On this page of StockholderLetter.com we present the 4/7/2023 shareholder letter from ThredUp Inc. — ticker symbol TDUP. Reading current and past TDUP letters to shareholders can bring important insights into the investment thesis.

Inspiring a new generation of consumers to think secondhand first. To our stockholders: Despite the uncertain macroeconomic environment, our approach remains the same. We re committed to doing the hard things to build an enduring, transformational company with competitive advantages in the resale industry. We believe this philosophy will translate to significant value creation over the long-term. 2022 tested our ability to balance this long-term approach with the near-term pressures of economic volatility and the scrutiny of being a newly public company. I believe our financial results proved that we re capable of weathering the storm. Managing complexity in the face of uncertainty is not new to our management team: as you may recall, thredUP was founded during the Global Financial Crisis. But I also think our results speak to the structural advantages of the marketplace model and flexible supply chain we ve built over the past decade. When we started to see deterioration in the economy, we were able to quickly play defense by pulling a variety of levers around prices, payouts, processing, and merchandising to adapt to the uncertain environment. Unlike traditional retailers who overbought inventory heading into last year, we didn t need to bet on trends many quarters into the future we could allow the data to shape our decision-making. The same data that made us cautious in 2022 is leading us to feel increasingly optimistic about 2023. With retailer inventory positions normalizing, promotional activity slowing, and shoppers continuing to seek value, we think the setup for resale could be promising. And if we see conditions improve, we can more aggressively flex the levers in our marketplace to take advantage of any opportunity. thredUP s Competitive Advantages With that backdrop in mind, I want to zoom out and remind you of our competitive advantages that will enable us to grow and capture share, not only this year but also in
years to come. Here are the three elements I think you should consider when evaluating our strategy: 1) It s all about supply. We ve never spent any direct marketing dollars acquiring sellers. In fact, we ve seen such strong demand for our Clean Out kits that we experienced backlogs in our distribution centers throughout most of 2022. We ve even started to test charging suppliers a fee to use our Clean Out service, with initial results showing strong traction. We estimate there are potentially a billion Clean Out kits to be filled in the U.S. every year (we processed just over a million last year), and we re confident in the platform we re building to capture that long-term supply opportunity. Which brings me to my next point... 2) Technology and infrastructure create competitive advantages in this industry. Given we estimate there are potentially a billion Clean Out kits to be monetized in the U.S. every year, we are building the backbone infrastructure and technology stack to process a disproportionate part of this over time. Our single-SKU technology and distribution centers allow us to process large amounts of secondhand clothing, each undergoing our rigorous twelve-point quality inspection. The opening of our Dallas distribution center last year brings our U.S. network-wide storage capacity to 16.5 million items when fully utilized. The processing capacity and automation capabilities in this new facility will reduce wait times to process bags, unlock new ways to list items more efficiently, and give us more runway to grow. This is a significant step forward in deepening our operational moat. It also expands the surface area of data we can collect... 3) Our proprietary resale data makes us smarter every day. Every day we receive millions of data points on items that are processed, sold, rejected, favorited, added-to-cart, returned, etc. We ve built algorithms and models that use this treasure trove of data to improve our acceptance, merchandising, photography, pricing, and marketing capabilities so we can operate more thoughtfully whether that s growing our buyer pool, expanding margins, or
driving increased sell-through. The more items we process, the smarter we get in our execution. The combination of these three strategies unlocking supply, building infrastructure, and using our proprietary resale data enables us to serve our buyers and sellers in a differentiated way. Vectors for Growth One of the benefits of having a differentiated platform is that we can leverage its novel capabilities to enter new markets. For example, we re using the thredUP managed marketplace playbook to drive supply growth, marketing efficiency, and stronger unit economics in Remix, the European resale business we acquired in 2021. These efforts are helping to unlock the full potential of their complementary single-SKU platform. Despite economic turbulence in Europe last year, Remix achieved record revenues and profits. I ve been exceptionally pleased with the performance of Remix and the foothold it gives us in the European resale market, which GlobalData estimates will grow to $39B by 2025. Our Resale-as-a-Service ( RaaS ) franchise is another area where we are leveraging our marketplace assets to enter a new market. Backed by thredUP s single-SKU technology and infrastructure, RaaS enables brands and retailers to design their own resale experiences: whether that be a Clean Out service, full-service Resale Shop, Cashout Marketplace, or combination of the three. As more brands use the service, we create more touchpoints for new sellers to send us high quality supply and for new buyers to access our inventory. Only a few years into RaaS s development, we re now powering resale experiences for over 42 brands including household names like J. Crew, Kate Spade, Tommy Hilfiger, Madewell, and Athleta. By enabling brands and retailers to offer resale channels to their customers, we are establishing our market position as the go-to platform for how apparel resale happens on the internet.
Impact As I shared last year, I believe truly generational companies deliver more than just profits they also have a clear purpose. One of the unique aspects of thredUP is that the growth of our business is directly linked to the good we do for the planet. Buying and wearing secondhand clothing instead of new reduces carbon emissions by an average of 25%, according to Green Story Inc. We estimate that thredUP has saved over 1 billion pounds of CO2 emissions, over 2 billion kWh of energy, and over 4.4 1 billion gallons of water . While we believe growing our core business is the most direct way we can help the environment, we re also committed to using our brand and platform to make an impact more broadly. We recently published our inaugural Impact Report, outlining how we are helping our people, communities, and the planet while growing a sustainable operation. For example, we launched an exciting partnership with The AZEK Company to recycle all our returned Clean Out bags into AZEK decking products, which are recognized for their innovative and environmentally sustainable design. Last year we also joined the American Circular Textiles ( ACT ) coalition, which will serve as a much-needed advocate for policies that accelerate the adoption of circular fashion solutions in the U.S. Together with ACT, we recently endorsed a Maryland bill that eliminates sales tax on secondhand items under $20 to make resale more accessible. It s exciting to see policymakers amplify the power of circular business models to drive sustainability and benefit the American consumer, and we re keen on thredUP being a part of those conversations. What s next? When I speak with brands, investors, reporters, and colleagues about what really matters in resale, a lot of it comes down to scale. Our mission is to inspire a new generation of consumers to think secondhand first. To inspire a generation, you need to think in terms of hundreds of millions and billions of items being recirculated, not just thousands. GlobalData projects the U.S. secondhand market will reach $82B by 2026, with the global opportunity at $218B. By 2030, they predict nearly one in five 1 Green Story Inc. May 2019
 • shareholder letter icon 4/7/2023 Letter Continued (Full PDF)
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 • Benford's Law Stocks icon TDUP Benford's Law Stock Score = 53


TDUP 4/7/2023 Shareholder/Stockholder Letter Transcript:


Inspiring a new generation of consumers to think secondhand first.
To our stockholders:
Despite the uncertain macroeconomic environment, our approach remains the same.
We   re committed to doing the hard things to build an enduring, transformational
company with competitive advantages in the resale industry. We believe this
philosophy will translate to significant value creation over the long-term.
2022 tested our ability to balance this long-term approach with the near-term
pressures of economic volatility and the scrutiny of being a newly public company. I
believe our financial results proved that we   re capable of weathering the storm.
Managing complexity in the face of uncertainty is not new to our management team:
as you may recall, thredUP was founded during the Global Financial Crisis. But I also
think our results speak to the structural advantages of the marketplace model and
flexible supply chain we   ve built over the past decade. When we started to see
deterioration in the economy, we were able to quickly play defense by pulling a variety
of levers around prices, payouts, processing, and merchandising to adapt to the
uncertain environment. Unlike traditional retailers who overbought inventory heading
into last year, we didn   t need to bet on trends many quarters into the future     we could
allow the data to shape our decision-making. The same data that made us cautious in
2022 is leading us to feel increasingly optimistic about 2023. With retailer inventory
positions normalizing, promotional activity slowing, and shoppers continuing to seek
value, we think the setup for resale could be promising. And if we see conditions
improve, we can more aggressively flex the levers in our marketplace to take
advantage of any opportunity.
thredUP   s Competitive Advantages
With that backdrop in mind, I want to zoom out and remind you of our competitive
advantages that will enable us to grow and capture share, not only this year but also in

years to come. Here are the three elements I think you should consider when
evaluating our strategy:
1) It   s all about supply. We   ve never spent any direct marketing dollars acquiring
sellers. In fact, we   ve seen such strong demand for our Clean Out kits that we
experienced backlogs in our distribution centers throughout most of 2022.
We   ve even started to test charging suppliers a fee to use our Clean Out
service, with initial results showing strong traction. We estimate there are
potentially a billion Clean Out kits to be filled in the U.S. every year (we
processed just over a million last year), and we   re confident in the platform
we   re building to capture that long-term supply opportunity. Which brings me
to my next point...
2) Technology and infrastructure create competitive advantages in this
industry. Given we estimate there are potentially a billion Clean Out kits to be
monetized in the U.S. every year, we are building the backbone infrastructure
and technology stack to process a disproportionate part of this over time. Our
single-SKU technology and distribution centers allow us to process large
amounts of secondhand clothing, each undergoing our rigorous twelve-point
quality inspection. The opening of our Dallas distribution center last year brings
our U.S. network-wide storage capacity to 16.5 million items when fully
utilized. The processing capacity and automation capabilities in this new facility
will reduce wait times to process bags, unlock new ways to list items more
efficiently, and give us more runway to grow. This is a significant step forward
in deepening our operational moat. It also expands the surface area of data we
can collect...
3) Our proprietary resale data makes us smarter every day. Every day we
receive millions of data points on items that are processed, sold, rejected,
favorited, added-to-cart, returned, etc. We   ve built algorithms and models that
use this treasure trove of data to improve our acceptance, merchandising,
photography, pricing, and marketing capabilities so we can operate more
thoughtfully     whether that   s growing our buyer pool, expanding margins, or

driving increased sell-through. The more items we process, the smarter we get
in our execution.
The combination of these three strategies     unlocking supply, building infrastructure,
and using our proprietary resale data     enables us to serve our buyers and sellers in a
differentiated way.
Vectors for Growth
One of the benefits of having a differentiated platform is that we can leverage its novel
capabilities to enter new markets.
For example, we   re using the thredUP managed marketplace playbook to drive supply
growth, marketing efficiency, and stronger unit economics in Remix, the European
resale business we acquired in 2021. These efforts are helping to unlock the full
potential of their complementary single-SKU platform. Despite economic turbulence
in Europe last year, Remix achieved record revenues and profits. I   ve been
exceptionally pleased with the performance of Remix and the foothold it gives us in
the European resale market, which GlobalData estimates will grow to $39B by 2025.
Our Resale-as-a-Service (   RaaS   ) franchise is another area where we are leveraging
our marketplace assets to enter a new market. Backed by thredUP   s single-SKU
technology and infrastructure, RaaS enables brands and retailers to design their own
resale experiences: whether that be a Clean Out service, full-service Resale Shop,
Cashout Marketplace, or combination of the three. As more brands use the service, we
create more touchpoints for new sellers to send us high quality supply and for new
buyers to access our inventory. Only a few years into RaaS   s development, we   re now
powering resale experiences for over 42 brands including household names like J.
Crew, Kate Spade, Tommy Hilfiger, Madewell, and Athleta. By enabling brands and
retailers to offer resale channels to their customers, we are establishing our market
position as the go-to platform for how apparel resale happens on the internet.

Impact
As I shared last year, I believe truly generational companies deliver more than just
profits     they also have a clear purpose. One of the unique aspects of thredUP is that
the growth of our business is directly linked to the good we do for the planet. Buying
and wearing secondhand clothing instead of new reduces carbon emissions by an
average of 25%, according to Green Story Inc. We estimate that thredUP has saved
over 1 billion pounds of CO2 emissions, over 2 billion kWh of energy, and over 4.4
1
billion gallons of water .
While we believe growing our core business is the most direct way we can help the
environment, we   re also committed to using our brand and platform to make an impact
more broadly. We recently published our inaugural Impact Report, outlining how we
are helping our people, communities, and the planet while growing a sustainable
operation. For example, we launched an exciting partnership with The AZEK Company
to recycle all our returned Clean Out bags into AZEK decking products, which are
recognized for their innovative and environmentally sustainable design. Last year we
also joined the American Circular Textiles (   ACT   ) coalition, which will serve as a
much-needed advocate for policies that accelerate the adoption of circular fashion
solutions in the U.S. Together with ACT, we recently endorsed a Maryland bill that
eliminates sales tax on secondhand items under $20 to make resale more accessible.
It   s exciting to see policymakers amplify the power of circular business models to drive
sustainability and benefit the American consumer, and we   re keen on thredUP being a
part of those conversations.
What   s next?
When I speak with brands, investors, reporters, and colleagues about what really
matters in resale, a lot of it comes down to scale. Our mission is to inspire a new
generation of consumers to think secondhand first. To inspire a generation, you need
to think in terms of hundreds of millions and billions of items being recirculated, not
just thousands. GlobalData projects the U.S. secondhand market will reach $82B by
2026, with the global opportunity at $218B. By 2030, they predict nearly one in five
1
Green Story Inc. May 2019


shareholder letter icon 4/7/2023 Letter Continued (Full PDF)
 

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