Secondhand Fashion Is Winning Shoppers. Can Retailers Turn That Demand Into Profits?
The hardest part of selling used clothes isn’t always finding a buyer. Sometimes it’s making enough on a $5 shirt to cover the work of getting it sold.
Secondhand apparel has become a $290B market. Retailers want a share of that growth, but some of the companies doing the most work to resell clothes are still struggling to make money.
Secondhand doubles in five years
The global secondhand clothing market has doubled in five years and accounts for roughly 10% of apparel sales, RBC Capital Markets estimates. In the US, secondhand fashion transactions rose 22% year over year in March in Bank of America Institute data.
Demand stretches from bargain hunting to designer labels. Discount apparel spending increased more than 4% between the fourth quarter of 2025 and the first quarter of 2026, while secondhand luxury spending rose fivefold.
Department stores face a weaker picture. Kohl’s sales fell 4% in fiscal 2025, and it forecast another 2% decline. Resale is expanding against that weaker retail backdrop.
The profitability problem nobody solved
Sellpy, the resale business 82% owned by H&M, processed more than 20M items through four European warehouses last year. Twelve years into the business, it still isn’t profitable.
Against that revenue sits a workforce of ~2.7k people inspecting, photographing, and pricing individual garments, some of which sell for less than $5.
ThredUp faces a similar gap between sales and earnings. Revenue rose 20% last year to $310M, but the company has yet to turn a profit after 17 years.
Vinted takes a different approach. Sellers photograph and ship their own goods, leaving fewer tasks for the marketplace. Europe’s largest used-fashion platform handled €10.8B in merchandise last year and first became profitable in 2023, 15 years after its founding.
Stockholm School of Economics professor Sara Rosengren describes Vinted’s model as requiring less investment and carrying less risk. Vinted leaves much of the work that fills Sellpy’s warehouses to its users.
Why the discount war is ending
Selling new garments cheaply is no easy alternative. EMARKETER analyst Sky Canaves says competing with Shein and Temu on price can leave rivals losing money.
The wider retail shakeout has been severe. Major US retailers announced ~7.33k store closures in 2024, up 33% from the previous year.
Some retailers are putting more emphasis on inventory discipline and products that can sell without a markdown. H&M reduced inventory 10% year over year to 15.8% of sales and reported a 54.1% gross margin, with the second-quarter figure reaching 56.6%.
Target is shifting space from commodity basics toward limited-edition designer partnerships. McKinsey’s findings put the appeal in numbers: promotional discounting erodes margins by 3.5 percentage points, while cultural collaborations lift full-price basket sizes by 18%.
Even Shein is looking beyond its original formula. Its sales growth slowed to 1.1% in early 2026, from 8% in 2025, following the end of US duty-free treatment for small parcels. After listing in Hong Kong with $15B in cash, it agreed to buy Everlane for $80M.
Reading exposure in this shift
The RealReal increased revenue 15% to $693M in 2025. ThredUp offers another direct route into resale, though its losses show why revenue growth alone isn’t enough to judge the business.
For diversified retailers, resale remains a smaller bet. Sellpy and H&M’s other resale brands contributed less than 1% of group revenue last year. Marks & Spencer is working with eBay, while Zara owner Inditex operates a customer-to-customer marketplace alongside its premium Atelier line.
There’s also a potential cost to selling used versions of your own products. RBC analyst Richard Chamberlain warns that secondhand purchases can replace sales of new fashion.
Sellpy is using AI to identify brands, sizes, and materials from photos and help set prices. But someone still has to empty the pockets and check for holes. The next buyer may be online. Much of the cost of reaching them is still on the warehouse floor.
