Building an Online Swap Shop
By Sarah Auerbach
Reinhart: Deriving success in derivative markets.
thredUP, a children’s clothing swap Web site cofounded by HBS classmates James Reinhart and Chris Homer (MBA ’09), expanded into toys last fall, just in time for the holidays. Shoppers had already begun swapping toys on the site, the L.A. Times reported (December 18, 2010), prompting thredUP to launch the new exchange.
thredUP’s 50,000 registered users swap more than 1,000 boxes of clothes a week. Buyers pay $5 plus shipping per box. Since it’s a swap service, users must send as many boxes of clothes as they buy. thredUP provides boxes and labels and schedules home pickups.
The Times called thredUP an example of how “shopping is changing in the wake of the Great Recession,” with Americans burnt out by their decades-long spending spree.
In a phone interview in early January, Reinhart said that site users swapped about 2,000 toys during the holidays. He also recalled how the idea for thredUP came to him at HBS.
“The original concept for how to deal with two-sided marketplaces, which is what thredUP is, came from HBS associate professor Andrei Hagiu’s Strategy & Technology class. That was the first time I thought about how there’s opportunity to work in derivative markets like secondhand clothing.
“I wrote my final paper about thredUP,” Reinhart continued. “When I went back and read it recently, it was kind of hilarious. Once you spend a year and a half working in a business, you realize how much you don’t know. It seems so easy on paper: ‘Yeah, sure, we’re just going to create demand here and supply here, and it’s all going to work out.’ Even now, we’re still dealing with big challenges.”
Soon after launching in April 2010, thredUP received seed financing from Trinity Ventures, a boutique early-stage venture firm based in Silicon Valley.
Homer joined the thredUP team after HBS, but he worked closely with Reinhart, a sectionmate, during their RC year. The trust built that year was key to thredUP’s success, said Homer. “One of the things that’s really hard when you’re building a new business is finding good people to work with, whether they’re on the founding team or employees. The broader the network and the deeper the trust you can build, the greater the chance that you’ll be able to find good people.”
