Everybody wants to be haute couture & sustainable .
Both environmentally and financially – at the same time in fashion. This is a challenge.
Is vintage á la Nasty Gals Vintage the answer? Time to dive into the Business Model Trends around vintage fashion resale.
Vive Vintage Fashion.
Vintage Fashion Business Model
- Before GirlBoss, Sophia Amoruso built Nasty Gal into a vintage fashion brand that was clearing $100M in revenue (prior to its collapse into bankruptcy) with a mix of trendspotting & elbow grease; the company started as an eBay store called ‘Nasty Gal Vintage’ in 2006
The OG model worked and since the time of its peak – a decade ago – it is hard to say that someone has found a more successful model in resale fashion, even with massive investment in people + tech.
- Vintage Fashion has the unique ability to blend environmental and financial sustainability because there is a rarity to a lot of the garments considered vintage – that rarity manifests in a ‘one man’s trash becoming another man’s treasure‘ and a lucrative business model
- Scouring vintage stores then flipping inventory online is a lean business model at the outset, requiring minimal investment, which is part of the allure. It is not simply an arbitrage model, as the merchandising, branding, and photography are equally important as the sourcing. But competition has made the sourcing process much more difficult in recent years
- The BMi (Business Model Innovation) trend built around platform-scale + resale fashion has hit a roadblock due to margin pressure; this has created a negative, downward cycle due to the large investment investment required to scale the model (ie. can’t recoup)
Vintage still sits on the edge of the market at this point. But that may continue to change as crops of consumers realize the value sitting latent in their closets. Where will this supply flow going into the future?
- Future Trends revolve around the tension between global networks – whether social commerce or eCommerce – and more local, vintage retail stores. Both are in competition for the top-end of the supply, but each provides a vastly different type of experience
*Vintage is generally defined as something that is 20+ years old. Resale is anything used and roughly < 20 years old. Naturally, there will be some crossover.
Vintage Fashion Resale Business Model
- Value Proposition is sourcing A+ vintage garments and then merchandising, branding, and reselling them to would-be consumers based on certain fashion trends
- Revenue is generated on the margin between the sourcing cost of the good and the resale price, minus all the merchandising, etc. costs
- Customer Relationships are between the companies and their customers who are looking for specific vintage garments/brands in order to suit a certain aesthetic ie. curated + bespoke
- Key Activities are sourcing vintage garments for cheap and being able to resell those garments without building up excess inventory
- Cost Structure is driven by what it costs to actually manage the entire sourcing process to what it costs to sell the garments and ultimately ship them to the end client
- Partnerships can help manage different layers of the model, from sourcing to merchandising to selling
Vintage Fashion Resale – Business Model Canvas (mockup)
Example Companies
Reformation (vintage division) – “real deal vintage” (sourced by a team of 3)
Real Real (vintage) – “shop authentic vintage at up to 90% off”
Neutral Ground – “committed to conservation, style preservation and conscious consumerism.”
Reference Business Model: Nasty Gal Vintage
OG (Original Gangster) Nasty Gal refers to the business before VC money was pumped into it in 2012 and before it was sold to Bonobos out of bankruptcy in 2017 ie. Nasty Gal Vintage.
On launching the store, Sophia used to actually pick through the lots of clothes donated by Salvation Army, to find vintage pieces.
Medium
The original eBay site was launched in 2006. After Sophia was kicked-off due to promotion she launched her own site in 2008. She wasn’t exactly sitting around an office throwing darts at a vision board in this era either.
At the time, Amoruso was a 22 year old community college dropout living with her step-aunt. By day, she checked student IDs at a local art school. By night, she ran Nasty Gal Vintage.
Medium
But she was savvy enough to flip some garments that were literally picked-up for dollars into $1,000+ sales. Imagine the margin on those purchases! Naturally, manually picking through charity garments is not a scalable model. That’s why the company found a niche in acquiring garments through closeout sales.
The early model for them was to find closeout lots from a manufacturer or left over at retailers, which they could turn around and sell at full price.
Medium
High-Margin Trendspotting
This wasn’t a model built on random inventory either; Sophia was trendspotting and looking to pick-up garments that would appeal to the audience that was increasingly growing around her brand.
She managed to find models who would work for “a few cheeseburgers,” which is not exactly what someone wants to stick in their biography; yet simultaneously, actions like these are how a cash-strapped entrepreneur scaled a vintage-resale model without capital.
“If it sold, I’d instantly go find more things just like it — If it didn’t, I wouldn’t touch it with a ten-foot-pole ever again”
Medium
Sales grew from $0 in 2006, to over $28 Million in 2011, and over $100 Million in 2012. All on the back of vintage. Among the many alleged errors from that point on was the switch in business models to launching the brand’s own collections in 2012 and hiring all the necessary talent to do so.
From nearly every teardown/case study of Nasty Gals Vintage, it is apparent that neither technology nor capital were positive contributing forces to the core model. The OG model worked and since the time of its peak – a decade ago – it is hard to say that someone has found a more successful model in resale fashion, even with massive investment in people + tech.
Future Trend: Repop Retail
The Resale fashion market is expected to grow 10X > Fast Fashion between now and 2030, to a market size of $80B+ while Fast Fashion will be worth roughly $40B. North America has the fastest growth rates within that context.
But the main companies who were positioned to take advantage of this trend have been so beaten down by the market in 2022 that their entire business model remains in question: Real Real (Ticker: Real), ThredUp (Ticker: TDUP), etc.
GenZ likes to get in touch with their inner fashionista on fashion networks like Depop (Ticker: ETSY acquired Depop in 2021 for $1.6B) – 90% of their users are in the under 26 crowd and it has ~30M users. A big component of Depop is resale + vintage.
Naturally, wherever the youth flock gives some indication of where the Future Trends go; yet, despite the hype among the younger crowd and a hot resale trend, even Depop recently announced a big loss.
Resale is an overly broad category capturing all of ‘secondhand’ – secondhand and vintage are not fully the same. The market dynamics of vintage are such that scores of “scouts” are actively acquiring supplies of all types looking for the best of the best vintage items, which sell for many multiples of what they were purchased for.
Had the Nasty Gal Vintage store stayed the course of its original business model, it would have been a multi-X unicorn by now.
“Now, when I’m sourcing, I’m not just competing against small businesses. I’m competing against corporations with far greater buying power,” Cassis-Shaw tells me. “They buy up huge lots of clothing to get the two good band T-shirts, or they scoop up all of the designer pieces at prices no small brand can afford.
Elle
Social Commerce
We know – analytically – that physical retail has a lower CAC (Customer Acquisition Cost) and higher loyalty rate than eCommerce/D2C/social commerce.
This is why digital networks with no physical presence may have a hard time lasting in this market over the long-term.
The ‘Repop Retail’ Future Trend is the emergence of the network-style, “social commerce” trend we see with Depop in resale, combined with that retail physical vibe that is such a core part of the fashion culture.
Yes, vintage still sits on the edge of the market at this point. But that may continue to change as crops of consumers realize the value sitting latent in their closets. Where will this supply flow going into the future? To digital-only, social-commerce networks, or to local vintage retail stores?
Probably a mix, but as we saw with the OG Nasty Gal business model analysis above, having bleeding-edge tech and a bunch of money doesn’t correlate to winning in the long-term.
Those brands that can increase the cultural relevance of vintage and make it ‘pop’ across generations will probably win the long game and that traditionally requires some form of ‘physical touch.’ It’s also a big win for sustainability if vintage continues to scale, but paradoxically, that doesn’t seem to be what’s driving the market – money + style is driving the market. Some things never change.
Overall, vintage is a fascinating market to analyze. It has a dimension of the past, present, and future all in one. The Business Model Trend of the Vintage Resale market will probably continue to scale, but how that looks over time is the question.
More Vintage Fashion Posts
Business Model Innovation – Resale Fashion