Photo: depop
How Can Big Retailers Stay On Top Of The Secondhand Market?
The online thrift market is getting more heated as inflation drives customers to seek more deals, and more small peer-to-peer sellers are going pro on platforms like Depop and Poshmark. This is leading some to ask if the new, more competitive thrifting landscape will impact how major retailers fold secondhand apparel and other goods into their offerings.
A recent CNBC article details anecdotes from small sellers on Depop about a growing tendency for customers to haggle for lower prices, sometimes negotiating for days to drop prices.
Depop has begun facilitating people dealing with sellers by rolling out a “Make an Offer” button on the item page. At the same time, sellers are experiencing an influx of interest. One high school student reported having an online shop on Depop, which recently reached 19,000 users, having begun as a shop just for friends.
Because of its sustainability promise and lower prices, the secondhand model has become a more significant part of mainstream retail in recent years as environmentalism has grown in popularity and inflation has led to more customers seeking ways to get more for less. Major apparel retailers have been offering secondhand clothing options, often through partnerships with startups focusing on the market.
By 2021, Macy’s, Walmart and JCPenney had all partnered on resale initiatives with thredUp, Burberry had partnered with reseller The RealReal and Neiman Marcus had purchased a minority stake in the resale platform Fashionphile, according to a Yahoo! News article at the time.
The trend has grown so popular that Business of Fashion has described a “parallel industry” of white-label resale springing up to manage the volume, with disparate retailers from fast-fashion (Shein) to luxury (Balenciaga) adding some sort of resale platform to their apps and websites.
Secondhand goods are also becoming more broadly acceptable in places where they have been outright frowned upon in the past. A Deloitte survey from the last holiday season found that customers were becoming more comfortable buying secondhand clothing to give as gifts. It found that 32 percent of holiday gifters intended to purchase resale items for giftees, up two percent from 2021.
Discussion Questions
DISCUSSION QUESTIONS: Do you see customers haggling for lower prices affecting how retailers operate their secondhand platforms? What can retailers in apparel and other segments do to fold secondhand merchandise into their offerings?
Poll
Loading …BrainTrust
Gary Sankary
Retail Industry Strategy, Esri
Cathy Hotka
Principal, Cathy Hotka & Associates
Secondhand and thrift are not new concepts. Retailers and brands that intend to enter the market have the same choice to make as they do for other functions or services: make or buy, i.e., run their own thrift platforms and build auction-like functionality or leave that to those that already know how and have all the functionality implemented, such as eBay or Poshmark. In fact, a company such as eBay — that has proven track record in this segment — could easily market customized secondhand/auction sites to retailers wanting to get into this market. I see it as a win/win proposition without having to reinvent the wheel, while giving up a few points in margin.
Customers have always haggled simply by being passive and waiting for prices to drop. They of course ran the risk of their favorite items selling out while they waited for their ideal price. Or they could could go to the front of the line by paying the ticketed price. Haggling, or providing a “make me an offer” button sounds fun for small secondhand businesses, but really messy and confusing for brands.
A better question is whether they should focus on the secondhand market except as a competitor. Many retailers have not yet implemented effective e-commerce solutions for their primary businesses. The additional complexities created by dealing with individual re-sellers, quality of product, and variability of pricing, create an almost unmanageable operational model for most retailers.
The secondhand market will continue to grow in many forms including the parallel rental market for higher-end goods. The “haggling” aspect is more of a niche and implies interaction which usually implies labor or AI. Retailers need to have a clear secondhand strategy that is visible to the consumer, that emphasizes sustainability, and is in-line with the retailer’s overall image. This can no longer be ignored or hidden.
Great points Perry. Bidding or haggling pricing will probably be isolated to marketplaces and retailers that focus on sustainablity like Patagonia and REI can be very successful.
If small sellers get caught in the growing tendency for customers to haggle for lower prices, sometimes negotiating for days to drop prices, they will never get big. The “Make an Offer” button makes ultimate sense. “If you don’t like our price, suggest a price you would like. You get one chance.” Haggling is for the bazaar. And even then, the shopkeeper knows what a bottom line acceptable price is.
I caution traditional retailers about taking on this new animal. The big problem is that it would have to be operated uniquely. It is an entirely different business model. This thinking will cause problems on both ends of the operational spectrum. Strategically, if they want to participate, fine. But don’t make it a secondhand add-on to their regular business.
What we found out from a study we did is that it is much more profitable to do resale in stores vs. online. Yet since operationally it’s a re-think, most companies are outsourcing to the likes of ThredUp or Trove. But there’s a reason ThredUp has never been profitable. Think of everything you’d have to go through to post just ONE item vs. simply putting it out on a rack. My biggest fear is that retailers will only do resale online, proclaim it “not profitable” and give up on it. For a change, this is one thing done better in stores and it drives foot traffic to boot. Let’s hope no one gives up on this very important offer too quickly.
The secondhand market has been exploding for a while now. We’ve certainly talked about it in this space quite a bit. The big issue for retailers who want to offer a secondhand channel to their offerings is consistency and quality. It is going to be very difficult for retailers to develop the capabilities to monitor the quality of the items being sold. Their brand is going to be associated with the products. This means they have to create a process to receive and inspect each item individually. Then they need to repackage it and ship it, and do so at scale. It that worth the effort? For specialty resellers this makes sense. For big brands who want to do this, I’m not sure.
One of the issues with secondhand for retailers is that each item is a one-off; there’s no scale. As a result, ideally, all secondhand sales are local. This is challenging, but customers clearly want it.
I don’t see the haggling on peer-to-peer platforms translating to an expectation of haggling on retailer sites any time soon. However negotiating is a fun part of the marketplace process for many consumers, and if retailers do decide to add that capability to their model, I could see shoppers enjoying it greatly.
Will the customers be haggling with real people or with AI?
Matt’s first /Daily Poll question confuses me: is the question “will haggling affect the platform(s) for secondhand goods?” or is it that haggling on the secondhand platforms will affect the primary platforms ??
The answer to the first is “that’s really what secondhand is all about…isn’t it?”
And I think it’s one more (good) reason for the mainstream to avoid it, tempting tho it may be: secondhand is a marketplace – you might argue actually thousands of individual marketplaces – of unique items; quality varies, and thus, logically, so must price. Standardization, the essence of what makes brands possible, is largely impossible.
As for the second (question): yes, it might; but it makes positioning in primary marketplaces all the more important.
In order to stay on top of the secondhand market, big retailers need to adapt and innovate their business models to meet changing consumer preferences and needs.
One approach for retailers is to offer their own secondhand platform. This enables customers to sell their used items directly to the retailer or to other customers, giving retailers the opportunity to keep customers engaged with their brand.
Another strategy is for retailers to partner with established secondhand platforms like ThredUp or Poshmark, these partnerships can give retailers access to a larger audience of secondhand.
Embracing circular fashion is another way, where items are designed to be reused and recycled, retailers can reduce their environmental impact and stay relevant in the growing sustainability movement.
To stay competitive in the secondhand market, big retailers need to use data to inform their strategies. This includes tracking trends in consumer behavior, analyzing sales data, and monitoring social media conversations.
Finally, creating a seamless omnichannel experience is critical for retailers looking to stay on top of the secondhand market.
I think the second hand platform either have to quality controlled similar to cars or watches being “certified preowned” by manufacturer. Otherwise the retailer is better off investing in a separate branding / company for preowned to prevent brand confusion.