Resale isn’t just a business, for a growing swath of consumers, it’s a pre-purchase consideration.
The new business-to-business platform Croissant launching Thursday aims to turn resale into a compelling sales tool aimed at shoppers of new fashion at the very moment they’re mulling over a purchase.
Using artificial intelligence, Croissant determines what a new fashion product will be worth in the secondhand market, and then guarantees this future buyback value at the point of sale for its retail partners.
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The start-up launches flush from a $24 million seed round.
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It’s a unique, yet straightforward framework designed to solve for one specific challenge: “How do you build a post-purchase touchpoint into the initial transaction?” explained chief executive officer John Howard. “Because it’s no longer good enough just to get the sale done. As focused as a lot of online merchants are on conversions and AOV [average order value], even that isn’t good enough these days, because CAC [customer acquisition costs] for those users just keeps going up and up.”
The logic is elegant in its simplicity — so much so that hearing it all laid out might conjure the sound of an imaginary forehead slap.
Gadget-heads, for instance, will often make initial purchase decisions for consumer electronics based on the phone, tablet or computer’s ultimate resale value. Some people stick with iOS, MacOS, iPadOS and WearOS devices out of personal preference, but others stay in Apple’s ecosystem because those gadgets generally fetch higher prices in the trade-in or secondary markets.
This behavior is not only familiar to Howard, a former private equity investor whose eight years at KKR steeped him in fintech, but also his team — including cofounder and chief technology officer John Klose and Vrishti Mongia, who landed at Croissant as head of product after stints at Meta and Moda Operandi. In fact, the platform takes cues from it.
Whether retail partners get on board and have their own forehead-slapping moment remains to be seen. But it looks like there’s little risk. The customer sees the buyback value during an online transaction, and the startup puts up the money to guarantee it. Upon receipt, it then sends the products to secondhand platforms such as Poshmark, DePop, ThredUp, The RealReal and others.
“We’re not a retail site ourselves,” Howard added. “You couldn’t go to Croissant online and shop retail items. But we go and leverage all of the existing players out there to make sure that that item finds a new home and that we get that to another buyer, as as swiftly as we can. And hopefully our cost basis is a little bit better in terms of what we’ve done.”
He doesn’t rule out a marketplace one day. But right now, the company is just focused on making the most of its launch phase. It’s a layered approach, and it needs to be worked carefully and folded in order — similar to the way bakers would create his favorite pastry snack.
Either way, Croissant intends to ride the massive wave of resale, which has been surging this year and is expected to double over the next five, thanks to the emphasis on circular fashion.
According to ThredUp’s Resale Report, the majority of Gen Z shoppers, at 82 percent, said that buyback value is one of their considerations in buying products. In fact, this segment was less likely to buy clothes with poor buyback value.
All of that paints a picture that investors appear to be excited about.
“Only a small percentage of resellable fashion is transacted globally each year, but it’s still a $130 billion market that is rapidly growing,” Stephanie Choo, partner at Portage, said in a statement. Portage is one of Croissant’s major seed round backers, joining KKR and others in the funding round.
“To date, retailers are seeing little to no benefit from this ongoing boom. Croissant enables them to harness the interest in and growth of resale to drive new full-price sales with minimal integration and no need to transact within the secondhand ecosystem themselves,” she said.