H&M’s secondhand business is 0.8% of sales after a decade of trying. ThredUp just gave its branded-resale software away for free and launched a 0% fee peer-to-peer product. Those two facts are the same fact.
Retailers are opening secondhand corners inside their stores because used clothing is cheap to acquire, flattering to the brand, and useful against tightening waste law in France and California. The economics underneath run the other way. Resale destroys the one thing fast fashion is built on, which is selling the same garment thousands of times from a single design, photograph and price. The specialists learned that lesson with money. ThredUp spent fifteen years building warehouses to handle used clothes one item at a time, posted a 79.4% gross margin in 2025, and still lost $20.2 million. In June it opened a peer-to-peer channel with no seller fees. Vinted, which never touches a garment, cleared €10.8 billion of goods and €62 million of profit in the same year. H&M is walking into the part of the value chain the specialists are walking out of.
Walk past the color-coordinated racks at H&M’s SoHo store and you reach a wall marked PRE-LOVED. Behind it sits a Jimmy Buffett T-shirt with a cartoon parrot on the front and a Moschino top at $250, hanging within a few feet of each other. Sofia Måhlén, who leads circular business models at H&M, told the Wall Street Journal she would be happy in her job if she converted some shoppers to secondhand. The rack is real, the intent is real, and the arithmetic is brutal.
What Happened
The Wall Street Journal reported on August 3 that H&M, Banana Republic and Reformation have all pushed secondhand sections into their retail floors. H&M runs its SoHo preloved corner with a small vintage store called Awoke Vintage, has opened about a dozen secondhand pop-ups over the past few years, and added preloved sections in Stockholm and Vienna in recent months. Banana Republic has run limited-edition drops of pieces from the 1970s, 1980s and 1990s. Reformation, which listed on the New York Stock Exchange last week, sells Prada and Bebe alongside its own labels in its preloved section.
The number buried in the middle of that story is the one worth keeping. Reselling across Sellpy, COS and the rest of the group came to roughly 0.8% of H&M’s total sales revenue in 2025. Against group net sales of SEK 228.3 billion, that is around SEK 1.8 billion, or close to $190 million. H&M has owned a stake in Sellpy since 2015 and took control of it years ago, booking a one-off SEK 999 million revaluation gain in 2023 when the Swedish resale platform moved from associate to subsidiary. Ten years in, with a platform on the balance sheet and a dozen pop-ups behind it, secondhand is under one percent.
The Backstory
Two things happened while H&M was hanging vintage on its walls.
The first is that the sustainable apparel brand stopped working as a business model. Allbirds went public in November 2021 at $15 a share and reached a $4 billion valuation. Sales fell from $298 million in 2022 to $152 million in 2025. The company shut its US full-price stores in February, sold the brand, the trademarks and the shoes themselves to American Exchange Group for $39 million on March 30, then announced two weeks later that it would rename itself NewBird AI and lease GPUs. Shareholders were asked to revoke the company’s public benefit corporation status and cut environmental conservation language from its charter, because renting compute burns a lot of power. The stock rose 582% in a session, adding about $127 million of value. William Blair’s Dylan Carden called the plan a Hail Mary and dropped coverage.
Everlane, which built a following on radical transparency, sold to Shein in May at a valuation near $100 million. L Catterton had led an $85 million round in 2020 that put the brand around $600 million, and by the end the debt on the business was roughly the size of the exit.
Reformation priced its IPO at $15 on July 29, the bottom of its range, and closed its first day at $15.08 for a market value near $890.9 million. The company runs a real business: $507 million of 2025 net revenue and $12.6 million of net income. Investors paid 1.8 times revenue for the largest sustainable womenswear brand in the world, and about $125 million of the proceeds went straight to repaying a term loan.
The second thing is that the resale specialists changed strategy. ThredUp sold Remix and left Europe in December 2024. On May 6, 2025 it removed all upfront and monthly fees for Resale-as-a-Service, the white-label software that powers branded resale shops, and let partner brands keep 100% of the revenue on their own secondhand items. CEO James Reinhart described it as an open-source approach and compared the ambition to AWS or Shopify. A year later the company reported branded resale adoption up 37% and appointed an advisory board to push it further. Then on June 9, 2026, ThredUp opened the beta of Direct Listing, a peer-to-peer channel with 0% seller fees and one-tap AI listing.
Read those moves together. The company that handled more than 172 million used items decided that the software layer was worth nothing and that the seller should do the listing work.
The Plan
H&M’s stated plan is conversion. Måhlén wants a customer who came in for kids’ socks to leave with a used jacket, and the group is spending against three payoffs at once.
Floor traffic comes first. One-of-a-kind stock creates a reason to visit that a wall of identical cotton tees cannot manufacture, and the pop-up format concentrates that scarcity into an event. Inventory cost comes second, because used clothing arrives cheap, free, or in exchange for store credit. Regulatory position comes third and gets discussed least. France published Law No. 2026-602 on July 9, with per-item penalties on ultra-fast fashion starting September 1 at €0.25 to €12 and climbing to €2 to €20 from 2030, plus advertising and influencer bans from January 2027. California’s SB 707 hit its first compliance deadline on July 1, forcing producers into a textile stewardship organization, and it exempts anyone selling only secondhand goods.
Under eco-modulated fee schedules, a documented reuse operation lowers the bill. That makes the preloved rack a hedge with a marketing budget attached.
The Business Model Angle
Fast fashion is a replication machine. H&M designs a garment once, photographs it once, writes one description, sets one price, and sells that unit tens of thousands of times. Every fixed cost in the merchandising chain gets divided across the run. Shein pushes the same logic further with thousands of new SKUs a day, and our Shein IPO breakdown shows what happens when the arbitrage under that machine gets taxed away.
Secondhand deletes replication. Each garment is its own SKU with a run length of one. Someone has to receive it, inspect it, grade the condition, photograph it, write it, price it against no comparable, store it, and ship it alone. That labor barely moves whether the item is a $12 Jimmy Buffett tee or a $250 Moschino top. Handling cost per item is close to fixed while revenue per item is not, which leaves two ways to make the model clear.
Raise the ticket, or move the labor.
Vinted moved the labor. The seller photographs the jacket, writes the listing, sets the price and drops the parcel at a pickup point. Vinted supplies trust, payment and shipping, then keeps a slice of the transaction. In 2025 that produced €10.8 billion of gross merchandise value, up 47%, on €1.1 billion of revenue, up 38%, with €62 million of net profit and €137 million of free cash flow. Around ten cents of every euro that crosses the platform stays there. Our take rate explainer covers why that number is the most powerful lever a marketplace owns.
ThredUp took the harder road and did the handling itself. The 2025 result was $79.7 million of Q4 revenue, a 79.4% full-year gross margin, and a $20.2 million loss from continuing operations. The gross margin is a consignment accounting artifact more than a signal of health, because the company books its commission rather than the full ticket, and the warehouse work still has to be paid for somewhere. Investors price it at about 2.3 times revenue against Vinted’s 7.3. The retreat from managed processing toward zero-fee peer-to-peer listing is not a product experiment. It is a company reading its own cost sheet.
H&M’s preloved rack is the third option, which is to pay for retail rent and retail staff to handle unit-of-one inventory at fast fashion price points. That combination has never produced a scaled business anywhere. It produced 0.8%.
The value split shows up in what investors will pay per dollar of revenue.
Note where the money sits. Vinted commands the highest multiple while touching none of the clothes, and the two companies that manufactured sustainable apparel land at the bottom of the range or below it. Investors are paying for the coordination layer, not the garment.
The Risk
Three arguments cut against this reading, and one of them is strong.
Start with scale. Under one percent of a SEK 228 billion business is still SEK 1.8 billion, and Sellpy is a platform rather than a shop corner, which means H&M already owns a stake in the model that works. Vinted’s 47% GMV growth proves demand is not the constraint. If the group leans on Sellpy and treats the store racks as advertising for it, the strategy holds up better than the headline percentage suggests.
Then regulation. If eco-modulated EPR fees rise far enough in France and across the EU, running reuse in-house becomes cheaper than paying the levy, and a loss-making resale operation turns into insurance. Building that capability early at negative return is a defensible call, and California exempting pure secondhand sellers tilts the field further.
The strongest counter is cost. ThredUp is betting its own recovery on AI collapsing the per-item expense, with one-tap listing, generative merchandising and automated pricing. Q1 2026 revenue rose 15% to $81.7 million with active buyers up 25%. If that technology drops the cost of turning a used jacket into a live listing by an order of magnitude, the labor asymmetry at the center of this piece narrows, and the retailers arriving now will look early rather than late. Watch ThredUp’s operating margin over the next four quarters, because that line settles the question.
The evidence so far still points the other way. A company convinced its handling costs were about to collapse would be charging more for the software, not giving it away.
Quick Questions
Is secondhand growing? Yes. A report prepared for ThredUp puts the US secondhand apparel market at $78.8 billion by 2030, and Vinted grew GMV 47% in 2025. Category growth and retailer capture are separate questions.
Why does H&M bother at 0.8%? Store traffic, cheap inventory, and a position against textile EPR rules in France and California. Those payoffs do not need a large resale P&L to justify the spend.
Is Vinted more profitable than H&M? Not in absolute terms. H&M earned SEK 12.1 billion after tax in 2025 against Vinted’s €62 million. Investors pay 7.3 times revenue for Vinted and 1.2 for H&M because of what each model does with the next unit of growth.
What killed the sustainable apparel brand? Price. Allbirds and Everlane charged a premium for virtue while shoppers moved to used clothing, which is cheaper, more distinctive and greener than anything sold new.
Does any brand-run resale work? Luxury does, because the ticket carries the handling cost. Vestiaire Collective and The RealReal operate at price points where inspection and authentication earn their keep. A $12 T-shirt does not.
The Business Model Analyst Take
H&M is not making a mistake by hanging vintage in SoHo. It is making a category error by calling it a business line.
The rack is marketing spend and regulatory insurance, and both are worth buying. The mistake sits in reading 0.8% as an early point on a growth curve rather than as a ceiling set by the operating model. H&M’s advantage is replication, and resale is the one product category where replication is impossible. Every hour a store associate spends grading a used jacket is an hour that produces one sellable unit instead of ten thousand.
The tell came from ThredUp, not H&M. When the company with fifteen years of processing infrastructure hands its branded-resale software to competitors for free and then launches a channel where sellers pay nothing, it is telling you which layer holds the value. That layer is trust, payment and logistics between two strangers. It is not a rack.
If H&M wants the resale market, the asset to press is Sellpy, and the question for Daniel Ervér is whether the group is prepared to run a platform that sells other people’s Zara jackets at scale. The H&M business model was engineered to move volume through owned stores, and the H&M SWOT analysis shows how much of the cost base depends on that footprint. Platforms and store networks pull in opposite directions on almost every decision.
Meanwhile Shein now owns Everlane, the sustainability brand, weeks before a French law starts charging Shein by the garment. Everyone in this industry is buying the story they are least able to operate.
