Case Study Description of thredUP: Think Secondhand First
In the fall of 2016, the management team at thredUP, the largest U.S. online retailer of secondhand clothing, is deciding whether to expand into international markets. Over the past 12 months the 7-year old startup, which had raised over $130 million in venture capital, had seen revenue grow 100% and gross margin double. Would moving abroad expand thredUP's total addressable market and help position the company for an IPO? Or would it prove a distraction, derailing momentum in the core U.S. business?
Authors :: Thomas R. Eisenmann, Allison M. Ciechanover, Jeff Huizinga
Swot Analysis of "thredUP: Think Secondhand First" written by Thomas R. Eisenmann, Allison M. Ciechanover, Jeff Huizinga includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Secondhand Thredup facing as an external strategic factors. Some of the topics covered in thredUP: Think Secondhand First case study are - Strategic Management Strategies, Growth strategy, Technology and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the thredUP: Think Secondhand First casestudy better are - – increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation, there is increasing trade war between United States & China, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs,
competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, etc
Introduction to SWOT Analysis of thredUP: Think Secondhand First
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in thredUP: Think Secondhand First case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Secondhand Thredup, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Secondhand Thredup operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of thredUP: Think Secondhand First can be done for the following purposes –
1. Strategic planning using facts provided in thredUP: Think Secondhand First case study
2. Improving business portfolio management of Secondhand Thredup
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Secondhand Thredup
Strengths thredUP: Think Secondhand First | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Secondhand Thredup in thredUP: Think Secondhand First Harvard Business Review case study are -
High brand equity
– Secondhand Thredup has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Secondhand Thredup to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Secondhand Thredup in the sector have low bargaining power. thredUP: Think Secondhand First has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Secondhand Thredup to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Secondhand Thredup
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Secondhand Thredup does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy in the thredUP: Think Secondhand First Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
High switching costs
– The high switching costs that Secondhand Thredup has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Highly skilled collaborators
– Secondhand Thredup has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in thredUP: Think Secondhand First HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Secondhand Thredup are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Strong track record of project management
– Secondhand Thredup is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to lead change in Innovation & Entrepreneurship field
– Secondhand Thredup is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Secondhand Thredup in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Secondhand Thredup is one of the leading recruiters in the industry. Managers in the thredUP: Think Secondhand First are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- Secondhand Thredup is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Secondhand Thredup is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in thredUP: Think Secondhand First Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Secondhand Thredup is one of the most innovative firm in sector. Manager in thredUP: Think Secondhand First Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses thredUP: Think Secondhand First | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of thredUP: Think Secondhand First are -
Slow decision making process
– As mentioned earlier in the report, Secondhand Thredup has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Secondhand Thredup even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Interest costs
– Compare to the competition, Secondhand Thredup has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High cash cycle compare to competitors
Secondhand Thredup has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High bargaining power of channel partners
– Because of the regulatory requirements, Thomas R. Eisenmann, Allison M. Ciechanover, Jeff Huizinga suggests that, Secondhand Thredup is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Products dominated business model
– Even though Secondhand Thredup has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - thredUP: Think Secondhand First should strive to include more intangible value offerings along with its core products and services.
High operating costs
– Compare to the competitors, firm in the HBR case study thredUP: Think Secondhand First has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Secondhand Thredup 's lucrative customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study thredUP: Think Secondhand First, is just above the industry average. Secondhand Thredup needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Workers concerns about automation
– As automation is fast increasing in the segment, Secondhand Thredup needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Skills based hiring
– The stress on hiring functional specialists at Secondhand Thredup has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the thredUP: Think Secondhand First HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Secondhand Thredup has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, Secondhand Thredup has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Opportunities thredUP: Think Secondhand First | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study thredUP: Think Secondhand First are -
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Secondhand Thredup to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Secondhand Thredup can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Secondhand Thredup is facing challenges because of the dominance of functional experts in the organization. thredUP: Think Secondhand First case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Secondhand Thredup can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Secondhand Thredup can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Secondhand Thredup can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Secondhand Thredup has opened avenues for new revenue streams for the organization in the industry. This can help Secondhand Thredup to build a more holistic ecosystem as suggested in the thredUP: Think Secondhand First case study. Secondhand Thredup can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Secondhand Thredup to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Secondhand Thredup to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Secondhand Thredup has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study thredUP: Think Secondhand First - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Secondhand Thredup to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Secondhand Thredup in the consumer business. Now Secondhand Thredup can target international markets with far fewer capital restrictions requirements than the existing system.
Learning at scale
– Online learning technologies has now opened space for Secondhand Thredup to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Secondhand Thredup in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Secondhand Thredup can use these opportunities to build new business models that can help the communities that Secondhand Thredup operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Threats thredUP: Think Secondhand First External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study thredUP: Think Secondhand First are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Secondhand Thredup with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing wage structure of Secondhand Thredup
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Secondhand Thredup.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study thredUP: Think Secondhand First, Secondhand Thredup may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Innovation & Entrepreneurship .
High dependence on third party suppliers
– Secondhand Thredup high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Consumer confidence and its impact on Secondhand Thredup demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Environmental challenges
– Secondhand Thredup needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Secondhand Thredup can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Secondhand Thredup needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
Regulatory challenges
– Secondhand Thredup needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Innovation & Entrepreneurship industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Secondhand Thredup in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Secondhand Thredup will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Secondhand Thredup can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Secondhand Thredup can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study thredUP: Think Secondhand First .
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Secondhand Thredup in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Weighted SWOT Analysis of thredUP: Think Secondhand First Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study thredUP: Think Secondhand First needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study thredUP: Think Secondhand First is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study thredUP: Think Secondhand First is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of thredUP: Think Secondhand First is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Secondhand Thredup needs to make to build a sustainable competitive advantage.