{"id":846,"date":"2015-09-30T16:00:30","date_gmt":"2015-09-30T20:00:30","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/thredup-utilizing-network-effects\/"},"modified":"2015-10-19T18:10:27","modified_gmt":"2015-10-19T22:10:27","slug":"thredup-utilizing-network-effects","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/thredup-utilizing-network-effects\/","title":{"rendered":"thredUP utilizing network effects"},"content":{"rendered":"

I first heard about\u00a0thredUP\u00a0<\/a>in a classroom setting, and learned it was founded by\u00a0James Reinhart<\/a>, HBS alum.<\/p>\n

thredUP is a started as a multi sided platform which connected people who wanted to sell used cloths (usually children’s) to people who were interested in purchasing used cloths in a good condition at a good price.\u00a0thredUP<\/a>\u00a0created value for people who didn’t want to throw away their cloths and were interested in conveniently selling them online. It also created value for people who wanted to purchase discounted used cloths in good condition.<\/p>\n

In the initial model,\u00a0thredUP were the facilitators of the transactions, similar to ebay. In this type of modal the platform has both direct and indirect network effects as sellers derive value only from actual sales which are possible only if there are buyers on the platform. the more buyers are on the platform, the sellers capture more value. On the other hand the buyers will only join the platform and use it repeatedly of they will find items they are interested in.<\/p>\n

This model has proven successful, especially with children’s cloths as their lifetime value is longer than the time a child or baby can actually use them. As a parent myself I frequently find cloths with price tags in my daughter draws that won’t fit any longer.<\/p>\n

On the other hand, parents do not have time to manage the sales process.<\/p>\n

As it evolved, thredUP moved to be a re-seller who select and certify cloths and then resell it to buyers, this progress allowed them to capture greater value. In this case the sellers put their old cloths in a bag and ship to\u00a0thredUP who goes over the inventory, “buys” some of the cloths from you and returns you the rest. Then they take a picture of the item describe it in detail and publish to their website.<\/p>\n

In my opinion the network effects are still there, because\u00a0thredUP \u00a0won’t buy clothes from you if the demand wasn’t there, moreover, now they have data on what was sold historically, and they won’t take items that aren’t in high demand. The new model increases the credibility of the platform as people trust the company to provide good quality and customer support and the network of buyers and sellers grows and grows.<\/p>\n

Alternatively, the sellers might get intimidated that their “merchandise” won’t get accepted as other sellers would offer\u00a0thredUP \u00a0 similar items. However, if the demand is there, and the demand is growing with the client base,\u00a0thredUP \u00a0 should be able to facilitate more trade and accept more items.<\/p>\n

This type of platform has downsides as private people are sellers and have limited to no affiliation to the brand. I can send my cloths to\u00a0thredUP \u00a0 or to a new platform alternatively, with no switching cost whatsoever.<\/p>\n

Sellers and Buyers can spend time and money on other platforms such as eBay, Swap.com, Loteda.com, etc. Or even go to physical locations such as yard sales and flee markets.<\/p>\n

thredUP owners increased their control of the multi sided platform by transferring it from a marketplace to a re-seller and grew their network by utilizing direct and indirect network effects. However, they are still at risk of imitation and substitute, as there is no affiliation and no switching costs both from the supply side and the demand side.<\/p>\n

 <\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

thredUP owners increased their control of the multi sided platform by transferring it from a marketplace to a re-seller and grew their network by utilizing direct and indirect network effects. 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