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Winter Is Coming to One of the Hottest Categories in E-Commerce

Three venture-backed companies that sell second-hand clothes online are looking for a buyer.

Composite image: iStock, am3pr

Over the last two years, venture capitalists have poured money into a new category of e-commerce sites selling second-hand clothes, each with a different twist. As tens of millions of dollars flowed in, critics warned there were too many of these sites receiving too much money. A shakeout was inevitable, they said.

It’s here.

Multiple sources tell Re/code that at least three of the venture-backed companies in the space have recently been shopping themselves to potential acquirers amid trouble attracting customers and new financing. One is close to a small sale.

Twice, a site backed by Andreessen Horowitz that sells used clothes from mainstream brands like Zara, Nike and Gap, has approached potential buyers about a sale after failing to build a big enough customer base, according to the sources. Elsewhere in the industry, Santa Monica, Calif.-based Shop Hers, a site for second-hand designer fashion, is finalizing a deal to sell to bigger Santa Monica startup Tradesy, sources say. And industry observers say at least one other venture-backed company in the space, which Re/code has not yet identified, is looking for a buyer.

Each of these companies tried to jump on the trend in e-commerce of focusing sharply on a retail category that Amazon or eBay didn’t do, or didn’t do well. Some have also marketed the idea to young, professional women that they can update their wardrobes without breaking the bank by selling their designer fashion through these sites instead of stashing it in the back of the closet.

But eBay still controls a large chunk of the online sale of second-hand clothes. And the competition for customers and investors has been fierce among new companies, with one company called The RealReal securing more than $80 million thus far.

While Twice has raised $23 million, a direct competitor, ThredUp, which has been around longer, has so far secured more than $50 million in capital and could raise more. That money allowed it to recently open its second warehouse, this one on the East Coast, to cut down delivery times to customers along the Atlantic. Other companies in the space include Poshmark, which has raised $40 million, and ThreadFlip, which has $21 million in funding.

Industry insiders believe there is the potential for one or two of these new second-hand sellers to build sizable businesses, but not more than that.

Twice raised an $18.5 million round led by Andreessen Horowitz early last year. It also attracted attention for the hire of NBA star Andre Iguodala as its menswear style director. Neither has been enough.

It is not clear whether the startup has found a buyer or someone to hire the team, but industry observers believe the Andreessen Horowitz connection could help in securing a soft landing.

Shop Hers was also going up against a bigger, better-funded competitor in the market of second-hand designer fashion. While it has raised $3.5 million since its 2012 founding, Tradesy has raised more than $44 million after its own near-death experience in 2013.

The Shop Hers sale, should it be finalized, would most likely not include any cash, sources say. Shop Hers found some traction with online shoppers, these people say, but not enough to raise a new round of funding.

Shop Hers CEO Jaclyn Shanfeld did not respond to a request for comment, while Twice CEO Noah Ready-Campbell and Tradesy CEO Tracy DiNunzio both declined to comment.

This article originally appeared on Recode.net.

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