. And it's not because they can't do it, it's just that, you know, given the chance to build or buy, they're better off working with someone for whom this is, like, a unique activity.
Yeah.
Right? And so, I think we're being patient in the competitive environment. I do think it will be very tough for a number of these guys to raise-
Yeah
raise money and, but there's some good, you know, potentially there's some good roll-ups, you know, out there. But I don't spend a lot of time worried too much about it.
Okay.
I mean, the good news, I guess this is hard to say it's good news, but let's assume some of these guys struggle getting funding.
Yeah.
They're all servicing... Generally, each one, each little one has one good client.
Right.
It's like, those guys are gonna wanna continue on this path, likely.
Right.
I think we're a great destination for that.
Are you seeing some of those wins on RaaS, where maybe a brand has been working with someone else, and they kind of see the writing on the wall, like, "Hey, they're not able to fulfill our needs or able to scale with us, and they're coming to you guys?
Yeah.
Okay.
Yes.
Okay.
Look, there's, like, they're great entrepreneurs out there, right?
Yeah.
Great entrepreneurs, like, they find a way to get things done. So,
Yeah
... you know, I don't think it's gonna happen overnight.
Got it. Last one for me. I have to hit on AI. It's like 23 buzzword-
Tell me what that means again.
- tech conference. Yeah, I know, everyone's had enough of it.
Yeah.
Look, obviously, you guys have a great moat in terms of your physical infrastructure, but you also have a huge data advantage.
Yep.
Because you have all this product, one-off coming in. You've partnered with a lot of the manufacturers to kind of pull in some of their data as well, to help that kind of triangulate. How do you see some of these developments that we're seeing real time in AI impacting your business over the medium term? Is there anything where you're like: Wow! Hey, if we can layer in XYZ, we're gonna be, like, way ahead of the competition or way ahead of where we thought we would be, you know-
Yeah
... even two, three years ago? Whether it's, like, able to, you know, determining the right items that are gonna sell through at the right rate, you know, dynamically pricing, anything like that.
Yeah, I have thought about this. I think the two things that are kind of bubbling to the top, one is, you know, one of the things that makes shopping secondhand online different than shopping new online, is just the photography.
Yeah.
Right? You're not able to see it necessarily on a model. You're not able to get all that laced out. Like, you know, it's just... You get a different experience. I think generative AI is gonna change all of that.
Okay.
Our ability to put product on people in settings, in scenes, is going to make shopping secondhand over the next couple of years, if, if we're right, feel indistinguishable from shopping new.
Okay.
I think that's a step function improvement in the buyer experience.
Yep.
It was not possible three or four years ago.
Yeah.
That's one which I'm very bullish on. The second is, I think, changing the way search works.
Okay.
So I think instead of trying to use a structured data set and using attributes and allowing customers to kind of filter by those, I think, you know, big LLMs are gonna allow us, sort of, this next generation of LLMs are gonna allow us to improve search tremendously. And, so I'm excited about that because I think the two areas for the buyer are really, you know, that: Can I find what I want?
Mm-hmm.
Can I get a sense of how it's gonna look on me and look amazing?
Right.
I'm pretty excited about those.
Yeah.
'Cause we had this conversation two years ago, those two things were not, those things were not in play.
Right.
And, now I'm pretty excited that two years from now we're going to be talking about how good they are.
Yeah, and not tough to envision as that buyer gets a better sense of, like, how this could look on me, the likelihood of them, you know, actually-
Conversion. Yeah, conversion, willingness to pay-
Yeah
Right? Like, all that stuff improves.
Right. Got it. Totally makes sense. I see that we are out of time, so thanks so much, guys, as always.
Thanks, Trevor. Good to see you.
Thanks, Trevor.
Thanks, guys.