South African startup FARO has raised $6 million in funding to pursue its vision of making fashion affordable while combating textile waste across Africa. The company's innovative approach to recommerce involves selling excess inventory from global fashion brands in emerging markets, reducing waste and providing value to both markets.

The problem of excess inventory is a significant one, with ASOS alone holding over £1.2 billion of unsold products in 2022. Meanwhile, emerging markets like Africa heavily rely on secondhand clothing imports, with 30% to 40% of these items deemed unusable upon arrival, leading to environmental degradation due to discarded textiles. FARO's solution targets this paradox, seizing the arbitrage opportunity in the global resale market, which is poised to reach $350 billion by 2027.

FARO's business model involves collecting consumer returns with minor defects from brands like Calvin Klein, Tommy Hilfiger, and Zara, restoring them using its facilities equipped with industrial laundries, steam tunnels, and affordable labor. This approach prevents waste while enabling the startup to buy inventory at ultra-low prices and resell it after value-adding processes. The company operates on a fixed-margin model, targeting 45% after all costs, and invests in better pricing for its customers when margins exceed targets.

Currently, FARO has four stores, with ambitious plans to scale to 1,000 locations over the next decade. Its inventory comprises roughly 40% reconditioned returns and 60% overstock items, sourced through partnerships with major brands. The startup offers discounts of up to 70% off retail prices, making fashion more affordable for African consumers.

FARO is also deploying AI-powered agents to streamline its operations, breaking down complex buyer workflows into manageable micro-tasks. The startup plans to add personalized shopping tools, notifying customers when similar products are about to arrive at one of its stores, enhancing the shopping experience. This could prove a meaningful differentiator in the African market, where e-commerce faces logistical challenges and population density makes delivery models costly.

FARO's success is evident in its rapid growth, with the company reaching $2 million in annual revenue with just four stores, achieving a 20x revenue growth last year. The startup aims to grow fivefold this year and plans to scale to 1,000 stores by building localized price profiles tailored to regional demand and the specific brands available as it expands into other emerging markets.

The company's new pre-seed round was led by JP Zammitt, president of Bloomberg, with participation from VC firms like Presight Capital, Garage Ventures, and individual investors. This funding will support FARO's mission to reduce textile waste and make fashion more accessible to African consumers.

FARO's innovative approach to recommerce has the potential to disrupt the fashion industry, providing a sustainable solution to the problem of excess inventory while promoting affordable fashion in emerging markets. As the company continues to grow and expand, it will be interesting to see the impact it has on the global fashion landscape.