Second-hand retailers are expected to see strong sales this holiday season due to a shortage of clothing at traditional retailers. According to Adobe Analytics, apparel saw the highest number of online shortages for U.S. retailers in recent months.
As traditional retailers face shortages in new products, prices are being raised and discounts are being dropped. Analysts expect consumers to spend 9% more this holiday season, but retailers can't force their supply chains to run any faster. Meanwhile, thrift-based retailers have been able to maintain their inventories of second-hand clothes.
"Inventory is scarce right now. Consumers are going to shop where they find inventory to make sure they have things in time for the holidays," a retail analyst at Jane Hali & Associates, Jessica Ramirez, told Reuters.
Consumers are already bracing for the higher prices. According to a survey conducted by GlobalData for ThredUp (NASDAQ: TDUP), more than half of all U.S. shoppers expect to see higher prices, and a third believe that supply shortages will make finding gifts more difficult.
The survey also found that 62% of respondents feel that buying second-hand gifts has become more socially accepted over the last five years. Two out of three respondents said they would be open to receiving a second-hand item as a gift. Amongst lower age groups, these percentages rise considerably.
Prior to the pandemic, second-hand shops were already seeing a surge in popularity as a result of growing climate concerns amongst young people. The current apparel shortages are only expected to hasten that trend. Over the next five years, ThredUp and GlobalData predict that the secondhand retail market will double in size from $36 billion to $77 billion, a growth-rate eleven times faster than that expected to be seen by first-hand clothes during the same time period.
According to a survey conducted by Accenture, more than a third of all shoppers reported that they plan to shop second-hand for holiday apparel this year. Under the age of forty, that percentage jumps to 50%.
Newly-listed Poshmark (NASDAQ: POSH) and ThredUp are expected to see $82.7 million and $61.8 million in fourth-quarter revenue, respectively. Analysts expect luxury second-hand retailer RealReal (NASDAQ: REAL) to report $113.3 million in revenue for the holiday season.
For Poshmark, this represents an increase in revenue of 22.9%, while RealReal sales are expected to grow by 53.3%.
Despite the revenue gains, analysts expect all three companies to report per-share losses. All three are rated "buy" on Wall Street.