Online Consignment Shop For Kids’ Items Swap.com Raises $4 Million Series A

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A newer competitor in the online consignment space, Swap.com, has raised $4 million in Series A funding for its e-commerce shop where parents can buy secondhand kids’ clothing, gear, books, toys, games and more. Though similar in some respects to competitors like thredUP.com, which also began by focusing on the kids’ clothing resale market, Swap.com differentiates itself by not only by the nature of the items it accepts and sells – most competitors don’t stray too far from clothing and accessories – but also in its business model.

Co-founder and CEO Dr. Juha Koponen explains that Swap.com operates as a true consignment store, whereas most of its competitors do not.

Today, thredUP and many of its competitors seem to go one of two routes: either they offer a peer-to-peer marketplace like Poshmark or Threadflip, or they pay users upfront for items sent in to the company to sell on their behalf, as thredUP and Twice do. Meanwhile, Swap.com does things differently – it only pays sellers after their items are purchased by other shoppers, but it also supports “swapping.” And Dr. Koponen adds, sellers can sometimes receive more for their items on Swap.com than on competitors’ sites as his company takes 20% plus $1 of every item it sells.

In addition, the company accepts all brands instead of limiting itself to more high-end apparel, and allows customers to sell non-clothing items like baby gear, books, toys, games, decor, movies and music, sport equipment, and also maternity clothes.

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Another differentiator is that Swap.com customers can pay using a combination of money and existing items as currency, which is where the company’s name “Swap” comes into play. For what it’s worth, thredUP previously operated a clothing swap service before pivoting into its online resale shop it runs today, having failed to make such a model work. Swaps on Swap.com are free, but the company does charge another flat fee for sorting, photographing, storing and listing items on sellers’ behalf. That’s why it makes more sense for customers to send in larger lots rather than items one at a time – the fees could eat away at any additional profits you could make here versus on a competitors’ site.

Dr. Koponen believes Swap.com will be successful, versus its competitors, because of increased efficiencies on the fulfillment side of its business, which is Swap’s “secret sauce.”

To that end, he notes that one of Swap.com’s new investors is Marc Onetto, former VP of Worldwide Operations and Customer Service at Amazon.com, and a board member at global electronics retailer Flextronics. Applying his expertise to the consignment model will be a competitive advantage, the startup’s founders (which includes co-founder Jussi Koskinen) believe.

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Swap.com currently reports a revenue run rate of $2.5 million, and has been growing at 20% month-over-month since 2013, after European swapping site Netcycler bought Swap.com in order to expand into the U.S. market. The site today lists over 150,000 items and adds more than 50,000 new ones monthly. The now roughly 50-person team (not all full-time) has also recently moved into a new 66,000 sq. ft. fulfillment center in its homebase of Bolingbrook, Illinois – a market the startup chose because of the ease of shipping to both coasts. That location outside the Valley has made it a bit more difficult in terms of raising funding, however, though Swap.com has picked up some notable angels in its A round.

The round included investment from a lesser known firm Cleantech Invest Plc., which, as its name implies, often funds a different sort of startup; and angels including Ari Hypponen (first employee at F-Secure), Ahti Heinla (Skype founding engineer), and Jaan Tallinn (Skype and Kazaa founding engineer), in addition to Onetto.