ThredUp launched three new artificial intelligence (AI)-powered tools to make it easier for customers to find and shop for items on its resale platform.

As of Aug. 5, the online reseller announced that the features — which include a style chatbot and advanced search using natural language and image recognition — are available to all users, following a successful test phase with a select group.

ThredUp, ranked No. 591 on Digital Commerce 360’s Top 1000 list of the largest online retailers in North America, operates as an online platform where users can send in their unwanted clothes, shoes, and accessories for resale. In addition to its core business, ThredUp partners with brands like H&M and American Eagle to provide “resale-as-a-service.” Digital Commerce 360 projects that ThredUp’s web sales will reach $109.04 million in 2024.

ThredUp web sales by year

How ThredUp’s new AI tools work

ThredUp’s new Image Search | Image credit: ThredUp

“Our mission is to inspire the world to think secondhand first, and in order to do that, we believe in making thrifting as frictionless as possible,” a ThredUp spokesperson said in an email to Digital Commerce 360. “With the implementation of AI, we are making thrifting more customized, more personalized, and easier to navigate.”

ThredUp’s new AI tools use advanced machine learning to understand natural language and visual cues. The intent will be to make it easier for shoppers to find items in ThredUp’s inventory of more than four million items. As the algorithms powering the software keep learning and evolving, the tools will offer more relevant and personalized results, according to the company.

ThredUp’s new search, image recognition and chat features

The first tool, Improved Search, allows customers to use natural language for more precise queries, like “swimsuit for a triathlon” or “tank tops for the 4th of July.” Although ThredUp has already used AI in search, the upgrade leverages advanced language models to better understand and respond to specific requests.

Another AI tool lets users upload a photo, take a picture, or share an Instagram post to find similar items in ThredUp’s inventory. ThredUp says the image recognition technology helps users recreate looks or discover new styles based on their visual preferences.

Finally, ThredUp’s new Style Chat is an AI-powered chatbot that serves as a personal stylist, creating complete outfits based on prompts like “outfit for a fall wedding.” Currently in beta, the bot offers conversational suggestions and allows users to refine their choices by selecting options like “more formal” or “more casual.” ThredUp says it partnered with OpenAI for the technology but also collaborates with other vendors.

ThredUp’s most recent earnings results

ThredUp’s AI investments come at a time when the company is grappling with revenue and profitability challenges. Despite reaching a record $322 million in revenue and a record 6.9 million orders in 2023, ThredUp posted a net loss of $71.2 million for the year, though that was still down from a $92.3 million loss in 2022.

In its fiscal second quarter ended June 30, 2024, ThredUp saw a 4% drop in revenue, bringing in $79.8 million. While U.S. revenue remained steady at $66.7 million, European revenue declined by 18% to $13 million. Following a strategic review, ThredUp announced in its earnings report that it plans to exit the European market.

Amid ongoing inflation, one bright spot for the company is the growing consumer shift toward secondhand apparel to save money. According to ThredUp’s 2024 Resale Report, 55% of consumers say they’ll spend more on secondhand items if the economy doesn’t pick up. The report, conducted by GlobalData, highlights that resale grew 15 times faster than the overall retail clothing sector last year, with online resale seeing a 23% year-over-year growth rate.

The report highlights a rising trend toward online shopping for secondhand apparel, particularly among younger generations. In 2023, nearly two-thirds of consumers who bought secondhand items did so online, up 17 points from 2022. Among younger shoppers, 45% prefer buying secondhand apparel online, while 38% favor brick-and-mortar stores.

Looking ahead, online resale is expected to more than double over the next five years, reaching $40 billion by 2028 with an annual growth rate of 17%.

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