Thredup CEO James Reinhart on the company's new partnership with Walmart

James Reinhart, co-founder and CEO of Thredup, joins "Squawk on the Street" to discuss the company's new partnership with Walmart to deliver fashion through resale.

Walmart is getting into the fashion resale market with ThredUp, an e-commerce company that buys and sells secondhand clothes, shoes and accessories.

Starting Wednesday, customers can browse thousands of pre-owned items for women and children on the big-box retailer’s website. They can get free shipping from Walmart so long as they spend $35 or more. And if purchases don’t work out, they can return the items at a nearby store.

Walmart is expanding its online fashion assortment at a time when it could grab more market share in apparel and accessories. The coronavirus pandemic has exacerbated challenges for clothing retailers. Stores have been shuttered for months, and some are now reopening with only curbside pickup or limited foot traffic. Major names, including J.Crew, Neiman Marcus and J.C. Penney, have filed for bankruptcy protection. Others like Nordstrom have said they’ll permanently close some of their stores.

Walmart dominates the grocery business, but still lags in fashion despite its efforts. It has acquired plus-sized women’s apparel company Eloquii and menswear company Bonobos, developed exclusive apparel lines with Ellen DeGeneres and Sofía Vergara and revived Scoop, a trendy brand that used to have stores in New York City.

Denise Incandela, head of fashion for Walmart’s e-commerce business in the U.S., said the retailer has been talking to ThredUp for about a year. With the pandemic though, she said buying fashionable, yet budget-conscious items may have even more relevance.

“Everything that we do has been focused on making Walmart a destination for fashion,” she said. “We are absolutely seeing this as an opportunity to support a bigger portion of our customers’ closets.”

She declined to provide financial terms of the deal, but said it’s similar to arrangements with third-party vendors on Walmart Marketplace. Its website already sells some pre-owned designer watches and handbags.

During the pandemic, Walmart has seen a surge of shoppers turning to its stores, website and app to buy groceries, cleaning products, hair color and more to help them during long stays at home.

Even before the crisis, however, Walmart has looked for ways to nudge customers’ toward general merchandise on its website. By selling more higher-margin items like clothing, Walmart can help drive up profitability of its e-commerce business, which has not yet turned a profit.

For the big-box retailer, the deal with ThredUp is a way to expand its online fashion offerings and get in on the sustainability trend. ThredUp bills itself as the largest online thrift store. Customers can send in clothes, shoes, handbags and more, so long as they’re in good condition. If they pass a quality inspection and sell, he or she gets a portion of the profits. The San Francisco-based resale company has over 45,000 brands, ranging from designer names like Marc Jacobs to fast fashion like Forever 21.

ThredUp has struck deals with a growing number of retailers, including Gap, Macy’s, J.C. Penney and J.Crew-owned Madewell. Many of its partnerships with retailers have had a brick-and-mortar rather than e-commerce focus.

For Walmart shoppers, the lower-priced brand name goods may resonate at a time when millions of Americans are unemployed, furloughed or coping with pay cuts.

ThredUp CEO and co-founder James Reinhart said sales have remained strong on the company’s website during the pandemic, though tops now outsell bottoms and customers have favored leisurewear.

He said by partnering with ThredUp, retailers can “delight their customer in a new way” and acknowledge customers’ interest in sustainability. He said the company will bring more choices and elevated fashion brands to Walmart’s website. Items will be dual-listed on Walmart’s website and the company’s own, he said.

For ThredUp, he said, it’ll put its accessories and clothing in front of a larger audience.

“We’re a small fish compared to Walmart and so the ability to tell our story to a Walmart audience is really powerful,” he said.

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