ThredUp Debuts AI-Powered Chatbot and Image Search to Sort Inventory

ThredUp aims to solve one of the timeless challenges of thrift shopping: finding the perfect ‘fit (and fit).

New AI-powered tools rolling out over the next three days allow shoppers to upload an image either directly from Instagram or their device. Using tech from OpenAI, the platform then searches its inventory of 4 million items for similar pieces, suggesting secondhand lookalikes to match the original image.

Thrifters can also use the new Style Chat chatbot for suggestions based on the occasion, aesthetic, weather or style, and ask for adjustments based on the results until it’s right.

ThredUp has been using AI-powered search for years. Still, the new tools represent a significant step forward in the user experience by using language models that can more accurately respond to queries, explained James Reinhart, co-founder and CEO of ThredUp.

“What has changed rapidly over the last six months is that we now have built a whole suite of tools that can do more for the customer from a styling and merchandising perspective,” he said.

As an online thrift store, ThredUp relies on people sending in used items through its Clean Out Kits, which are then resold on the platform. Sellers get some money back, and ThredUp takes a percentage. Initially free, it began charging a processing fee of $14.99 for each Clean Out Kit last year as it focused on making a profit. Items that can’t be resold are sent to The Azek Company, which turns textile waste into decking and other outdoor living products.

In addition to its main resale business, ThredUp also works with brands like Madewell, American Eagle, Reformation and J. Crew to offer “resale-as-a-service.” Leaning on ThredUp to handle the logistics, the service allows apparel companies to generate added revenue by selling their products a second, third or fourth time. It also fosters goodwill with consumers looking for signals that brands are making environmentally conscious business decisions.

ThredUp, which struggled to make money in its first several years due to the logistical complexities of collecting, sorting, processing, reselling and shipping thousands of clothing items daily, broke even on an adjusted EBITDA (earnings before interest, taxes, debt and amortization) for its U.S. business last year for the first time. The 15-year-old company’s revenue continues to grow as it inches toward overall profitability, posting 5% growth in the first quarter of 2024 and building on a record $322 revenue for all of last year.

Some analysts credited continued inflation with the company’s higher-than-expected earnings this spring as consumers look for ways to cut costs.

The company is part of a category of businesses—including resale platforms like The RealReal and rental companies like Rent the Runway—that aim to shift demand away from new production to reduce the environmental impact of the fashion industry. Still, the fast fashion industry continues to grow as ecommerce giants like Shein and Temu gain popularity, putting the world on a crash course with the myriad environmental disasters created by textile waste, most of which is some form of plastic.

ThredUp has made climate a central part of its brand platform, publishing yearly reports on the impact of the resale industry and its climate footprint, and encouraging consumers to take a quiz that estimates their individual “fashion footprint” to better understand how their shopping impacts the climate.

In ThredUp’s new brand platform, debuting in a monthlong campaign this week, sustainability-related messaging remains part of the equation. “Endless Expression,” as the campaign is titled, aims to offer “every style for every version of you,” embracing the concept of infinity, Reinhart explained. The campaign will run on digital platforms and connected TV to start, and could be extended beyond the month depending on how it’s received.

Moving forward, ThredUp plans to build upon these initial AI search tools, making it easier for shoppers to navigate its giant inventory, which adds 40,000 items daily on average.

The current AI offerings are “the anchor technology of how we evolve the brand, how we evolve the customer journey,” Reinhart said.