Thrifting is the new department store shopping. The resale and secondhand market is thriving and by 2023, it’s expected to reach $53 billion. This has been fueled by shifting consumer demands, as people shop more sustainably and try to find rare luxury or vintage items.
With skyrocketing demand, people are also moving from in-person thrifting to online shopping – just like most things over the years. But it can be difficult for secondhand stores to sort through all of their inventory and make it available to online consumers. Imagine this: Instead of thousands of units for one SKU (e.g. multiple sizes and colors of the same sweater), like traditional retailers have, secondhand retailers have thousands of unique SKUs added each day with one item per SKU (e.g. a variety of sweaters coming from different brands, price ranges, and sizes).
Upright Labs makes navigating this ecommerce journey a lot easier. They offer a multichannel inventory management platform and hands-on services to help secondhand retailers like Goodwill, Salvation Army, and Habitat for Humanity turn their inventory into an effective online business.
Upright Labs has north of 70 enterprise clients and helps these retailers make $150 million a year in ecommerce sales. Their software is in over 3,000 secondhand retail stores across the US and clients are growing their business between 40 and 60 percent with Upright’s help. And Upright isn’t just good at making their clients successful, the company itself made seven figures in ARR in 2021 from their software alone.
Inventing Solutions for Everyday Life
David Engle, the CEO and co-founder of Upright Labs, has been an entrepreneur for as long as he can remember. He’s built at least half a dozen different businesses over the years. He was only 14 when he created his first business, bringing free carnivals to children who were underprivileged and disabled across the New York City metro area. From there, he fell in love with building solutions that help people in their everyday lives.
Amongst others, he built a food truck company and a real estate venture. They were all successful in their way, but they weren’t financially sustainable. David says, “I learned from each one what to do and what not to do. Those four or five failures allowed me to understand how I needed to build Upright.”
David and his co-founder (and now CTO) Jackson Geller launched Upright at the end of 2017. They were both students at the University of Maryland and met in a space called the Startup Shell, where students could come to build stuff. “It was an empty room that some kids took over. Everyone had key access and a lot of students would be there from 9 pm to 4 am. There were no rules, you could just be coding, drinking, and doing whatever you wanted,” David says fondly.
David and Jackson both spent time building things and that’s how they got to know each other. David ended up sharing what he was working on and Jackson was on board with his great idea – and that’s how they started Upright Labs together.
Bringing Automation to the Secondhand Industry
Before David came up with the idea for Upright Labs, he was working on something in the same industry. He says, “I was hiking one day and saw someone wearing this awesome Patagonia sweater. I loved the design, but couldn’t afford it as a poor college student. I found myself researching the secondhand sector and discovered that there was something called clothing traders or salvage vendors.”
These people buy huge quantities of unsold clothes from retail stores. How it works is that all items go on the sales floor and whatever doesn’t get sold directly to the consumer gets sold wholesale. Clothing ends up getting sold for pennies on the dollar.
David says, “Jackson and I started buying thousands of pounds in weight of Patagonia, North Face, Hunter, and all of these other name brands. These were the same providers that were supplying Nasty Gal, for example, years back. We would then resell them for at least four times the price.”
The big issue with this business was how much manual effort was needed to sell each item. It was inefficient and time-consuming, which sparked an idea. Jackson told David that they should automate the process. David says, “We also noticed that the clothes we were bulk buying almost always had a Goodwill sticker on them. We started consulting with Goodwill stores to see what their processes were and realized just how ineffective and paper-based their entire system was.”
They sold the business and Upright was born out of the inefficiencies that they experienced in the secondhand retail space. Upright was going to provide solutions to streamline the day-to-day operations for these types of retailers who had been doing everything manually to date.
Customer Needs at the Core of Their Growth Strategy
Before they dove headfirst into the technology side of the business, David and Jackson consulted for a few clients and learned about their specific challenges. They decided it was important to bring a tool to the market that these companies could use immediately. David says, “We knew it wasn’t going to be fully fleshed out, but it would already help them list all of their items online and automate part of the process.”
Even at these beginning stages, the founders had a vision of where they wanted to take Upright Labs: an inventory management system with multi-channel listings, employee metrics, and much more. But they couldn’t get there right away. So Jackson started building the platform, while David continued to consult clients to help them set up streamlined operations.
Within three months, Upright had the first iteration of their software up and running – and clients were paying to use their tool. David sold it to their consulting clients and taught them how to tailor their operations to work with their software. They continued to work closely with their customers to understand exactly what they needed to solve their problems, and following their input, released new features on a weekly – sometimes daily – basis.
David says, “We consistently ask ourselves: What does the customer need, how do they need it, and how can we bring it to them? Our whole growth strategy has been about solving our customers’ challenges and then those customers bring in new clients for us.” The way they’ve grown has allowed them to gain a deep understanding of Upright’s target audience.
When Clients Start Pitching Your Product
David says one of the most challenging aspects of starting a business is product-market fit: “When you’re building a product, you know that there are half a dozen people who definitely need it, but it’s hard to know how big the market is and when that inflection point is.”
Upright’s first two years in business were focused on building the product and finding product-market fit. In the last two and a half years, they’ve been able to focus on escalating the business and setting up a referral network. David says their churn is almost nonexistent. “Our clients stay with us – churn is not even a metric we calculate!”
He says, “A lot of companies will celebrate that they have a new customer and then stop there. That’s not how we look at it. When we get a new client, we ask ourselves how we can keep innovating for them. How are we going to keep pushing the possibilities? We want clients to look back in 10 years and say ‘Wow, Upright has helped us innovate in this way and that way.’ Our challenge is figuring out which areas to innovate in and where to focus our time so that it drives the most amount of return for our clients.”
David says he knew Upright reached its inflection point when their clients were directly introducing them to other companies over email. “They were going to bat for us and recommending us over anything else on the market. Instead of me selling (because I was leading sales at the time), our existing clients were pitching us and telling others how we could solve their problems – and they were doing it better than I was,” David says laughing. “Once that started happening, we really saw the possibilities of where Upright could go.”
How Upright Fuels Secondhand Ecommerce
How does Upright measure success? David says, “For us, it has always been about the impact we’re making. Being able to help our clients generate more profit, which they can then push back to their own mission and fund new mission-critical services. The great thing is that we’ve been true to that since we started.”
Today, over three million unique items are being sold through Upright’s platform each year, generating over $150 million. Their clients will create anywhere from 3,000 to 20,000 unique SKUs that need to be listed online – and these donated items do not have any barcodes. Upright’s system handles everything from identifying the item, creating the barcode, adding the photography, listing the item, taking care of the shipping, and so on.
Not only does the platform allow retailers to streamline their entire sales process and manage their online inventory, but it also tracks efficiencies like how many photos are needed to sell an item, how much revenue a photographer is generating, and how many items have been on the shelves but not sold.
Upright has expanded into two branches: software and services. David says it’s currently a 70/30 split in terms of revenue for each branch, but they are both equally valuable. The service arm is available to clients who need that extra helping hand. Upright will design and launch clients’ ecommerce warehouses. They help set everything up perfectly in tandem with Upright’s software and train the business on how to use the tech in the best way.
The Unexpected Advantages of COVID
Upright started going remote before COVID came along, so it wasn’t the biggest transition to becoming a fully-remote company when it was necessary. (They now have 20 employees in 12 different states and David himself is based in Portland, Maine.) But David says he was worried financially about the business and how the pandemic was going to impact their clients.
“After the first month, we realized that it was the reverse. Since everyone was stuck at home, people collectively started cleaning out their entire homes and donating everything they didn’t need. Suddenly Goodwill, Salvation Army, and so on, started receiving bags and bags of donations. The entire secondhand market scaled and all our clients saw a boost in business,” he says.
These secondhand stores had always relied on traditional in-store shopping – ecommerce being relatively new in their business strategy. But with the influx of donations and the nationwide shutdown, it was important for retailers to switch from in-person to online to capitalize on this revenue opportunity.
They turned to Upright to help build and streamline their online inventory. As a result, Upright saw clients growing more than 100 percent year over year for ecommerce. COVID opened up so many new opportunities for this industry, and Upright is the operating system that powers these companies’ online ecosystems.
Looking at the future, David says, “There’s just so much potential to help our clients grow and expand. When you look at the industry of secondhand retail, it’s the first inning of what’s possible with ecommerce for stores like Goodwill, Salvation Army, Habitat for Humanity, and other thrift stores. Upright wants to help all these companies generate more revenue by creating a sustainable system so they can push more profit back to their own missions of helping people in need and reducing waste.”
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