Should thredUP prioritize expanding its luxury consignment offerings to increase average order value, or focus on more affordable items to attract a wider customer base?

Introduction

The trade-off we're examining today is whether thredUP should prioritize expanding its luxury consignment offerings to increase average order value or focus on more affordable items to attract a wider customer base. This decision is crucial for thredUP's growth strategy and market positioning in the competitive online consignment space.

To address this trade-off, I'll analyze the current product landscape, identify key metrics, design an experiment, and provide a data-driven recommendation. My approach will consider both short-term gains and long-term strategic implications for thredUP's business.

Step 1

Clarifying Questions (3 minutes)

• Context: I'm thinking about thredUP's current market position. Could you share how our luxury vs. affordable item split looks right now in terms of revenue and inventory?

Why it matters: Helps understand the starting point and potential for growth in each segment. Expected answer: 70% affordable, 30% luxury in both revenue and inventory. Impact on approach: A more balanced split might suggest a different strategy than a heavily skewed one.

• Business Context: Based on our recent performance, I'm curious about our primary growth lever. Is it customer acquisition or increasing order value from existing customers?

Why it matters: Aligns the trade-off decision with our core growth strategy. Expected answer: Customer acquisition is the primary focus. Impact on approach: Would lean towards affordable items if acquisition is key, luxury if retention and order value are priorities.

• User Impact: Considering our user segments, I'm wondering about the overlap between luxury and affordable item buyers. What percentage of our customers purchase from both categories?

Why it matters: Indicates potential for cross-selling and impact of focusing on one segment. Expected answer: 20% overlap between segments. Impact on approach: High overlap might suggest a balanced approach, low overlap could justify segment-specific strategies.

• Technical: Thinking about our platform capabilities, how much additional work would be required to support an expanded luxury offering in terms of authentication and handling?

Why it matters: Assesses feasibility and resource requirements for the luxury expansion option. Expected answer: Significant investment in new authentication processes and specialized handling. Impact on approach: High technical barriers might favor the affordable items focus in the short term.

• Resource: Considering our current team structure, do we have the expertise in-house to scale up luxury offerings, or would we need to hire specialists?

Why it matters: Determines the speed and cost of implementing the luxury expansion. Expected answer: Limited in-house luxury expertise, would require new hires. Impact on approach: Resource constraints might influence timeline and feasibility of the luxury option.