1

February22,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

1) Themarketplaceforonlinefashionresalecontinuestoevolverapidly.Followinganinitialwaveofonlinefashionconsignmentstartups,weakerplayershavegoneoutofbusinessandstrongerplayershavegrownandattractedmoreinvestmentfundingtopropeltheirfurthergrowth.

2) However,thereislikelytoberoomforonlyoneortwoplayersineachsubsectoroftheapparelresalemarket,asfashion“re-commerce”websiteswillhavetocompetefiercelyforbothinventoryandcustomers.

3) Thedigitalsecondhandapparelsectorwilllikelycontinuetogrow,boostedbyglobalexpansion,increasedseasonalinventorysupplyanddemand,millennialpenetration,brandmomentuminthefull-priceretailchannelandtheinvestmentnatureofcertainluxuryproducts.

4) Wehavealsoseentheemergenceofplatformstargetingnicheproductmarketssuchassneakerresalesandsocialmediapeer-to-peerresaleappssuchasDepopthattargetspecificdemographicgroups.

Deep Dive: Fashion

Re-Commerce Evolution

Deborah Weinswig

Managing Director,

Fung Global Retail & Technology

deborahweinswig@fung1937.com

US: 917.655.6790

HK: 852.6119.1779

CN: 86.186.1420.3016

2

February22,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

TableofContents

Introduction…………………………………………………………………………………………………………………………………………………..3DefiningRe-Commerce.......................................................................................................................................3AnEvolvingSector...............................................................................................................................................3

ContinuedInvestorInterestinFundingApparelRe-CommerceCompanies…………………………………………………….4

Low-to-Mid-PriceOnlineResalePlayers…………………………………………………………………………………………………………5ThredUP..............................................................................................................................................................5Poshmark............................................................................................................................................................5

LuxuryGoodOnlineResalePlayers………………………………………………………………………………………………………………..5TheRealReal........................................................................................................................................................5Tradesy................................................................................................................................................................6VestiaireCollective..............................................................................................................................................6

FiveCatalystsforRe-CommerceGrowth………………………………………………………………………………………………………..6

Depop:InstagramMeetseBay……………………………………………………………………………………………………………………….9

NicheStreetwearResellers:StadiumGoods…………………………………………………………………………………………………..9

KeyTakeaways………………………………………..…………………………………………………………………………………………………..10

3

February22,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

IntroductionDefiningRe-CommerceFashionretailisbeingreshapednotonlybye-commerce,butalsoby"re-commerce"—consumersbuyingandsellingpre-ownedapparelonline.Thefashionresaletrendisoneofanumberofinnovativeforcesimpactingapparelretailing,whichwearecoveringacrossourOn-Trendseriesofreports.

Onlinemarketplaceshavemadeitmucheasierforconsumerstobuyandsellsecondhandclothing,footwearandaccessories.Luxurygoodsareespeciallypopularinthere-commercechannel,astheirhigherpricesgiveconsumersgreaterincentivestobuyandresellthem.Re-commercecompanieshaveadoptedavarietyofdifferentbusinessmodels,includingdirectrepurchase,consignmentsalesandfacilitatingpeer-to-peersales.

Onlineresalecompaniesprovidesellerswithaugmentedservicessuchasphotographing,pricingandpostinginventoryinformationonline.Sellersarepaidformerchandiseeitherupfrontoronconsignment,whichmeansthatthesellerisonlypaidoncethemerchandiseissold.

Peer-to-peermarketplaceplatformsfacilitatethematchingofinventorysellersandbuyersandchargeacommissiononeachsale.Inapeer-to-peermodel,buyersandsellersconnectwitheachotherdirectly,thewaytheydooneBay.

AnEvolvingSectorThemarketplaceforfashionre-commercecontinuestoevolverapidly.Followinganinitialwaveofonlinefashionresalestartups,weakerplayershavegoneoutofbusinessandstrongerplayershavegrownandattractedmoreinvestmentfundingtopropelfurthergrowth.

Itisdifficulttoarriveatanaccuratemarketsizeforthissector,sinceallthecompaniescurrentlyoperatinginitareprivateanddonotdisclosesalesfigures.However,oneofthemajorresaleplayers,ThredUP,hasestimatedthattheUSapparelresalemarketwillgrowata6%CAGRover10years,from$14billionin2015to$25billionin2025.

Source:Thredup.com

TheUSapparelresalemarketisestimatedtogrowata6%CAGRover10years,from$14billionin2015to$25billionin2025.

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February22,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

BesidesThredUP,othermajorcompaniesintheonlinere-commercespaceintheUS,theUKandEuropeincludePoshmark,Tradesy,TheRealRealandVestiaireCollective.Wepublishedourfirstdeep-divereportontheonlineresaleandconsignmentmarketinJanuary2016.Thatreportprofiledallfiveofthesemajorre-commercecompaniesandtheirbusinessmodels.Readerscanfindthatreportatbit.ly/FashionResale.

Inthisupdate,wediscussthecontinuingevolutionandgrowthoftheapparelre-commercesegment.Weanalyzemarketcharacteristicsandthemainplayers,anddiscussfivefactorsthatarelikelytoboostthefashionre-commercesector.Finally,weprofiletwonew,niche-focusedresaleplatforms,DepopandStadiumGoods.

ContinuedInvestorInterestinFundingApparelRe-CommerceCompaniesSince2009,investorshavepouredmorethanhalfabilliondollarsinventurefundingintoapparelresalecompanies,andre-commerceremainspopularatmassmarket,middlemarketandluxurypricepoints.AccordingtoFashInvest,afashioninvestmentcommunity,investorsinvestedmorethan$175millionintheonlineresellingindustryin2016.

• VestiaireCollective,aFrance-basedonlineresellingplatformforluxurygoods,secured$62millioninfundinginJanuary2017,bringingtotalfundsraisedto$130millioninfivefundingroundssincethecompany’sfoundingin2009.

• Swap.comraised$20millioninDecember2016,bringingitstotalfundingtoapproximately$50million.ThecompanycurrentlyoperatesaChicagowarehousethatisthesizeofsixfootballfields.

• TheRealRealhasraisedatotalof$122millionsince2011andThredUPhasraised$131millionsinceitsfoundingin2009,accordingtoVentureBeat.Poshmarkhasraisedmorethan$70millioninfunding,accordingtoWomen’sWearDaily.

Figure1.SelectedRe-CommerceCompanies:TotalFundingRaisedSinceCompanyFounding(USDMil.)

Source:Companyreports/FungGlobalRetail&Technology

130 123

75 70

VesjaireCollecjve TheRealReal Tradesy Poshmark

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February22,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

Despitecontinuedinvestorfundinginterest,thereisroomforonlyoneortwoplayersineachsubsectoroftheapparelresalemarket,asfashionre-commercewebsiteshavetocompetefiercelyforbothinventoryandcustomersinordertobenefitfromeconomiesofscaleandachieveadequateprofitabilitymargins.

Low-to-Mid-PriceOnlineResalePlayersUS-basedThredUPandPoshmarkleadinthelow-to-mid-priceonlineresalesegment.

ThredUPThredUPisthemostmainstreamandwell-knownonlinefashionreseller,anditclaimstohavebeenthefirsttoentertheindustry.

PoshmarkPoshmarkhas1.5millionsellersthatoffer4millionitemsdaily.ShoppersonthePoshmarkappspendanestimated25minutesdailyonitandopenitseventoeighttimeseachday.AccordingtoPoshmark,oneinevery50USwomensellssecondhandclothingviaitsmarketplace.

Figure2.SelectedRe-CommerceCompanies:TotalNumberofMembers,2016(Mil.)

Source:VentureBeat/Women’sWearDaily/BusinessofFashion/FinancialTimes/FungGlobalRetail&Technology

LuxuryGoodOnlineResalePlayersThethreemainplayersinthepremiumandluxurysecondhandfashionresalemarketplaceareTheRealRealandTradesy(bothbasedintheUS)andVestiaireCollective(basedinFrance).Thesethreecompaniesareprofiledinmoredepthinourfirstresalereport,atbit.ly/FashionResale.

TheRealRealTheRealRealhas5millionmembersworldwideandisestimatedtohavedoubleditsgrossmerchandisevalue(GMV)yearoveryearin2016:

• Thecompanypaidout$200milliontoconsignorsin2016andisestimatedtopayout$300–$350millionin2017.

6.0

5.0 5.0 5.0

1.5

VesjaireCollecjve

TheRealReal Tradesy Depop Poshmark

TheRealRealhas5millionmembersworldwideandisestimatedtohavedoubleditsGMVyearoveryearin2016.

Since2009,investorshavepouredmorethanhalfabilliondollarsinventurefundingintore-commercecompanies.

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February22,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

• Halfofconsignorsthatusetheplatformhaveneverconsignedbefore.

• About98%oftheitemslistedonthewebsitesellwithinthreemonths.

• TheRealRealoperatestemporaryphysicalpop-upshops,andthecompanyplanstoopenonepermanentphysicalstoreintheUSinthefuture.

Figure3.TheRealReal:GMV(USDMil.)

Source:Women’sWearDaily/FungGlobalRetail&Technology

Tradesy• Tradesyhas5millionmembers.

• TheaverageordervalueonTradesyis$300andthesiteisestimatedtohavereached$300millioninsalesin2016.

VestiaireCollective• TheVestiareCollectiveplatformhas6millioncustomersacross48

countriesandconsignorsin17countries.Thecompanylists600,000itemsforsale,and4,000newproductsarelisteddailyonthesite.

• FranceisVestiaireCollective’smainmarket,representing35%oftotalsales.ThecompanyisalsoaleadingplatformintheUK,Germany,SpainandItaly.

• VestiaireCollectivecustomersspentanaverageof$427in2016,versus$371in2015.Thecompany’sCEOstatedthatannualsalegrowthhasaveraged70%.

FiveCatalystsforRe-CommerceGrowthWeseefivekeyfactorsconspiringtoboostthefashionre-commercesector.

1. Thereisroomforglobalexpansion:

• VestiaireCollectiveplanstodedicateitslatestroundofinvestmentfinancingfundstointernationalexpansion,inparticularintheUSandAsia.

100

200

400

2014 2015 2016

Weseefivekeyfactorsconspiringtoboostthefashionre-commercesector.

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February22,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

Approximately77%ofshoppersandconsignorsconsideraluxuryproduct’sresalevaluewhentheybuyatfullpriceatretail.

• TheRealRealplanstoaddmoreinternationalconsignmentsellers.Thesiteshipsinternationally,butconsignorsarecurrentlybasedonlyintheUS.

2. Full-pricebrandmomentumstimulatesdemandintheresalemarketandhasasignificantimpactontheresalevalueofbrandedproducts:

• Theresalemarkettendstoreflectchangesandtrendsintheretailmarket.

• ThredUPreportedthatactivewearwasamongthefastest-movingcategoriesonitssitein2016,reflectingthecontinuedmomentumoftheathleisuretrend.

• Thearrivalordepartureofacreativedirectorataluxurygoodscompanytendstohaveanimpactonconsumerinterestinabrandandtoincreasetheresalevalueofcurrent,previousandfuturecollections.Forexample,theappointmentofHediSlimaneatYvesSaintLaurentresultedina275%increaseinresalesofcertainofthebrand’sproductsduringhistimeatthefashionhouse.AndtheresalevalueofsomeChristianDiorproductsincreasedby25%inthethreemonthsfollowingRafSimons’departurefromthecompanyinOctober2015,comparedwiththethreemonthsbefore.

• TheRealRealsaysthat77%ofitsshoppersandconsignorsconsideraproduct’sresalevaluewhentheybuyatfullpriceatretail.

• Intermsofspecificluxuryproductcategories,bagconsignmentsellersaregenerallyabletorecoupthehighestpercentageoftheoriginalretailsaleprice.Theyarefollowedbyconsignorsofshoesandready-to-wearapparel,accordingtoVestiaireCollective,whichhasalsolaunchedaresalecalculatorthathelpssellersestimateresaleincome.

Figure4.SelectedLuxuryGoods:PriceRecoup%ofOriginalRetailValue,

Source:VestiaireCollective/FungGlobalRetail&Technology

75%

57%

40%

Bags Shoes Apparel

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February22,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

Approximatelyone-thirdofTheRealReal’sconsumersaremillennials.

3. Consumersseecertainluxuryproductsasinvestments,whichsupportsthehigh-endresalesegment:

• Limited-editionitemsarehighlysoughtafter,andsomeitemsarefashioninvestmentsthathavehighresalevalue.

• Theresalebusinessisespeciallypopularforprestigioushandbags.Thereisevenahandbaginvestmentindex,TheRareHandbagIndexfromonlinemarketplaceJustCollecting.Theindexincreasedbyjustunder8%annuallybetween2004and2016,andoneparticularChanelpurseincreasedinvaluebymorethan230%duringtheperiod.

4. Inventorysupplyanddemandseeseasonalincreases:

• ResaleinventorysupplyincreasesduringAprilandMayandagaininOctoberandNovemberasconsumerschangeovertheirseasonalwardrobes.

• Unwantedholidaygiftsalsoincreaseresalemerchandiseinventory.InJanuary2016,thenumberofitemsonSwap.commarkedwithanewtagjumpedbyabout25%fromthemonthlyaverage,andSwap.comexecutivesanticipatedasimilarsurgefor2017.PoshmarkexpectsitsconsignmentlistingstodoubleinFebruaryandMarch2017fromthelastfewmonthsof2016asconsumersusethesitetogetridofunwantedholidaygifts.

5. Millennialmarketpenetrationislikelytoincrease:

• Approximatelyone-thirdofTheRealReal’sconsumersaremillennials.

• Poshmark,apeer-to-peerapparelresalemarketplacefoundedin2011,hasapproximately1.5millionsellers.Thecompanyclaimsthatonein50womenintheUSsellsecondhanditemsonitsmarketplace.Poshmark’slargestuserdemographicincludescollegestudentsandmillennials.

Source:Poshmark.com

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February22,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

Depop:InstagramMeetseBayAsre-commercehasevolved,social-media-type,peer-to-peerfashionresalemarketplaceappshaveemerged,enhancingtheonlineresalemarketplaceforcustomerstotradeitems.Meanwhile,opportunitiesremainforresalemarketplacesservingnichecategories,suchassneakerresales,ortargetingspecificdemographicgroups.Depopisacompanythatcombineseachoftheseelements.

DepopisaUKsecondhandfashionappthatwasintroducedin2012.Theapphasabout5millionusers,listsmorethan1.5millionitemsmonthlyandsellsmorethan500,000itemsmonthly.Thecompanyraised$8millionin2015.

DepophasbeendescribedasacrossbetweeneBayandInstagram.Theappisgearedtoteenagersandyoungadults.Itisdesignedtolookandfunctionlikeasocialmediasiteratherthanasanonlinestore.Userscan“like”andfollowotherusers,ratetheircustomerexperience,sendmessagesinordertobargainoverthepriceofanitemandleavecommentsaboutitemsthatotherslistforsale.Theappiseasytouseandpicturesoftenshowclothingforsalemodeledbythesellersthemselves.Depophasnolistingfeesfornewsellersanddoesnotchargeasalescommission.

Thecompanysaysthatteenagersarenowbuyingmerchandiseatmarketsandused-clothingstoresandresellingitonDepopandotherfashionresaleapps.AccordingtothefounderofDepop,one14-year-oldgirlsawanecklaceoneBaythatshebelievedwaspricedtoolow.Shetookascreenshotandpostedanadvertisementforthesamenecklace,atahigherprice,onDepop.WhensomeonebidforthenecklaceonDepop,sheboughtthenecklaceoneBayandarrangedforittobesenttotheDepoppurchaser.

NicheStreetwearResellers:StadiumGoodsAnothergrowingsubsectionofthedigitalresalemarketisbrandedstreetwearmerchandise.Thecategoryincludesbaseballcaps,hoodedsweatshirtsandsneakers;rareandlimited-editionsportssneakersassociatedwithcertainathletesareespeciallypopular.

NewYork–basedStadiumGoodsisanonlineresellerofraresneakers,offeringmorethan15,000pairsthroughitswebsite.Thecompanywasfoundedinlate2015andraised$4.6millioninitsfirstfinancinground.StadiumGoodshaspartnershipswitheBayandTmallGlobal,whichisanextensionofAlibaba’sTmall.combusiness.

Source:Stadiumgoods.com

RaresneakerresellerStadiumGoodsraised$4.6millioninfinancingandoffersmorethan15,000pairsofsneakersforsalethroughitswebsite.

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February22,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

KeyTakeaways• Themarketplaceforonlinefashionresalecontinuestoevolve

rapidly.Followinganinitialwaveofonlinefashionconsignmentstartups,weakerplayershavegoneoutofbusinessandstrongerplayershavegrownandattractedmoreinvestmentfundingtopropeltheirfurthergrowth.

• Anaturalevolutionhasbeenseenintheintroductionofsocial-media-type,peer-to-peerfashionresaleapps,whichareexpectedtoattractmoreyoungbuyersandsellerstothere-commercemarket.

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February22,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comEvaK.SeniorResearchAssociate

HongKong:8thFloor,LiFungTower888CheungShaWanRoad,KowloonHongKongTel:85223004406London:242-246MaryleboneRoadLondon,NW16JQUnitedKingdomTel:44(0)2076168988NewYork:1359Broadway,9thFloorNewYork,NY10018Tel:6468397017

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