How tariffs and AI are giving secondhand platforms like ThredUp a boost

At ThredUp's expansive 600,000-square-foot facility in Suwanee, Georgia, approximately 40,000 used clothing items are processed daily. The company’s logistical capabilities, with four warehouses across the United States, now rival those of major fast-fashion retailers. "This is the largest garment-on-hanger system globally," stated Justin Pina, ThredUp’s senior operations director. "We have the capacity to store over 3.5 million items here." The secondhand apparel market is experiencing unprecedented growth, projected to reach $367 billion by 2029—growing nearly three times faster than the overall apparel market, according to GlobalData. The tariffs introduced during President Donald Trump’s administration, aimed at boosting domestic manufacturing, have inadvertently affected the fashion industry, which is heavily reliant on imports. As reported by the American Apparel and Footwear Association, approximately 97% of clothing sold in the U.S. is imported, primarily from countries like China, Vietnam, Bangladesh, and India. While Gen Z has been a driving force behind the rise of secondhand shopping, an increasing number of Americans are embracing this trend. "When tariffs increase retail costs, resale platforms become the smarter choice. This isn't just a passing trend," explained Jasmine Enberg, co-CEO of Scalable. "Tariffs are accelerating changes that are already transforming American shopping habits." James Reinhart, CEO of ThredUp, noted that the company is already witnessing these effects. "Our business is generating free cash flow and growing at double-digit rates," he remarked. "We’re optimistic about our economics, with gross margins nearing 80% and our operations entirely based in the U.S." In the third quarter, ThredUp reported a remarkable 34% increase in year-over-year revenue. The company also experienced its highest-ever customer acquisition rate, with new buyer growth soaring 54% compared to the same period last year. "If tariffs push retail prices up by 20% to 30%, that creates a significant advantage for resale," stated Dylan Carden, a research analyst at William Blair & Company. "Pre-owned items are exempt from these duties, which naturally shifts consumer demand." During a behind-the-scenes tour of the ThredUp warehouse, CNBC observed the seamless integration of automation and human labor. AI systems efficiently photograph, categorize, and price thousands of garments each hour. According to Reinhart, this technology is crucial for scaling the resale market to match retail efficiency. "AI has significantly accelerated our adoption rates," he commented. "It's enhancing discovery, styling, and personalization for our buyers." This technological shift is not limited to ThredUp. Fashion-tech startups like Phia, co-founded by Phoebe Gates and Sophia Kianni, are leveraging AI to rapidly analyze thousands of retail and resale listings. "The millions in transaction volume we’ve generated indicate a substantial market need," Gates said. "Consumers are seeking smarter, more affordable shopping options." ThredUp is poised to leverage domestic infrastructure, automation, and AI to maintain its competitive edge, as tariffs originally intended to revive U.S. manufacturing may ultimately fuel a new era in American fashion. "The future of fashion is set to be more sustainable than today, with secondhand shopping at its core," concluded Reinhart.