Photo: Levi Strauss
Is it time for mainstream retail to go all-in on the resale market?
Secondhand is in. That’s the finding of the new “2021 Resale Report” published by thredUP.
Annual sales of resale clothing, defined as the more curated segment of secondhand, currently stand at $36 billion, and that number is forecast to more than double over the next five years to $77 billion, 11 times the pace of overall apparel retailing.
The market is expected to grow as more consumers buy secondhand and more retailers offer the products for sale. Around 33 million people purchased secondhand apparel for the first time ever last year, even as many cut back on buying new clothes. The average resale shopper bought seven secondhand items in the past year, replacing the equivalent of 542 million new items in the process.
Many mainstream retailers and consumer-direct brands are beginning, albeit slowly, to move into the resale market and others are exploring ways to enter. Gap, Macy’s, Nike, Nordstrom, Levi Strauss, Lululemon, Rent the Runway, Target and Walmart are among those doing so.
The upside appears clear, with secondhand apparel only making up one percent of the total volume of retailers that have moved into the business. Forty-two percent of retail apparel executives said they believe that curated selections of secondhand clothing will become an important part of their businesses over the next five years.
Among mainstream retailers reluctant to enter the market, the reasons given include concerns over cannibalization of their existing sales, inadequate merchandise supplies and lack of operational expertise to manage the business properly.
Karen Clark, thredUP VP of marketing communications, told RetailWire that the company launched its resale as a service model to address these concerns. The online consignment and thrift business is not “supply constrained” as its free clean-out service kit allows customers to place their clothing in bags and ship them with a supplied label via FedEx or UPS. This provides retailers and brands with access to “thousands and thousand and thousands of items” that fit their specific merchandise criteria.
“We also can help them monetize all those brands that they can’t sell because we have a marketplace where we can sell those brands for them,” said Ms. Clark. “So we’re making it really easy for consumers, which then unlocks the product that is otherwise locked up.”
Discussion Questions
DISCUSSION QUESTIONS: Are retailers and brands moving too cautiously or at the right pace into the resale market? What factors are limiting the participation of mainstream retailers and consumer-direct brands in the resale apparel market and how will they be overcome?
Poll
Loading …BrainTrust
The secondhand business requires significant operational changes to execute well, and so moving cautiously makes good sense. As noted, product supply is also a constraint as more and more secondhand competitors seek product. That said, secondhand is not merely a fad, but a legitimate trend that’s here to stay and, as such, it’s wise for retailers and brands to keep a close eye on it.
The boom in resale is underpinned by demand, especially from Gen Z consumers who favor the sustainability aspect of the circular economy. As such, it makes sense for more mainstream retailers to explore the resale arena to both secure another stream of revenue and aid customer loyalty. This isn’t about replacing their mainstream businesses but, as savvy players like REI have shown, it helps towards sustainability goals and can become a solid channel in its own right. All that said, resale can be a complex business so brands need to make sure they have the infrastructure in place, especially to handle the logistics of incoming and outgoing product.
There are obvious problems with the resale market — one-of-a-kind SKUs and verifying returns among them — but the demand is there. The companies best positioned to benefit are the vertically integrated ones like Gap, Levi Strauss and Nike.
Yes! Yes! Yes! Gen Z is hyper-aware about the environmental impact of their consumption, positioning this resale market to grow red hot. Even Boomers remember buying “vintage” clothing in the 1980s, so they are no strangers to used clothing either. Bring on the rummage bins!
Being cautious is not a surprise. It is a new area and processes, systems and approaches are not mature yet. Patagonia have done a super job of providing used product on their website – cataloguing by year and condition. But this could well be a constraint for some retailers depending on how their product codings have been structured in the past.
In some areas, well worn products are somewhat on-trend but this is not the case in every area. Consumers are known for being fickle so the worry that this could change might make retailers reluctant to venture into this area. Conversely, “doing the right thing for the planet” could well be a differentiatior and it potentially gives brands more control over how their product is positioned – versus platforms like eBay where consumers could be open to fake products.
Coincidentally, tomorrow is Upcycling Day, at least in the UK. According to this, “Upcycling Day is all about celebrating the art of upcycling. However, with that art also comes the focus on sustainable use of household goods, recycling items instead of being wasteful, and the many different ways we can reuse things.” While Upcycling applies mostly to furniture and like goods, I don’t see a reason why the precepts can’t be applied to apparel.
Retailers and brands could move at a faster pace given how much demand exists for resale and how important this could be for the environment. Lack of operational expertise is a problem easily solved by pursuing executives who have made sustainability their priority to help lead the charge. Addressing the fear of cannibalization will require some time and effort re-evaluating and re-weighting the product mix to scale back on new item creation, but it will be worth it since this movement is here to stay.
There is certainly demand for resale in many categories. More than I would have thought “back in the day.” At issue for retailers, especially national retailers, is the supply chain and consistency in costs and pricing. Retailers need to figure out how to source secondhand product at scale while providing customers with confidence around quality, availability and authenticity.
The Half Price Books model can probably teach us a lot about how to do this. Of course books and media enjoy ISBN numbers and don’t really vary from one to another. But they do a nice job keeping stores stocked with relevant products. Might be something for apparel to study.
Not to be a jerk, but can’t something be left for independents?
To me, for the most part, mainstream retailers getting into secondhand is like mainstream retailers getting into warehouse stores. It becomes a major distraction from the core business.
But really, let others have the space. It’s a very different business.
A jerk? Hardly! You’re merely pointing out the answers to George’s questions may well be “No” and “They won’t.”
After reading this I did an absolutely anecdotal survey of Millennial and Gen Z consumers at Starbucks. When asked if she was likely to shop for secondhand goods at a mainstream retailer, like Gap or Macy’s or Nordstrom, one young woman said no, she prefers to go to secondhand shops and thrift stores. I asked why and she said because the things sold in mall stores will cost more than where she shops. She makes a good point!
It’s hard to ignore a market that is garnering significant and growing consumer demand and investment dollars. So I am generally in favor of most retailers experimenting to gauge whether it helps win, grow and keep customers they need to drive their business long-term. Having said that, the unit economics of mainstream resale look extremely challenging. Understanding a path to profitability is always important. In this case, especially so.
Selling isn’t an issue. It’s the acquisition of the merchandise. Where does used clothing come from? The customer. So for this to work in traditional retail, it has to be easy for the customer. If they bring in clothes to return (for resale), there has to be someone on the team who has been properly trained to determine if it meets a standard. It’s a matter of training, logistics and merchandising. It’s not a small commitment. The questions is if the retailer knows the revenue/profit and the cost associated with the sale.
I don’t think it’s possible for “traditional” retailers to just flip a switch and start selling used. Having been in that business, I can tell you that everything about it, other than ringing the register (online or offline) is different. The best way to get into that business would be to create a sub-brand and start from scratch. Even then, all the resources formerly available to you would pretty much be useless. To illustrate the challenge, here are just a couple of questions: How much inventory do you have? Where did it come from? What did you pay for it and what will you charge for it (margin)? How did you pay for it? Whose job is that?
I rest my case, your honor.
You can’t even get employees to show up, much less engage customers, and now they are going to be taking in old clothes and making judgments that lead to massive profits? Sorry, I’m still not seeing how all these players chasing this customer are able to survive without VC money. And as strong retailers jump into the pool I predict it will weaken their ability to stay focused on selling, not shopping their customers. Just sayin’.
I wouldn’t worry about cannibalization — if people want to buy preowned, they will … nothing you can do to stop them — as much as this just not being something retailers are good at (or at least I’ve no reason to think they’re good at it). Retailers, or any large company really, are set up to buy and sell goods “en masse”… I don’t see that coming into play here, when you’re essentially buying and selling goods one at a time.
I don’t believe the demand for secondhand apparel is really driven by Millennials’ and Gen Z’s love for sustainability. It’s driven by their love for the new-gen social platforms like Instagram and TikTok and the resulting need for a bigger and fashionable wardrobe. However, given their lifestage, they don’t have the wherewithal to afford expensive clothes and hence their love for second-hand clothes.