FARO, a South African recommerce startup, recently raised $6 million in funding to expand its operations aimed at reducing textile waste and making fashion affordable across Africa. The investment round was led by JP Zammitt, president of Bloomberg, alongside venture capital firms like Presight Capital and Garage Ventures. Prominent angel investors also participated, including Mato Perić (MPGI), Leonard Stiegeler (Pulse), Oliver Merkel (Flink), Vikram Chopra (Cars24), and Tushar Ahluwalia (Razor Group), among others.
The $6 million injection will primarily be used to scale FARO’s operations, including the ambitious target of expanding its retail footprint to 1,000 stores within a decade. FARO’s value proposition revolves around repurposing unsold or returned inventory from global fashion brands like ASOS, Boohoo, G-Star, and Levi’s and selling them at significant discounts in African markets. Its innovative approach involves reconditioning these items with industrial facilities, minimizing waste and offering high-quality fashion at up to 70% off retail prices.
FARO’s financial model targets a fixed margin of 45% after costs, ensuring affordability for consumers without compromising profitability. The company operates four stores in South Africa, which generated $2.3 million in revenue last year — outperforming traditional retail benchmarks with just a fraction of the footprint initially projected.
Why The Investors Invested
Investors were drawn to FARO for several compelling reasons:
- Solving Two Market Inefficiencies
FARO addresses a dual inefficiency in the global fashion industry: the surplus of unsold inventory in developed markets and the high environmental costs of secondhand imports in emerging markets. By repurposing these surplus items, FARO simultaneously reduces waste and caters to an underserved but aspirational consumer base in Africa. This innovative business model aligns with the growing investor interest in sustainable and impact-driven ventures. - High-Growth Potential in Recommerce
The global resale market, or recommerce, is projected to reach $350 billion by 2027. FARO’s strategy to tap into this market in emerging economies, particularly Africa, positions it as a first-mover in a largely untapped space. Investors see this as an opportunity to capitalize on the rapid urbanization and growing middle class in Africa. - Strong Revenue Trajectory
FARO’s early performance has been exceptional. Generating $2.3 million in revenue with just four stores, the startup demonstrated a robust proof of concept, achieving 20x revenue growth within a year. The success of its pilot pop-up store, which brought in $100,000 in its first month, further validated the scalability of its model. - Experienced Leadership Team
The founding team brings significant expertise from global and African markets, including experience with Amazon, Jumia, and Superbalist. Their combined knowledge of retail operations, logistics, and e-commerce provided investors with confidence in the team’s ability to execute and scale effectively. - Tech-Driven Differentiation
FARO’s integration of AI to optimize inventory management and enhance the shopping experience offers a strategic edge. Its AI-powered tools aim to streamline labor-intensive processes, improve operational efficiency, and create personalized consumer experiences. These innovations make FARO not just a retail company but also a tech-driven platform with long-term scalability.
A Look at FARO
Founded in 2023 by David Torr, Will McCarren (former Zumi founder), Chris Makhanya, and Amber Penney-Young, FARO is headquartered in South Africa, with plans to expand into other emerging markets. The startup focuses on transforming surplus and returned fashion items from global brands into affordable, high-quality clothing for African consumers. FARO sources its inventory at ultra-low prices — sometimes as little as £1 per item — through partnerships with major fashion brands.
The company’s operations revolve around reconditioning products in facilities equipped with industrial laundries, steam tunnels, and efficient labor. This approach enables FARO to sell items at significant discounts, targeting mid-market consumers who value branded goods for their status and quality.
FARO’s retail strategy is tailored to South Africa’s developed shopping landscape, which boasts over 2,000 shopping centers. By avoiding e-commerce, FARO sidesteps logistical challenges that have hampered other African retailers, instead focusing on in-store experiences. Plans for personalized shopping notifications further aim to strengthen consumer loyalty.
With a current inventory split of 40% reconditioned returns and 60% overstock, FARO maintains a customer-centric ethos. As CEO David Torr notes, the company reinvests surplus margins into better pricing rather than inflating profits, fostering long-term consumer loyalty.
FARO’s growth strategy includes expanding into other African markets, though its success will depend on adapting to local consumer behavior and economic conditions. The company’s vision, underpinned by sustainable practices and tech-driven efficiency, has made it a standout player in the African retail sector.