The Rise of Recommerce

The Rise of Recommerce

By John Bajorek

As the seasons begin to change, many people are vying to create that perfect fall wardrobe to make themselves the envy of all of their friends and followers (if you’re into that sort of thing). But let’s be honest—it’s likely that there are some pieces in their closet that haven’t seen the light of day in a while, and won’t anytime soon. In order to make room for all of their newest fashion finds, those older items need to be removed. But how? According to 64% of women1, the answer lies in the resale market. One person’s trash can be another’s treasure, and in the age of minimalism and social media clout, consumers are clearing their closets for the sake of a cooler wardrobe and fast cash. Whether it be an affinity for sustainability and style or an interest in variety and value, the public’s everchanging attitudes towards the fashion industry are creating an impactful recommerce movement that is positioned to change retail forever. The secondhand market is set to double in value from $24 billion to $50 billion in just five years.1 Traditional department stores are no longer the only venues that are at risk; the resale boom is coming for all corners of the industry, disrupting everything from luxury brands to mass market merchants.

The Resale Resurrection

Apparel resale of the past used to be dominated by low-income and college-aged buyers looking for accessible clothing options in thrift stores like Goodwill and The Salvation Army or on the original digital recommerce platform, eBay. Times have changed, and the 2008 recession pushed more consumers towards recommerce venues after traditional retailer’s extreme price cuts of the time conditioned buyers to hold out for cheap deals. But this was just the start; shortly thereafter, the public’s love for vintage and streetwear items that could only be found in resale exploded. Pressure from social media in the age of the influencer then rose rapidly; now, once consumers feel that their wardrobe had reached its “social media shelf life”, they take to resale to recycle their wares for their next best thing or the thing that no one else has. The public’s growing concern for the environment has also made many consumers turn away from their fast fashion favorites towards ethical, waste-reducing practices. In fact, 72% of consumers now prefer to buy from environmentally friendly brands and buying one used item reduces its carbon footprint by 82%.1

Minimalism and sustainability can go hand in hand in resale seeing as how it powers apparel rotation rather than accumulation. According to ThredUP, 667 million pounds of trash would be generated if 1 out of 10 Netflix subscribers cleaned out their closets.1 Resale turns that trash into treasure and that treasure into profit since the consumer of today does not buy with the intent to keep. The average number of items in consumers’ closets is declining, with the number of pieces dropping from 164 to 136 between 2017 and 2019.1 And that is only expected to go down as 40% of consumers now consider the resale value of an item before it is even purchased.1

72% of consumers now prefer to buy from environmentally friendly brands

An All-Ages Attraction

Despite the intense generational faults seen in many of today’s industry disruptors, the resale market seems to cater to the interests of all consumers from Boomers all the way to Gen Z. Secondhand apparel shoppers are predominantly made up of Boomers (31%) and Millennials (33%), with Gen X and Z trailing closely behind at 20% and 16%, respectively. In terms of growth, Millennials and Gen Z are the driving force behind this trend as 18-37-year-old consumers are engaging with the resale market 2.5x faster than other age groups.1 These generations are seeing levels of growth close to 50%, and even older generations are growing fast at rates between 15-20%.1 Younger consumers’ interest in these resale venues can be attributed to their higher social media engagement and interest in ethical practices, as the need for new but desire to “do good” is increasing. Many do not have the money to spend on the brand-new big-ticket items that their peers on social media boast, so they take to resale to boost their closets conscientiously. So, where are these secondhand products coming from?

Resale’s Hottest Resellers

Recommerce is no longer just the secondhand stores of the past. Goodwill and Salvation Army are still fan favorites, but now consumers have a wide range of resale options from apps that put the selling in your hands or services that take your items and sell them on their own. The most popular items in resale are bags, shoes, and dresses, and these are the sites doing the best of the best in the market2:

  1. ThredUP: ThredUP is a great resource for those who don’t want to do the selling themselves. Their process is simple: sign up for their Clean-Out Kit (plastic bag and prepaid shipping label), fill it up, send it back, and wait. They take a variety of brands both low and high end, and have a large influencer network boosting their share in the landscape.
  2. Poshmark and Depop: Both of these platforms are extremely popular among younger generations looking to get quick cash for their trendy items. Buying and selling happens right on their apps, and the more photos the seller posts the better. Poshmark boasts a wider range of items and low-cost brands, while Depop is a vintage, cool girl playground.
  3. The RealReal: Quite possibly the most popular luxury reseller in the market, The RealReal will either come pick up your items directly or send you a prepaid mailer. They list them on their site, but only after their extensive authentication process. They accept a variety of designer women’s, men’s, and children’s clothes as long as the brand is on their approved list, and also sell luxury accessories (their handbag market is booming) and fine art pieces.

This is just the tip of the resale platform iceberg, and all of these are thriving while catering to a variety of audiences with a variety of tastes. Why? Because secondhand shoppers come from every walk of life; 26% of luxury shoppers, 25% of department store shoppers, and 22% of value chains shoppers also buy secondhand.1 The most sought out brands in secondhand are Frye, Kate Spade, Tory Burch, Burberry, and UGG. This tells that most brands, especially those popular in resale, have a huge opportunity to venture into the market and resell their products on their own.

Why Retailers Are at Risk

The fact of the matter is, if people are seeking a high-quality product new at full price versus used with a lower-level price tag, they will choose the latter. 72% of shoppers moved away from buying from traditional retailers and towards used items, and the average secondhand shopper has replaced 8 new apparel items with used items in the past 12 months.1 Those hit the hardest by resale? Fast fashion. By 2028, the used fashion market is set to be valued at $64 billion, while fast fashion will decline to $44 billion.3 It has undoubtedly lost its luster with younger consumers; both H&M and Zara have missed earnings expectations this year, and Forever 21 has been pushed towards bankruptcy. 4x as many people plan to increase spending on used clothing versus fast fashion1, and for good reason as it offers constant wardrobe rotations without the waste or quality sacrifice. It is obvious that resale is capturing market share, and traditional retailers are taking note.

4x as many people plan to increase spending on used clothing versus fast fashion

Nearly 9 out of 10 retail executives want to get into resale by 2020, and some already have; seeing how store openings in the face of the retail apocalypse have slowed, they are looking for new ways to bring consumers into stores. Brands are partnering with resale platforms (& Other Stores, Stella McCartney), driving resale through in-store set-ups (Neiman Marcus, Levis), engaging in rental programs (H&M, American Eagle), and even facilitating consignment on their own (Reformation).4 The hold up for many brands, though, lies in cost and/or resistance to change. Resale and rental programs in traditional retail settings can pose many logistical challenges for brands. Authentication processes can be cumbersome and expensive, and training associates in this area will only increase costs. Rental services require dry cleaning and quality control, and some aren’t willing to front the extra time or money to make these operations viable.

As Tiffany Kantar, an analyst at Kantar Consulting, said, “It’s a different economic model that traditional retailers probably don’t have much experience with.”5 Most of the rental or resale services offered by traditional retailers are less than a year old, and many are attempting to copy unprofitable startup models. When a company implements a rental service, they see it as a chance to collect revenue from consumers 12 times a year rather than a few times a year from in-store purchases. In reality, many of these monthly providers underestimate the number of consumers that will ultimately stop using the subscription service before the year is up.

Traditional retailers that get into resale and rental also run the risk of cannibalizing their own business. Resale sections could very likely take away sales from full-price products and Macy’s has attempted to avoid this by giving their resale partner, ThredUp, a list to keep certain brands out of resale and only in full-price areas.5 But this can still confuse shoppers as the amount of discounted sections available gives consumers an array of cheap options; there are regular sale sections, clearance, and last-chance already available. Adding a resale section into the mix will only push more consumers away from full-price towards cheaper finds.

The bright side? There is still opportunity for retailers in resale and rental—if it’s done correctly. ThredUP department store pop-ups entice customers to spend 21% more and visit 70% more frequently.1 Apparel recycling options even drive support, with 60% of consumers reporting that their loyalty would increase if their preferred offered these programs.1 For traditional retailers, there are five great reasons to test resale in their model: revenue boosts, sustainability, customer loyalty, new customers, and increased traffic. With secondhand items projected to make up 1/3 of closets by 20331, the time to get into resale is now. Adopt the channel early, and become a pioneer in one of the fastest growing apparel markets before your products are ONLY found in resale.

John Bajorek
John Bajorek
Executive Vice President, Strategic Growth & Innovation
WD Partners

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