By Sabrina Escobar

Gen Z's embrace of "thrifting" may soon extend to other generations as tariffs increase the cost of new production. The shift could benefit the thrift store ecosystem -- and the share prices of several small companies attempting to capitalize on the trend.

The past few years have seen a flurry of start-ups, initial public offerings, and merger and acquisition activity in the retail resale space, as companies have sought to satisfy younger generations' appetite for used goods. Online resellers ThredUp, The RealReal, and Poshmark all made their public-market debuts in the past six years.

Even Goodwill Industries, the nonprofit, launched an online shop in 2022.

The efforts haven't always been successful. Management teams have struggled at times to scale a business model that is more suited for local consignment and charity shops than delivering consistent shareholder returns.

ThredUp shares trade for $3.96 -- a roughly 72% discount to their IPO price of $14. The RealReal is trading at a similar discount to its IPO price, and Poshmark sold itself in 2022 to South Korean internet giant Naver for less than half its IPO price.

Yet some analysts and investors may be warming up to the sector again as they bet that it not only will be insulated from the worst of the trade war, but could also benefit as consumers trade down to cheaper options. Unlike firsthand retailers, resale shops don't need to import most of their merchandise. That means they can maintain more stable prices than traditional retailers.

This advantage could attract more consumers as tariffs increase the cost of imported goods, driving up demand for secondhand items and boosting resale businesses' sales and stock values.

A recent survey of over 500 consumers conducted by returns processor ReturnPro found that 55.4% of respondents would be more likely to buy items via a secondary marketplace to avoid tariff-inflated prices on new products.

"Anything that increases the cost of new apparel is likely also to provide some modest tailwind to secondhand goods, because we don't have exposure to bringing in products from overseas," said James Reinhart, CEO of ThredUp, on a March earnings call with analysts. "Everything that we process and sell on ThredUp is all here in the U.S. So I think in both areas, tariffs can be a net positive for our business."

Thrifting Trends

Younger generations have already embraced thrift stores -- both brick and mortar and online -- as a go-to shopping destination. Some 45% of teens bought clothes secondhand this spring, according to Piper Sandler's semiannual Taking Stock with Teens Survey. Older shoppers could follow suit as firsthand product prices increase, said Sender Shamiss, CEO of ReturnPro.

"The economics of it are going to sway a lot of consumers," Shamiss said.

The U.S. secondhand apparel market grew 14% year over year in 2024, to $25 billion, about five times faster than the broader retail clothing market, according to a 2025 market study conducted by ThredUp that is widely cited by industry groups. By 2029, this market is expected to reach $74 billion, growing 9% annually, on average.

Growth might slow this year if consumer spending recedes in the months ahead, as many economists forecast. That would dampen broader demand for all discretionary purchases, said Jeff Lindquist, a partner at Boston Consulting Group. But resale could still come out ahead of its traditional retail peers, he said.

"We're basically going to see a pullback in that discretionary spend, so it's bad for everybody, but I would say it's less bad for resale and preowned," Lindquist said.

Investing in Secondhand

Investors, too, may want to consider shopping secondhand. But just as you would exercise caution when picking up thrift-store goods, tread carefully among reseller stocks.

While online upstarts such as ThredUp and The RealReal may be the trendier choices as thrifting goes digital, both have near-term risks. Neither company has turned an annual profit yet as measured by earnings per share, and analysts don't foresee such profits in the next two years.

For lower-risk exposure to the group, consider Etsy. Although resale isn't its core business, Etsy's 2021 acquisition of Depop, a popular Gen Z peer-to-peer secondhand marketplace, has been a success. Depop was the fifth favorite website for teens to shop for apparel this spring, according to the Piper Sandler's survey. Depop is now one of Etsy's fastest-growing segments: Depop's gross merchandise sales grew 31.6% year over year in fiscal 2024, the company said, even as total-company GMS fell 4.4% from fiscal 2023.

Analysts have been bearish on Etsy for the past few months, given concerns that a slowdown in discretionary spending will affect core business sales. But BTIG analyst Marvin Fong believes those concerns are overblown. "The combination of healthy [free cash flow], low expectations, reasonable valuation, and a strong competitive position offers a relatively favorable risk-reward," he wrote in a note following Etsy's February earnings report.

Etsy shares have fallen more than 30% over the past year, and now trade for about 18 times the next 12 months' earnings.

Although apparel and luxury goods have been some of the biggest growth drivers for resale, other categories have been gaining ground, as well, such as mobile phones, gaming systems, computers, and car parts. These could also see increased demand in response to tariffs, Shamiss said.

Ebay -- the original online resale company -- is well positioned to meet that demand. Shares have outperformed the market this year, up 7.3%, compared with the S&P 500's 8.6% decline, But they are still fairly inexpensive, trading at 12.4 times the next 12 months' earnings.

"We still see eBay shares as one of the relatively safer places to hide in our e-commerce coverage," wrote Lee Horowitz, an analyst at Deutsche Bank, in an April 14 note.

For the vintage bricks-and-mortar thrifting experience, consider thrift-store operator Savers Value Village, which went public in 2023. Unlike many of its online competitors, Savers has been profitable for years, delivering adjusted earnings per share of 58 cents in the fiscal year ended December 2024. A little under half of its stores are in Canada, but it is expanding into the U.S. market at a rapid clip, which Dylan Carden, an analyst at William Blair, believes "supports decades of growth."

"We believe that weaker peers, growing acceptance of resale, dwindling competitive positioning of traditional retailers, and a fractured market all support Savers' longer-term growth vision," he wrote in an April note initiating coverage with an Outperform rating.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 24, 2025 02:30 ET (06:30 GMT)

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