How the Booming Off-Price and Resale Sectors Helped Kidsy Build a Million-Dollar Children's Marketplace

Why it matters:

• The off-price retail segment is booming. Generating more than $340 billion in 2024, the market is expected to climb to over $600 billion by 2031, according to Coherent Market Insights.
• Online resale is the fastest-growing sector of the U.S. secondhand goods market, according to a 2023 report from ThredUp and GlobalData.
• Startup Kidsy leans into the burgeoning market for off-price and secondhand children’s goods: By 2030, the U.S. online resale market of baby and kids' products is poised to grow to $6.8 billion.

Shraysi Tandon walked an unconventional path to her startup Kidsy, an off-price e-commerce company that resells children's overstock and open-box (returned and offered on sale) products.

A business journalist for years, she leaned on her reporting background to direct the 2018 documentary "Invisible Hands," about child labor in global supply chains. As Tandon immersed herself in the tangled web of supply chains for the documentary’s storytelling, "I also learned about inventory glut and the liquidation industry as well as all the retail pain points that retailers, brands, and manufacturers faced," Tandon said.

In her reporting for the documentary, Tandon found tremendous waste in the retail ecosystem. Goods that didn't get sold through liquidation or resale outlets made their way to other countries or to landfills.

Tandon's findings mirror the return industry: Total returns cost the U.S. retail sector $743 billion in merchandise in 2023, according to the National Retail Federation. And conversely, fed by consumer returns and overstocks, the liquidation market is booming, valued at an estimated $644 billion.

Against this backdrop, when Tandon first became pregnant — she gave birth to her first child in 2021 and her second in 2023 — she was determined to buy baby items only through overstock or liquidation outlets.

Environmental considerations notwithstanding, Tandon also realized just how expensive an endeavor it is to have a baby. First-year costs alone can run into the thousands of dollars. And while the products that a baby needs — car seats, strollers, cribs — are nonnegotiables, they find use for only a limited span of time. "Everything is in your house for three months at the minimum and maybe 12 months at the most," Tandon said.

But when Tandon went looking for off-price baby goods, she found no market leader in the sector. Retailers like T.J. Maxx and HomeGoods might have carved a niche in off-price retail, but Tandon found a void in the baby and children's segment. So, along with software engineer Sinan Sari, she launched Kidsy as Co-Founder and CEO in September 2023.

[Read: Secondhand Surge: Inflation, Product Scarcity, and New Tech Platforms Fuel Resale Market]

How Kidsy works: Helping big brands like Macy's and Evenflo unload excess kids' inventory

Kidsy partners with large brands and retailers to absorb their overstock and returns inventory for babies and children up to eight years old. Its roster of partners includes Macy's, Bloomingdale's, Target, Walmart, Luna Baby, Evenflo, and consumer products giant Newell Brands.

The e-commerce company carries 70% of its inventory that it packs and ships directly. It relies on drop-ship arrangements with its retailer ecosystem for the rest. The average discount is between 25% to 35% off full-price goods. "That seems to be the sweet spot for a lot of our customers, because they typically don't find these discounts in the market every day and have to wait until Black Friday or another holiday," Tandon said. Kidsy lops off an average "take rate" of 35% on every item it sells.

Consumers can be fickle, with tastes heavily influenced by social media, a phenomenon Kidsy is aware of. To counter such here-today-gone-tomorrow tastes, Kidsy is "hyperfocused on making sure that the products we offer are not [from suppliers who trade in] short-lived trends but are from legacy companies and brands that have been around for decades," Tandon said.

Data-driven decision-making is essential, especially in the consumer business. "When you are holding inventory, you have to make sure that the turnover and inventory management are very strong. We're very good at building out models and data sets that inform every part of our decision-making, whether that's operations or hiring or marketing … inventory and product management," Tandon said.

Just as with most off-price retail, product turnover is high and there's an element of surprise to shopping on Kidsy. "There's an urgency and serendipity that makes for a really exciting shopping experience," Tandon said.

[Read: 5 Back-to-School Shopping Trends Businesses Can Capitalize On This Year]

The right time for Kidsy: American parents will spend $12.8 billion on secondhand children's goods by 2030

It's a good time to be in the off-price market. Generating more than $340 billion in 2024, the market is expected to climb to over $600 billion by 2031, according to Coherent Market Insights.

The momentum is carrying over to the kids' space too. American parents will spend $12.8 billion on secondhand products for kids and babies by 2030, according to projections from Mercari market research.

Investors are taking notice. In March 2024, Kidsy announced it had raised over $1 million in a preseed round, which was the company's first round of funding after launching from its beta phase in September 2023. New York-based Impellent Ventures and its partners David Brown, Phil Beauregard, and Tariq Trotter (aka Black Thought of the Roots) led the round. Other notable investors included the Hustle Fund, Everywhere Ventures, Responsibly Ventures, and The Fund.

Kidsy has seen seven times growth since it launched just over a year ago and hit $1 million in revenue six months after its September 2023 launch.

Tandon sees a shifting consumer mindset toward the embrace of overstock or gently used items. "Today it's cooler to say you found something at a thrift or consignment store as opposed to paying full price," Tandon said. More than half of Americans in a 2024 survey considered themselves to be the best bargain hunters they know.

High inflation rates play a role too, Tandon said, although the move toward off-price is here to stay, she argues. "All these factors have really created this very strong tailwind which is why we'll likely see re-commerce completely overtake traditional retail in the next ten years," Tandon said.

And Kidsy is hoping to ride those tailwinds all the way to the bank. The company employs 13 and plans are in motion to use artificial intelligence to further deliver operational efficiencies and "a simple user-friendly experience on the front end," Tandon said.

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