Did you know that globally, one rubbish truck’s worth of clothes ends up in a landfill site every second? And that’s just clothes. At Gartner, I’ve spoken to a few clients about options to reduce this impact while improving customer engagement and potentially even boosting revenue. Those conversations center on recommerce – specifically resale. Here, I’ll share a few things I know.
Recommerce refers to the buying and selling of previously-owned new or used goods. There are three options for recommerce retailers typically use:
Buy Back for Resale: Retailers pay/credit customers for used products, which are resold online.
Take Back: Retailers take back used products from customers but don’t pay them. They then resell products as ‘used’.
Recycling: Retailers take back used products from customers but don’t pay them. These products are not resold but are recycled or “downcycled”.
Thirty-seven percent of retail clients that Gartner surveyed in 2021 either offer resale programs today or are considering/planning to launch them in the next two years. That’s still less than the percentages for ‘take back’ schemes (40%) and recycling programs (60%). Still, it signifies a strong interest for resale given the additional complexity involved compared to other programs.
There are three factors pushing retailers towards resale programs:
- Consumers are increasingly buying and selling second-hand products
- The technology needed to efficiently handle previously-owned goods is improving
- Circularity is being given more importance by retailers as part of sustainability efforts
There’s a lot to unpack in that, so let’s get into it.
1. Increased Usage by Consumers
Various groups regularly buy second-hand online, from collectors to bargain hunters. Likewise, sellers can have a variety of motivations. Across both buyers and sellers, consumers generally comprise younger demographics and value environmental sustainability more than others.
Given the increasing buying power of Gen-Z and millennials, the increasing interest in sustainable purchases across age groups, plus the growing focus on cost given inflationary pressures, it’s likely that sales in this industry will increase. In fact, the second-hand apparel market has been forecast to grow by 18-24% C.A.G.R. up to 2026 (Statista). This was accelerated by the pandemic but had been trending upwards for some time prior.
Online marketplaces like The RealReal, Depop, Poshmark, Tradesy, Vestiaire Collective, ThredUP and Fashionphile all serve consumers directly. Alongside revenue, these platforms have increased their site traffic over the past few years, largely thanks to VC backed media campaigns alongside UGC-led content and a focus on sustainable messaging on social media.
Alongside effective marketing campaigns, resale marketplaces often provide better merchandising information than brands themselves (see Watchbox vs. Rolex product pages). With that in mind, the gauntlet is very much thrown down for retailers to step up.
2. Resale Technology Improvements
Third-party platforms aren’t the only option available to customers for recommerce. Brands are increasingly offering their own resale programs thanks to ‘Resale as a Service’ (RaaS) offerings from the likes of Trove, Thrift+ and ThredUP. These RaaS solutions provide the back-end technology necessary to offer recommerce to customers efficiently enough to make it financially viable.
Technology is a major cost associated with recommerce. Managing SKUs on an individual basis, as well as the logistics required to process incoming goods and distribute these is complex, to say the least.
For this reason, retailers have commonly sought partnerships to support this part of the operation. Some prominent retailer partnerships include:
- Levi’s “SecondHand” (Trove)
- Farfetch “Donate” (Thrift+)
- New Look (Re-Fashion)
- Madewell “Forever” (ThredUP)
- Balenciaga (Reflaunt)
- Alexander McQueen (Vestiaire Collective)
- The North Face “Renewed” (Archive)
Not every retailer partners with RaaS providers to run their resale program but it is becoming the norm. Still, there are differences in the model that retailers will actually use:
- Either leveraging brands’ own sites or using brand stores on third-party sites
- Offering brand credit to resellers or cash upon receipt or cash upon resale
- Using distinct branding for a resale marketplace or simply showing the brand’s (and platform’s) name.
When entering into partnerships, brands should consider how each option would fit within their broader strategy for sustainability and customer engagement. The price point, transaction volume and resources available for circularity all impact the approach that a retailer should take.
3. Growing Interest in Circularity by Retailers
Scrutiny of retailers’ impact on the environment has increased dramatically in recent years among customers, investors and employees. That gives almost all retailers a reason to invest further circular programs to extend the lifespan of their products.
Eileen Fisher and Patagonia have been pioneers in recommerce, offering resale programs for several years due to the importance they place on reducing their impact of the environment. Other more-recent entrants have tied their resale offerings more closely to E.S.G. efforts to engage with more ethical shoppers. FARFETCH Donate, for instance, ensures that profits on resold goods are donated to charity.
But sustainability isn’t the only reason for retailers to get involved:
- Supporting brand values: Most retailers link their circular options to corporate E.S.G. plans, while several seek to support or improve their brand perception by promoting messaging around these programs.
- Increased customer engagement: Brands can offer circularity to expand post-sales services to customers. Luxury fashion brands, for instance, sometimes offer credit for future purchases in exchange for old products. This enables them to gain revenue on the next sale of the pre-owned good, while encouraging another transaction from the original buyer.
- Reduced Returns: Ecommerce sales have increased as a share of total revenue since the pandemic but this channel carries far higher return rates than brick-and-mortar sales. Resale gives retailers another option to prevent refunds that cut into margins.
- Increased Revenue: There are no definitive figures on whether the second-hand market cuts into first-hand sales but many suggest resale actually hits a different consumer type to retailers’ core buyers. Either way, placing a stake in the fast-growing second-hand market offers a way of fighting back against unofficial second-hand sales, which don’t provide revenue to brands.
Resale is a rapidly growing market and the signs all point to continued expansion in revenue and items traded. The real test is whether this industry can scale up efficiently.
With more retailers moving into this space, competition will increase and consumers’ expectations will likely rise. With that in mind, moving early makes sense.
Gartner has research on recommerce from a supply-chain perspective for clients (click here) and can speak to options available for marketing clients too. If you’re interested in learning more, set up an inquiry and I’d be happy to discuss it with you!
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