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Executive Summary
Vinted is a Lithuanian second-hand clothing retail platform with a presence across Europe as well as in the United States and Canada. It has expanded dramatically throughout 2020, due in large part to the suitability of its business model to the COVID-19 situation. The company is currently working on strengthening its position further and entering new markets. Its internal and external environments are promising for future growth, with few significant weaknesses. As such, little to no adjustment is likely necessary to achieve the companys growth and market share increase objectives.
Introduction
This report has been written to create a better understanding of the current global fashion resale market and how respective companies can increase their brand awareness. Focusing on the company Vinted, this report will help to increase its brand awareness in order to create more market share. The following main research question will be answered to achieve this: Which strategy should Vinted implement to increase its brand awareness by 5% in one year?
The set-up of the report commences with a company description and a problem definition, followed by internal and external analysis. A SWOT analysis will summarize the key elements of the findings, based on which conclusions will be drawn.
Company Description
Vinted is a Lithuanian company founded in 2008 that has since expanded throughout much of Europe as well as Canada and the United States. It offers users an online marketplace for used clothing, enabling sellers to list their unwanted items on a platform that provides exposure and facilitates shipping and provides buyers with greatly expanded variety. Additionally, unlike more traditional second-hand clothing shops, Vinted connects buyers and sellers directly, funding its operation by collecting a service fee. Another source of revenue comes from the ability of sellers to bump or spotlight their offerings for a small cost to put them at the top of the catalog in relevant searches. Overall, this model enables Vinted to offer fair prices to both parties that are better than what they would have received if they had gone to a physical shop, along with a superior selection. Sellers can use market mechanics to set the best price buyers will take, and shoppers can take advantage of the transparent pricing and low markup.
Problem Definition
Overall, 2020 and early 2021 has been beneficial for Vinted due to its online nature. As Lunden (2021) notes, while the company had to close for two months at the beginning of the COVID-19 pandemic, it readjusted its operations for improved safety and proceeded to increase its valuation from $1 billion in 2019 to $4.5 billion as of late May 2021. Its focus on sustainability through the recycling of used clothes instead of the purchase of new ones also matches current trends. There are some issues, notably the presence of scams on the platform that trick users, but these problems are inherent in the companys hands-off approach and likely outweighed by its advantages. The problem that will be reviewed in this report is Vinteds current international expansion effort, for which it has raised $303 million (Lunden, 2021). To capitalize on its success, the company will have to move to markets that do not share its current operation areas Euro- and Anglocentric cultures.
Internal Analysis
Organization
In terms of organization, Vinted appears to be viewed favorably by its employees. Working at Vinted (n.d.) rates the company 4.2 stars with overall high employee satisfaction with both the business as a whole and its CEO. The companys culture appears to be friendly and open to innovation, welcoming new employees and helping them become accustomed to the companys operations. Moreover, at the lower levels, it tends to be highly democratic, with every employee encouraged to participate and contribute ideas ( Working at Vinted, n.d.). Lastly, many employees were appreciative of the free schedule they were granted by the company, working whenever they liked as long as they delivered results. With that said, some reviewers voiced concerns about the lack of transparency surrounding the decisions of the upper management. Additionally, there were complaints about legacy staff occupying high positions due to their tenure with the company despite not necessarily having the capabilities to perform well in the role.
Innovation
The business concept of Vinted is based on ideas that, at the time of its conception, were innovative. It has maintained this course since, aiming to remain at the forefront of the industry and offer customers the best experience. Per McLaughlan (2021), the companys focus has been on offering a superb experience to the customers through continuous unit economic improvements and ease of usage optimizations. While none of these goals necessarily mandate continued and extensive innovation such as that exhibited by Apple or Google, they can only be achieved through the combination of numerous small improvements. For the company to stay ahead of the market, it needs to recognize and implement these opportunities before its competition does. Vinteds success in remaining a market leader, especially in Europe, suggests that it has succeeded in establishing a culture that fosters and uses innovation for beneficial purposes.
Financial Situation
Overall, as mentioned above, 2020 and early 2021 have been largely excellent for Vinted economically. As an online business, it was less affected by the initial closures and lockdowns across the world than purely physical companies. Once its operations returned to normal, it was also able to capitalize on the market share that was previously held by physical second-hand retailers and expand its operations. As a result, as mentioned above, Vinted has been able to more than quadruple its valuation between 2019 and early 2021. Moreover, this growth trend does not appear to be slowing, and the company seems to be experiencing little difficulty scaling to accommodate the current size of its operations. It is currently considering expansion, for which it has raised $303 million, also as detailed above. Overall, the financial outlook for Vinted is extremely positive, as the business is both relevant to current cultural trends and adapted to the new global environment that emerged with the advent of the COVID-19 pandemic.
Production
Vinted does not produce any products per se, as it is a purely service-oriented company. It offers sellers access to its online marketplace, where they can connect with buyers and sell their products directly. To facilitate the process, the business collects a fee that is used to provide customer support, insurance, delivery tracking, and other essential services. In the event that the sale concludes without complications, the company keeps much of the fee, which means it derives most of its revenue from maintaining a high-quality service. An additional source of income is the combination of bumps and spotlights that sellers can use to promote their products, which effectively go to the company in their entirety. By maintaining and improving its services, the company earns enough income to sustain its operations and expand as it has since its inception.
Marketing
Overall, Vinteds recent marketing has focused on sustainability, which is becoming a growing concern due to the efforts of activists and organizations. As a result, many people have become increasingly aware of their effects on the planet and become more likely to appreciate the environmental benefits of second-hand clothing. With that said, buyers often overestimate the quality and durability of fast fashion items, a similarly cheap alternative to second-hand, while voicing concerns about the cleanliness of resold items and the stores where they are sold (Sorensen & Jorgensen, 2019). Vinted addresses both the concerns by offering customers items from a variety of brands, including fast fashion ones, while connecting sellers and buyers directly via an online marketplace. Users can browse options at leisure and inquire into particular aspects of the clothes, and unethical sellers who supply low-quality clothing will quickly lose their reputation and ability to sell clothes. The companys marketing emphasizes both of these aspects, as well, as creating the image of a platform that can assist the user in helping the planet without sacrificing anything and while benefiting personally.
External Analysis
Market Analysis
The market for second-hand clothing appears to have been performing excellently across the world, which partially explains Vinteds rapid growth. The factors described above have contributed to the growth of its popularity, with people increasingly interested in sustainable alternatives to fast fashion. Thomas (2020) cites an analyst that expects the market to expand to $64 billion by 2025 from its $28 billion valuation as of 2020. As a large and well-established retailer, Vinted is well-positioned to take advantage of this ongoing growth and stay ahead of the future developments in the field of sustainability.
Competitor Analysis
Porters Five Forces model will be used to analyze the competition.
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Competition in the industry: high. There is a variety of second-hand clothes marketplaces that can try to undercut each other with fees.
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Potential of new entrants into the industry: medium. While it is not challenging to establish a second-hand clothing sales platform, seller and buyer adoption is necessary for success.
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Power of suppliers: medium. Sellers are free to list their clothes on multiple different platforms at once, but they are still dependent on these platforms as a whole.
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Power of buyers: high. Customers have an extensive choice of platforms as well as brick-and-mortar second-hand clothing stores.
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Threat of substitutes: medium. Fast fashion is often seen as a viable alternative to second-hand, though this perception may be changing.
Customer Analysis
Second-hand clothing, especially that sold online, primarily appeals to younger people since they are more likely to be unable or unwilling to purchase new and expensive clothing. With that said, there are also other factors that influence second-hand purchase intention and are not necessarily as apparent or simple to quantify. Ek Styvén and Mariani (2020) find that buyers are also interested in moving away from the market, abandoning mass consumption trends that they perceive to harm Earth, and exploring alternative market channels. Factors such as nostalgia should also be considered, as they can lead one to purposely seek out old clothes. Overall, to appeal to Vinteds customers, the company needs to consider items other than price and sustainability.
Macroeconomic Environment Analysis
Overall, the macroeconomic environment appears to be favorable for Vinted. COVID-19 is still an ongoing problem that is likely going to result in permanent changes in how many businesses function. Moreover, the emphasis on sustainability is growing in Vinteds target markets, further increasing its growth potential. However, the same may not be the case in the other markets where the company is looking to expand, such as Asia. Lastly, the pandemic has led to an economic downturn that will likely result in people seeking cheaper alternatives to what they usually purchase, including clothing.
SWOT Analysis
Conclusion
Vinted appears to be well-positioned in the market, a supposition that is supported by its rapid growth over the last year. In addition to reinforcing its positions in its core markets, it is also planning an expansion effort into new regions, for which it has already secured funding. Overall, the companys position appears to be strong, though the international effort may be risky. It should be able to achieve its goal of increasing its market share by 5% within the next year, especially if global and not local market shares are considered.
References
Ek Styvén, M., & Mariani, M. M. (2020). Understanding the intention to buy second-hand clothing on sharing economy platforms: The influence of sustainability, distance from the consumption system, and economic motivations. Psychology & Marketing, 37(5), 724-739.
Lunden, I. (2021). Vinted raises $303M for its 2nd-hand clothes marketplace, used by 45M and now valued at $4.5B. Yahoo News. Web.
McLaughlan, F. (2021). EQT Growth leads investment in Vinted, Europes largest online C2C platform dedicated to second-hand fashion. Web.
Sorensen, K., & Jorgensen, J. J. (2019). Millennial perceptions of fast fashion and second-hand clothing: an exploration of clothing preferences using Q methodology. Social Sciences, 8(9). Web.
Thomas, L. (2020). The resale market is expected to be valued at $64 billion in 5 years, as used clothing takes over closets. CNBC. Web.
Working at Vinted. (n.d.). Web.
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