ThredUp is ending the points-based component of its loyalty program, as the resale platform continues to look for ways to bolster its bottom line.
Beginning Oct. 1, 2024, shoppers will no longer earn points on their ThredUp purchases, and any points already accumulated will expire on Jan. 15, 2025. To ease the blow, the platform plans to reduce the minimums required to access free shipping (down from $69 to $49 for users in the Superstar rewards tier, for example), and offer a $15 shopping credit to users who send in their first Clean Out bag (offsetting the $14.99 processing fee). Both of those enhancements also will take effect Oct. 1.
“This decision wasn’t an easy one, but it will allow us to remain more committed than ever to providing great everyday pricing and frequent discounts and deals,” explained the company in an email sent to customers on Sept. 18. “It also allows us to continue investing in improving your shopping experience with new shopping tools like style chat, image search and others coming soon.”
“We are constantly refining our strategies to prioritize initiatives with the greatest potential impact,” added Alon Rotem, ThredUp’s Chief Strategy Officer in comments shared with Retail TouchPoints. “While we’re phasing out points-based rewards, we’re evolving the loyalty program in the months to come — customers will receive new benefits such as early access to new arrivals, prioritized customer service and shopping credits for Clean Out beginning Oct. 1. We’ll also continue to offer current birthday- and shipping-related benefits. We’re confident that the changes we’re making will create even more value for our community.”
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The move is counter to that of many other retailers, which have responded to waning consumer loyalty — being driven in large part by increasing cost-consciousness on the part of shoppers — by launching new loyalty programs or bolstering existing ones. But ThredUp’s business is particularly sensitive to financial pressures for a number of reasons.
Not only does the company operate at the lower end of the resale price point spectrum, but it also faces the complicated dynamics of full-service resale, which requires both investment in the selling and fulfillment side of the business and also significant expenditures to process, list and store its vast assortment of single SKU products. It’s for this reason that most resale operators tackle only one side of the equation — either the sell side, as with marketplaces like Poshmark and Ebay, or the logistics side, as with technology solutions such as Trove and Archive.
ThredUp’s laudable ambition in handling both ends of the equation is designed to make the process of selling and buying secondhand as easy as buying new for consumers and brands. But it’s an expensive proposition — and one that ThredUp has struggled to make work. The elimination of reward points is only the latest in a series of cost-cutting measures the company has made to try to balance the books:
- In August, the company announced that it was pulling out of Europe, an expansion that ThredUp had hoped would drive more profitable scale for its business;
- Also in August, reports surfaced that the company was testing out a peer-to-peer offering that would sit alongside its current managed marketplace. A peer-to-peer addition would allow for some inventory on the platform to forego one of the most costly parts of ThredUp’s business — taking in and processing inventory directly from consumers;
- In May, the platform began quietly testing a premium consignment service that would cost $35, instead of the standard $14.99, to ensure that every item a user sends in will be listed. With the company’s standard “Clean Out” service, only items deemed likely to resell are listed; and
- The first sign of major shifts in the business model appeared in early 2023, when that $14.99 fee was instituted for the Clean Out service, which had previously been free.
The company has been taking a number of proactive measures to make its operations more efficient as well, most notably the debut last month of new AI-powered tools that aim to help shoppers find more items more easily, in addition to continued technology advancements to streamline its backend operations.
For Q2 2024 ThredUp reported a 4% decrease in revenue from the same quarter last year to $79.8 million, leading to a net loss of $14 million, as well as a 3% YoY decrease in active buyers to 1.7 million.
“While this quarter presented challenges in both the U.S. and Europe, we have emerged with a renewed focus,” said ThredUp CEO and Co-founder James Reinhart in a statement. “Looking ahead, we are intent on enhancing our product experience through gen AI, improving our unit economics and driving process improvements throughout our operations. As we become a U.S.-only business again, we expect to grow faster, with structurally higher gross margins, positive adjusted EBITDA and free cash flow.”
ThredUp did not immediately respond to Retail TouchPoints’ request for comment on this story.
