Why We Invested in Trove
G2 Venture Partners is thrilled to welcome the newest member of our portfolio, Trove, having led their latest financing round.
Fashion is one of the most polluting industries in the world
The fashion industry is responsible for ~10% of annual global carbon emissions and emits more CO2 than the aviation and shipping industry combined¹. Annually the fashion industry uses 1.3 trillion liters of water and causes ~20% of industrial water pollution². Producing clothing also causes deforestation, microfiber debris on shorelines, reduces farmland, and increases chemical pollution. However, despite these negative environmental impacts, only 15% of clothing is donated, recycled, or resold and the rest goes directly to landfills or is incinerated. On average, a Western family throws away 30kg of clothing annually and an item of clothing is worn 7 times before it is discarded. As a result, textiles comprise over 5% of waste in landfills.
Brands are looking for solutions to reverse or reduce their environmental footprint without impacting their profits and resale is a great option.
Customers are ready for resale
The secondhand fashion industry is a $27Bn market and, within that, recommerce is growing ~10x faster than brick & mortar thrifting and vintage³. The recommerce industry is expected to grow from a $17Bn industry today to a $68 industry by 2028⁴.
This trend is being accelerated by Millennials and Gen Z consumers who are breaking the stigma of second-hand clothing. These digitally native consumers aspire to access brands that they otherwise wouldn’t be able to afford. In addition, they enjoy the experience of discovery, are more comfortable with buying apparel secondhand, and are generally more environmentally conscious.
Multiple Peer to Peer (P2P) platforms and managed marketplaces have emerged over the past three years validating consumer demand for both buying and selling used apparel, with 5+ valued at >$1B (PoshMark, ThredUp, RealReal, StockX, DePop). However, these platforms drive consumers — and their revenue — away from brands themselves.
Brands want a slice of this growing market trend
Brands are starting to take notice of these trends and are seeking to regain control of their merchandise and re-engage with their customers.
Many brands are choosing to launch “branded recommerce” to access the fastest-growing retail market segment while capturing a slice of the revenue. Resale provides life to inventory that couldn’t be sold. It improves asset turnover, sell-through rates, and net profits. With the rapid expansion of recommerce, brands expect that 10–30% of their future revenue will be from resale. In addition to opening up new revenue streams, Trove expands brands’ access to an often new and younger customer base. Trove’s existing brand partners estimate that 50–65% of their resale customers are new to the brand, with many eventually converting into their main product line. Resale also acts as a customer retention and engagement tool: trade-in customers shop and spend ~2x as much as non-secondhand customers, and sellers are in the top quintile of customer lifetime value. With new opportunities to generate revenue and attract customers, branded recommerce — unlike P2P platforms or managed marketplaces — enables brands to maintain control of the customer experience and avoid being co-located with their competitors.
The icing on the cake is that resale integrates sustainability initiatives into their core business. Buying pre-owned clothing saves on average 1kg of waste, 3,040 liters of water, and 22kg of CO2 compared to buying new⁵.
Unique position within the industry
Trove is the only at-scale B2B focused player. The existing large resale platforms are adding B2B capabilities, but we heard from brands that they prefer to work with B2B focused players for two main reasons. First, the existing platforms don’t give them enough control over the customer experience and brands “don’t want to be included in an online department store.” Second, these resale platforms have built their businesses on driving traffic to their own websites and have limited experience — and incentive — to drive customers to the brands’ websites.
While P2P players and managed platforms have built their businesses on driving customers away from brands, Trove enables brands to bring recommerce back into their own ecosystem.
We are proud to be part of Trove’s story
We’re excited to partner with Andy Ruben, Gayle Tait, and the rest of the Trove management team. Scaling Trove into a global B2B recommerce platform will help brands access the fastest-growing segment within retail, add a new revenue stream, acquire new and younger customers, maintain the customer experience, increase customer retention and engagement, improve their product lifecycle, and make sustainability a tangible, core part of the brand.
Read Press Release: https://www.businesswire.com/news/home/20210825005454/en/Trove-Secures-77.5-Million-Series-D-Funding-Round-Led-by-G2-Venture-Partners
Bloomberg Article: https://www.bloomberg.com/news/articles/2021-08-25/resale-used-lululemon-patagonia-rei-powered-by-trove-raises-77-5-million
¹ The World Bank: How much do our wardrobes cost to the environment?
² World Resource Institute: The apparel industry’s environmental impact
³ Business of Fashion: The Future of Fashion is Resale (July 2021)
⁴ Cowen Equity research: The $86Bn recommerce market opportunity
⁵ Ellen Macarthur Foundation: 10 circular investment opportunities