Photo: iStock / Iryna Imago
Will Retailers Do Good And Do Well In The Recommerce Market?
The U.S. secondhand market is growing 16 times higher than general retail and is expected to double by 2026, reaching $82 billion. This rapid increase is due to consumers moving to recommerce to save money and address concerns about waste.
Scott Friend, a partner at Bain Capital Ventures, speaking at Shoptalk 2023 in Las Vegas, said his firm invests in recommerce because “it’s an interesting sector with an increasing amount of money behind it for sustainability purposes.”
Anthony Marino, president of thredUP, in a different Shoptalk session focused entirely on reselling, said, “Every year, consumers get a little more interested in the environments and doing something to help. They are more aware of sustainability and are looking for the best way to get rid of all their old stuff. On the buyer side, the younger shoppers want to buy used products more than new ones.”
Mr. Marino added that in the resale market, the shopper isn’t solely motivated by value and understands there is often excess new product available. This growing segment of consumers is buying secondhand products first for ethical and social reasons.
Reselling isn’t confined to apparel. AptDeco, an online secondhand furniture store, is trying to take advantage of the $17 billion used furniture market by setting up city- and region-specific trade areas. These limited geographies attempt to address the delivery issue, significantly impacting the trading of oversized items like furniture.
As a bastion of recommerce, eBay is seeing great success with consumer electronics by adding a warranty confirming the product works. Mari Corella, GM of home & hard goods at eBay, said this gives the shopper more confidence. She added that eBay is also using events like Earth Day to encourage people to get into reselling.
Discussion Questions
DISCUSSION QUESTIONS: What are the most critical factors driving resale growth now? What do retailers entering the secondhand market need to do if they are going to be successful?
Poll
Loading …BrainTrust
Cathy Hotka
Principal, Cathy Hotka & Associates
Ken Morris
Managing Partner Cambridge Retail Advisors
The resale market is being driven by many factors, several of which have been identified in this article. The growth in resale represents a true change in consumer behavior and attitudes around the use of goods, environmental sustainability, inflation and the cost of living. However as exciting as the secondhand market is, it also presents a number of challenges for traditional retailers/brands including the need to create entirely new processes for ingesting and processing used goods for resale. That said, retailers across categories are paying attention to the resale market – it’s too big to ignore.
For a large retailer to be successful in the secondhand market they will need to install a process that includes: limiting products to their area of expertise, developing a product intake process that can operate at scale, hiring buyers to evaluate products/resaleability/price, and creating a searchable database/marketplace that allows shoppers to find a very specific needle in a potentially enormous haystack. The tech is there. The human side of the equation may be more difficult for corporate retailers.
We are in accord on all points!
I agree that a key factor in the success of these ventures will require real curation — evaluation of the items, presentation of the items, and a plan to liquidate items that don’t have a selling price at the end of the day. This is a complex challenge and a worthy endeavor — one that can quickly become a mountain of stuff if not managed thoughtfully with tech and talent.
Saving money while saving the world? It’s the dynamic duo of recommerce appeal. But the Goodwill model—since 1902, by the way—ads another dimension: providing jobs for those who need the jobs most. This will be the greatest challenge for recommerce, resales, circular sales or whatever we end up calling it most. As James Carville famously said during the George H.W. Bush vs. Clinton election, “It’s the economy, stupid.” Appealing to our best intentions on sustainability and social responsibility works, but I wonder if we’ll see sustainability playing out in the long game.
By the way, GoodWill is not thinking like a 120-year-old here, either. Their GoodWillFinds.com is one of the first-ins for dedicated online resales.
As Mr. Marino from ThredUP indicated, resale is driven by a whole host of factors: the desire to find interesting and vintage pieces, money saving, sustainability concerns, the social aspect of secondhand, the thrill of the treasure hunt, and so on. This multifaceted nature is one of the reasons resale is so successful. That said, it isn’t easy. In many cases, resellers are selling single SKUs which is a very different, more complex, and less efficient model than their mainstream businesses. That’s why many opt to partner with players like ThredUP or Trove which run the resale part of the business for them.
Resale is growing because customers want it. They like the idea of helping the environment while saving a few dollars. This is a clear challenge for retailers, but also an opportunity for them to connect with consumers on a different level. Let’s rise to the occasion.
There is no single salient factor here but a combination of several. Retailers will need to learn how to streamline the process of getting product, making it salable, categorizing/pricing it, and placing it on an effective online platform. Resale has had a place in society for at least 100 years. The industry–through the use of existing technology–is making it easier for consumers to find the bargain and purchase it.
My granddaughter, now 18 years old, has been shopping secondhand for years. Why? Price and fashion. Yes, for a teenager, secondhand is fashion. For most of those years, resale was a pretty simple business. The retailer collected donations, sorted products, and presented them to those who wanted to shop and discover. The operating model was fairly straightforward.
However once it is turned into a business, everything changes. The operational issues get incredibly complex. Handling the used product becomes more than just receiving a bunch of it, sorting it, and hanging up acceptable products. For the consumer, the expectation also changes. Am I much more accepting of the condition of a product from Goodwill than I am if I get it from ThredUP?
Interesting products are the key to resale success. Retailers need to acquire merchandise that consumer will buy, regardless of their various drivers (value, uniqueness, etc.) and ensure positive pre-, during and post-shopping experiences.
That is what precisely makes this business model challenging.
The limited supply of desirable goods is something that mainstream retailers need to keep in mind when making the investment in recommerce.
Yep, once upon a time, outlet stores sold overstocks and seconds.
Then they got so popular that the outlet stores had to make lesser products for outlets. Will we eventually see the same here as resale is unable to supply $82 billion in merchandise?
Tho I would take the market size figures with a grain (or two) of salt – as it’s largely P2P it was until recently pretty much beyond the scope of sales tax reporting (a reliable metric of sales) – it’s not unreasonable to believe it’s growing. The reason, methinks, is a happy three way-marriage between sellers needing (or wanting) to raise money, buyers wanting to save money and technology that makes it all possible (30 years ago eBay, et al simply didn’t exist, and while pawing thru racks at Goodwill or trekking to garage sales may have been fun, it was a limited opportunity).
Still my advice to retailers remains the same as last week: stay out of it, your entry will only ruin the fun…for everyone. And that’s no April Fooling.
We’ve all experienced resale in some form before – we used to call it eBay! Although that was mostly driven at an individual level than by large retailers. So this is really an evolution as well. I’m also reminded of the early days of the off-price apparel store trend after the Great Recession. Consumers in search of good deals, developed shopping habits around off-price formats, which eventually expanded beyond apparel in parallel to the growth of eBay.
Now there is a new opportunity with resale at a much larger scale, however, retailers will need to rely on technology to help manage the processes involved for sourcing, intake, and managing inventory because simply having random products available isn’t an efficient and sustainable process for a larger retailer. Consumers are developing a new shopping habit with resale that favors finding those once expensive products at much lower prices with the item still in good condition. Much like how everyone started out shopping on eBay, but now the desire is for easier discovery. The opportunity is great both for retailers and their technology partners!