High demand for children’s hand-me-downs is driving rapid growth at Swap.com, which moved from a 67,000 square-foot building to a 360,000 square-foot facility in September to handle its increasing inventory and staff.
Swap, a U.S. subsidiary of Finland-based Netcycler, is an online consignment store for used apparel and accessories. Although children’s apparel is the biggest part of its business, Swap expanded to women’s apparel in March. The web-only consignment shop expects revenue to hit $40-$50 million by the end of 2016, up from $7 million this year, says Justin Knechtel, vice president of marketing.
“There are very few opportunities where you can buy a lot of clothes for your kids without spending a lot of money,” he says. “We are in one of the biggest markets because kids grow.” Many buyers and sellers return to Swap.com to purchase new items and sell old ones. About 60% of Swap’s monthly revenue comes from repeat customers.
Customers can browse Swap.com for products or send the company boxes of lightly used items to sell on the website. Swap approves about 75% of what customers send. Swap handles on-site marketing, photographing, shelving and shipping products; sellers set prices on their own items through a vendor dashboard. Swap takes 25% of the purchase and $1.50 per transaction.
Launched in 2013, Swap has about 150,000 customers and 543,465 items on the site, with the average item priced at $7, Knechtel says. The company has a backlog of 5,000 customer boxes that need to be processed. Knechtel says that’s a sign of growing demand d and why the company believes it is on pace to reach $50 million in revenue next year.
The company moved in September into the much bigger facility near Chicago so it has room for the 750,000-plus items in inventory, Knechtel says. The new warehouse has capacity for 10 million items. The company plans to add 700 employees next year to its current 200. Most hiring will be for the fulfillment center, where employees inspect, photograph and shelve items, but about 25 positions will be in marketing, with others in administration and engineering.
Swap’s biggest challenge is efficiency. “We handle everything from taking photos to managing inventory, and it’s challenging to do that efficiently on a $3 product,” Knechtel says. Swap owns all of its technology and software, which is one way it mitigates these challenges. Marc Onetto, former senior vice president of Amazon’s global operations, is a board member and investor in Swap and has helpedthe company scale efficiently, Knechtel says.
Swap has raised $19.6 million from investors, with its latest round of funding coming in early December. The funding Swap received pales in comparison to other online consigners like thredUp, which raised $131.1 million, and The RealReal, which raised $82.9 million. The RealReal is No. 239 in the Internet Retailer 2015 Top 500 Guide.
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