Will circular commerce drive traffic to stores?

Discussion
Photo: Getty Images/yoshiurara
Aug 16, 2022

Through a special arrangement, what follows is a summary of an article from WayfinD, a quarterly e-magazine filled with insights, trends and predictions from the retail and foodservice experts at WD Partners.

Resale is enormously popular. In fact, secondhand apparel, according to thredUp, is expected to grow 16x faster than the market for new apparel by 2026.

But these upward trends in resale are occurring across all retail categories. They aren’t exclusive to Goodwill, specialty thrift stores and online marketplaces either.

Some big name brands like Home Depot, Dick’s, REI and IKEA are hopping on board, offering customers buyback, secondhand and rental programs. Big picture, there is a lot going on in the resale market, but it goes without saying that a big enabler is sustainability.

Resale supports a circular ecological system where rather than being sent to the landfill, items (sometimes refurbished) enter into the hands of a new owner. At our current rate of consumption, we would need 1.8 Earths to keep up, according to the Global Footprint Network. If everyone lived as we do in the U.S., that number jumps to 5.1 Earths!

And it isn’t only consumers and the environment that will benefit, but brands too.

A survey we recently conducted of 2,500 consumers found that over 71 percent participate in shopping for used merchandise at least once a month — 11 percent participate daily, 26 percent weekly and 33 percent monthly.

Turns out, the motivation to shop secondhand is connected to many factors, like fun, “treasure hunting,” price and, of course, ecological benefits.

As consumer demand continues to veer more towards sustainable shopping, brands should be inclined to jump on board and introduce greener options. But could the opportunity for brands to introduce resale be even bigger?

Due to the rise in e-commerce, retailers have been struggling for over 25 years to garner foot traffic to their stores. In many cases, this decline has required them to close the doors to one of their biggest sources of profit. We’re finding that resale is potentially a lot more profitable in-store than online — think photo shoot, double ship and repackaging of items. All of this begs the question: if done right at the store level, can resale drive foot traffic back to stores?

DISCUSSION QUESTIONS: Do you agree that resale has the potential to be significantly more profitable in stores than online? Could resale be a major catalyst in driving in-person traffic to stores?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Circular commerce will drive traffic to stores undoubtedly. There is nothing like the thrill of finding treasures or one-of-a-kind pieces"
"A tactic of marketing “limited quantities available” could be a traffic driver, but resale isn’t unique enough to drive traffic alone."
"While resale goods can increase brand loyalty with additional cost savings, it is a lot more fun going shopping with empty bags and coming home with a handful."

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21 Comments on "Will circular commerce drive traffic to stores?"


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Mark Ryski
BrainTrust

Yes, I believe that for certain retailers, resale goods could help drive store traffic and be helpful to margins. That said, traffic is only really valuable if it’s converted into a sale. Resale is more than a fad and heading toward being a mega trend, as rightly pointed out in the article. However the key to resale success is in how the used goods will be presented and offered. Retailers who apply focus to creating efficient processes for managing, merchandising and promoting these goods will find customers ready to buy.

Lucille DeHart
BrainTrust

The greatest challenge with resale as a profit driver is the overall cost associated with the entire process. While consumers like the idea of contributing to a more environmentally responsible practice, retailers need to first figure out how to seamlessly absorb resale items into their systems so that they can manage inventory, plan merchandising assortments and flow in goods appropriate to season and local. That said, with rising inflation, resale seems to offer consumers a viable option for cost savings, which will ultimately determine the success of the program. I do believe that the industry will figure this out, much like the car industry leveraged certified pre-owned cars as a revenue and consumer acquisition stream. Will this type of retail drive in-store traffic? Uncertain, I don’t really see overall consumer behaviors changing for one segment of the market; I do think online resale will drive the growth, at least initially.

Liza Amlani
BrainTrust

Circular commerce will drive traffic to stores undoubtedly. There is nothing like the thrill of finding treasures or one-of-a-kind pieces. In many cases, resale may be the only way for customers to get into aspirational brands.

Aligning values with consumers on sustainability will capture the other end of the market – the ones that care about fashion’s environmental impact.

Dave Bruno
BrainTrust

I agree, Liza – I really think bringing the “Treasure Hunt” experience to retailers and brands across categories gives resale so much opportunity for sustainable growth.

Bob Amster
BrainTrust

One may ask the question: Is resale in stores akin to “outlet” stores? Outlet stores do well, therefore one would expect that resale in outlet or full-line stores should drive store traffic. It’s like rummaging through the garage and finding “neat” stuff for sale.

Katie Thomas
BrainTrust

There’s a lot of complexity with resale that should be considered. Both brands and consumers, frankly, aren’t engaging with resale only for sustainability reasons. As the article mentions – it’s the treasure hunt. Which doesn’t appeal to every consumer (myself included – I’ve never been a good Marshall’s shopper).

Also, perhaps most importantly, the resold items need to be in good condition and priced right, which still takes time and money. Many consumers call out that resale sites can be nearly as expensive as buying something new – which could quickly erode the value.

Ken Morris
BrainTrust

Goodwill has over 4,000 locations for a reason. And there’s a reason they don’t do it online. The logistics are way more favorable doing circular retail in person. With “return culture” firmly embedded into online shopping, we should see retailers looking at pushing online returns back into the stores more than they do now. Especially with inflation so high and consumers loving bargains and sustainability, it’s a win-win.

As with all major shifts in retail today, circular retail will also force retailers to rethink store space and layout. Online return stations placed in the middle or even toward the back of the store pull traffic in, so at least some of my money is on setting up “revived” merchandise back there, too.

Melissa Minkow
BrainTrust

Some of the margins can certainly get slashed when the sale occurs online due to those additional costs associated with fulfillment. However resale does really well both online and offline. Secondhand can be a great way to drive foot traffic to brick-and-mortar in that many brands are now allowing drop offs of old clothes in exchange for discounts on their next buys. Overall, though, this is a booming space in general.

Carol Spieckerman
BrainTrust

True scale isn’t achieved in a single channel. Store-based resale isn’t just potentially more profitable, it is arguably necessary for success for resale players like ThredUP. Circular economy enablers that have mastered the complexities of single-item resale (if not profitability) can forge partnerships with enumerable competing retailers and brands with impunity. Retail’s big question is “buy, build, or bridge?” and third-party resale companies have made a compelling case that retailers should bridge their way to resale rather attempting to DIY.

Christine Russo
BrainTrust

Circular retail and resale should not be viewed a gimmick to drive traffic because it is not. The circular economy was initially novel, however it is now baked into retailers’ (online and offline) strategies because the customer demands it and the world needs it.

Lisa Goller
BrainTrust

Compared to online, stores boost resale profitability by ensuring fit and certainty, and reducing returns. Resale could lure shoppers to stores by offering affordability, sustainability and immediate access to items.

Jeff Sward
BrainTrust

Resale and circularity will succeed based on trust. Trust in the brand and trust that the secondhand garment has an appropriate level of quality and value. That’s going to be best determined by some treasure hunt shopping in the stores. It’s going to be interesting to see the balance that is struck between new and used. Imagine the apparel business taking lessons from the auto business.

Di Di Chan
BrainTrust

While resale goods can increase brand loyalty with additional cost savings, it is a lot more fun going shopping with empty bags and coming home with a handful. If it is easy to re-sell online then, at least in the short run, it will likely increase traffic to the retailer’s e-commerce platform first. After the resale, the increase in brand loyalty and the additional cash in the pocket will likely drive more in-store traffic too.

Ricardo Belmar
BrainTrust

Consumers like resale options because it helps them contribute to sustainability efforts and it delivers a perceived price value during times of inflation. For these reasons we would expect resale to be more than just a fad and become a mainstream sales option. Resale may be more profitable in-store and as a traffic driver because it lends itself to the treasure hunt mentality that has driven traffic at stores like T.J. Maxx and HomeGoods for so many years. The nature of resale means it’s not as straightforward to maintain inventory across stores and can deliver unique merchandising opportunities at each store. It’s that treasure hunt feeling that will cause consumers to buy in-store resale vs. online!

Andrew Blatherwick
BrainTrust

Resale is a great initiative for the environment, for retailers and consumers hit by high inflation. But lets not get carried away, this is likely to reduce once inflation falls and people have money back in their pockets. Undoubtedly, Gen Z are more concerned about the environment and will likely use resale more, they are also less likely to spend on unnecessary “stuff” as they are more interested in experiences than belongings, but they will still buy new when times are better. Will it be a major traffic builder for stores? I doubt it will change the retail landscape.

Brian Delp
BrainTrust
3 months 23 days ago

It depends on how the value proposition is presented. The online consumer tends to skew a bit younger, and is typically more eco-conscious, however the in-store customer can be more value-conscious. In-store and online can require different messaging if you’re trying to appeal to a broad customer base. A tactic of marketing “limited quantities available” could be a traffic driver, but resale isn’t unique enough to drive traffic alone.

Scott Norris
Guest

Our house and design taste is mid-century modern. So while we do frequent IKEA and Crate & Barrel, for the important pieces I’m more likely to go to the vintage furniture stores here in the Twin Cities because I know they’re curated, repaired/restored/reupholstered by experts, and going to last for another generation or more. And I’m willing to pay for quality where it counts. Can IKEA do that? Not without completely changing their entire organization. Should IKEA do that? No. Let each stream in the Great Material River find its level of specialization to match its appropriate audience and profit potential.

Bob Phibbs
BrainTrust

I don’t buy resale as a powerhouse profit driver. As BofFashion recently said, “Resellers seem to be suffering from the same slump in online shopping that’s hitting sales at DTC brands. Costs are rising, too. The RealReal said earlier this month that it’s struggling to find enough salespeople to expand its more lucrative consignment business. Poshmark, which has been profitable in the past, is no longer, due in part to higher marketing costs as it hunts for new customers and attempts to convert sellers into buyers.”

There are no ways I see to sell used merch at a profit and with authenticity.

Brian Cluster
BrainTrust

Secondhand shopping is not a niche anymore. According to Morning Consult, 44% of Americans have bought a second-hand item in the past three months which is the highest among the 15 countries surveyed. If almost half of the population is interested, it is certain that the demand is there to drive traffic. The key for retailers is to create and execute a resale program that appeals to their target customers. As this market gets more crowded, retailers will need to stand out by branding the program, establish ongoing trust and also be successful in recruiting sellers to sell their previously used items. For Gen Z, this is not a fad — and second-hand buying will simply be one of their considerations for finding fashion across their lifetime.

Patrick Jacobs
BrainTrust

Resale models work well for luxury products and retailers are understanding there is potential as an additional sales channel, but I do not believe there is a significant amount of profit to be made. Further investment to scale may lead to success but the logistics of vetting, refurbishing and reselling come at a high cost.

I am not sure there is enough buy-in from the average consumer, but the up and down pains of the retail industry may lead to more foot traffic with guests eager to see their dollar go further.

Anil Patel
BrainTrust

With consumerism, two types of products have grown at a very fast rate:

  1. The products that primarily serve “convenience” to customers;
  2. The products that communicate a person’s personality and reflect their status symbol.

So the real question here is, circular commerce will target which market? Additionally, I think, there would be two major challenges for re-commerce: Firstly, second-hand items must give customers a compelling reason to buy i.e., either the price or the product itself. Secondly, retailers must ensure that resale products are in good condition in order to win customers’ trust.

The initiative is very praiseworthy and will bring “eco-wakening” in people. It will change customers’ attitudes from “I don’t care” to “I care.” Even though bringing this shift won’t be easy, it will undoubtedly make a big impact on society.

wpDiscuz
Braintrust
"Circular commerce will drive traffic to stores undoubtedly. There is nothing like the thrill of finding treasures or one-of-a-kind pieces"
"A tactic of marketing “limited quantities available” could be a traffic driver, but resale isn’t unique enough to drive traffic alone."
"While resale goods can increase brand loyalty with additional cost savings, it is a lot more fun going shopping with empty bags and coming home with a handful."

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