By Uday Sampath Kumar

(Reuters.) – Smaller rivals are being snapped up by second-hand clothing businesses to lock in investments as thriftwear demand surges ahead of peak season. This is due to supply chain snarlups at traditional retailers.

To counter the competition from high-end apparel companies like ThredUp Inc and Poshmark Inc, newly listed firms such as ThredUp Inc and ThredUp Inc have begun to acquire smaller businesses. Levi Strauss & Co Urban Outfitters Inc (NASDAQ) have started their own thrifting companies.

Analysts say that second-hand clothing businesses must grow their volume to make steady profits in an industry known for its tight margins.

Neil Saunders of GlobalData’s managing director stated, “Companies such as ThredUp, Poshmark, have to show growth. And one thing that they will likely do in the coming years is acquire others players, possibly in foreign countries.”

GlobalData predicts that the resale market will grow eleven times faster than the wider retail sector between 2025 and 2025. This is due to a rising awareness about the environmental impact of fast fashion.

This could be a draw for companies looking to expand quickly and capitalize on the boom. Industry estimates indicate that the U.S. secondhand apparel market could double to $76.4 billion in 2025.

(GRAPHIC: Thrifting boom – https://graphics.reuters.com/USA-RETAIL/egvbkmgexpq/chart.png)

Poshmark is a peer-to-peer platform that makes 20% of every transaction. It acquired a company that authenticates shoes earlier in the month.

The company plans to pursue more acquisitions, particularly in international markets. It also wants to increase its cash reserves by more than $500,000,000.

“So far, all four of the four countries that we have entered – U.S.A. Canada, Australia, and India – were organic,” CEO Manish Chaudra said to Reuters.

Rival ThredUp acquired Remix Global European thrift site in July as a bid for expansion beyond the U.S. The company declined to discuss potential future deals.

Etsy (NASDAQ) Inc also purchased Depop, a British secondhand fashion app for $1.6 billion. Julie Wainwright CEO of The RealReal (NASDAQ) Inc said that further consolidation was “going to happen” earlier in this year.

(GRAPHIC: Secondhand apparel gaining market share – https://graphics.reuters.com/USA-RETAIL/gdpzywggkvw/chart.png)

FRESH STYLES

Supply-chain disruptions that make it difficult for retailers to obtain new styles are a benefit to second-hand sellers. Adobe Analytics (NASDAQ:) Analytics stated that apparel had the highest levels of online out-of stock in U.S. retail sector during the peak holiday season.

Tradesy, a Richard Branson-backed online resale platform, raised $67million in an earlier funding round. This year’s holiday sales were strong because of a shortage of new clothing.

Tracy DiNunzio CEO, stated to Reuters that the company favored independence growth and was open for “other possibilities.”

Others have also found that they are ripe to be invested by more established companies. Vestiaire Collective is a luxury thrift platform that raised $215million this year. This was part of a funding round which also featured a French luxury brand. Kering (PA) To take a 5% interest in the company.

Jon Copestake (a senior analyst with EY’s Global Consumer Group) stated that “I cannot imagine any major clothing or fashion company not either investing in, or acquiring” a successful startup platform.

Levi Strauss’ thrift site “Levi’s Secondhand”, which sells authenticated denim, was launched last year.

Urban Outfitters, another apparel company, is moving to a peer-to–peer marketplace. The platform connects buyers with sellers of second-hand clothes. It also collects a 20% commission.

Margin margins are slim so increasing sales volume is important. Urban Outfitters believes that a peer to peer model is the best way for a business to succeed. This model allows individuals and companies to make deals together rather than directly involving themselves in sales.

It is a volume-based play. Peer-to-peer marketplace models allow for scale and speed. The platform does not determine supply.