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Online consignment shop Swap has raised $20 million in financing to expand its marketplace for used clothing.

Swap.com on Wednesday said the round of funding, its largest so far, would help grow its business connecting customers across the country with sellers who mail clothing in bulk to the company's vast warehouse in the Chicago suburbs.

Juha Koponen, co-founder of the four-year-old company, said Swap's 1.5 million-item online inventory is especially popular with customers in rural areas with less access to malls and big-box stores.

"It's an industrial approach to selling pre-owned items," said Mr. Koponen, a nuclear physicist by training, who helped launch the startup and moved to the U.S. from Finland this year.

Consumers are doing more of their shopping on websites and apps. Online spending on Thanksgiving and the following Friday jumped 18% this year to $5.27 billion compared to last year.

Consumers use sites like Craigslist Inc. and eBay Inc. to sell everything from secondhand clothing to furniture. Newer apps like Letgo and sites like Chairish cater to tech-savvy or more tailored audiences for used electronics and secondhand home decor.

Mr. Koponen said Swap is competing less against those e-commerce firms than against retailers like H&M Hennes & Mauritz AB for fashionable shirts and slacks for an average of $7 an item.

This week the website advertised an ugly sweater sale, targeting college students and others who mark the holiday season by donning gaudy knitwear from the '80s and '90s. A pair of red women's skinny jeans from J.Crew were on sale for $8.

Swap charges its consignment sellers $1.50 plus 30% of the sales price. The site lists some 1.5 million items at a time, from a warehouse inventory of about 2.5 million. Some items too dirty or damaged to sell again are recycled or sold to exporters.

Mr. Koponen wouldn't say how much revenue Swap generates or whether it is profitable. He said revenue more than doubled this year over 2015 and that the site works with tens of thousands of sellers.

The new funding, led by eEquity, a Swedish private equity group, is the largest injection to date in a business that previously raised about $30 million, according to the company. Mr. Koponen said Swap will expand its staff and marketing efforts from an office in downtown Chicago.

"What we have now is a really strong operational engine," Mr. Koponen said. "We just want to make everybody aware."

Write to Patrick McGroarty at patrick.mcgroarty@wsj.com

(END) Dow Jones Newswires

December 08, 2016 08:35 ET (13:35 GMT)

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