Global fashion brands are struggling with billions of dollars worth of unsold inventory. In most cases, these brands avoid reselling in core markets such as the UK and US to prevent market cannibalization. Meanwhile, emerging markets such as Africa rely heavily on imported second-hand clothing, of which 30-40% is deemed unusable upon arrival, leading to environmental degradation from discarded textiles.
This situation highlights a contradiction. Excess inventory of new and unsold goods in developed markets coexists with ecological damage caused by imports of used goods in emerging markets. But this dynamic also creates unique arbitrage opportunities for startups in the global resale market (also known as recommerce), which is expected to reach approximately $350 billion by 2027.
Looking to seize that opportunity is FARO, a South African startup that emerged last year and recently raised $6 million to pursue its vision of making fashion affordable while combating textile waste across Africa. .
Selling excess inventory in emerging markets
Here's how it works: African markets do not have the economic power to support retailers that sell brands such as Calvin Klein, Tommy Hilfiger, and Zara at full price. But the desire for authentic products on the continent persists. FARO ensures that surplus stock from these brands has a second life in high-demand South Africa, creating value for both markets and reducing waste.
The recommerce startup targets consumer returns with minor defects that brands often scrap or incinerate due to high labor costs, said co-founder and co-CEO David Toll. told TechCrunch. FARO collects these items and remediates them using facilities with industrial laundries, steam tunnels, and affordable labor. This approach allows startups to purchase inventory at ultra-low prices (sometimes as low as £1 per piece) and prevent waste while allowing it to be resold through a value-add process.
Torr explains that the business operates on a fixed profit model with a target of 45% before all costs, including swing tags and processing. He also said FARO is investing in better pricing for customers rather than inflating profits when margins exceed targets.
Currently, FARO has four stores and has ambitious plans to expand to 1,000 stores over the next 10 years. The company's inventory is approximately 40% refurbished and 60% overstock. FARO sources these clothing items through partnerships with leading brands such as ASOS, Boohoo, G-Star, Jack & Jones, and Levi's, offering select items up to 70% off retail prices. Masu.
“Our fundamental belief is if we can be the most exciting driver of great value for our customers. That's how we create loyalty and continuity, and that's how we get to 1,000 stores. , by focusing 100% on customer centricity,” says Toll. .
South Africa's retail market is highly developed, with over 2,000 shopping centers unlike any other in Africa, making it a major location for physical off-price retail distribution. This approach is essential because off-price inventory (consumer returns that often include unique single items) is too costly to digitize and list online.
Even large off-price retailers like TJX operate primarily offline, relying on established supplier relationships and profitable legacy systems with little incentive to innovate. However, inventory management still relies on outdated and labor-intensive processes, and the inefficiencies of these systems are becoming increasingly apparent as planners manually process large volumes of manifests in Excel. Masu.
Torr said FARO is developing an AI-powered agent designed to break down these complex buyer workflows into manageable microtasks and streamline operations.
“Some brands just have 15,000 or more employees working with data in Excel at the corporate level,” he says. “If you think about what AI can do, you can build an AI agent to do it, and that's what we've done. And the precision is infinitely better than humans can do it.”
Torr said the startup also plans to add personalized shopping tools. For example, customers interested in a particular brand or item can receive notifications when similar products arrive in store, improving their shopping experience.
If it works, it could be a meaningful differentiator. E-commerce continues to face obstacles in Africa due to logistical challenges and population density, making delivery models more costly. Platforms like Takealot and Jumia have held their own for years, but the rise of ultra-cheap and trendy platforms like Temu is proving more than just an advantage to price-sensitive South African consumers. It is also threatening the dominance of South Africa's popular fast fashion brands. .
The road to 1,000 stores
FARO is finding its place by optimizing its internal operations and partner supply chain by avoiding e-commerce altogether, and targeting aspirational buyers who value the status and perceived quality of branded goods. Mr. Toll says that it is growing.
FARO launched an experimental pop-up store in South Africa in 2023, generating $100,000 in revenue in the first month. The company initially expected it would need seven stores to reach $2 million in annual revenue, based on traditional retail benchmarks.
Instead, FARO, which operates in urban hubs, mid-market centers and formal retail spaces, achieved 20x revenue growth last year, reaching that milestone of $2.3 million in just four stores. states. Now, the recommerce startup is aiming to grow five times this year, CEO David Toll said.
Regarding plans to expand to 1,000 stores, how to effectively build localized price profiles tailored to local demand and the specific brands available, with an eye toward expansion into other emerging markets. It's taking place. Consumer behavior and preferences are not universal and can vary significantly from region to region. A strategy that works in South Africa may not resonate in Kenya or Nigeria.
Torr launched FARO with three other co-founders: Will McCarren, Chris Makhanya, and Amber Penney-Young. They bring together experience from Amazon, Jumia, UCOOK, Superbalist, Spice & Roots, and Zumi.
The investment was led by Bloomberg President JP Zammit. VC firms such as Presight Capital and Garage Ventures, as well as Mato Peric (MPGI), Leonard Stiegeler (Pulse), Oliver Merkel (Frink), Vikram Chopra (Cars 24), Tushar Ahluwalia (Razor Group), and Managing Director Daniel. Private investor Teal Capital companies such as Funk participated.