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Will Sustainable Second-Hand Clothing Remain Retail Viable?
It’s no secret that second-hand clothing offers affordable prices without compromising on quality. While these items may not be brand new, they’re far from worn out. Most second-hand shops carefully curate their offerings, ensuring you’ll find gems amidst the racks.
Beyond budget benefits, second-hand shopping also aligns with environmental concerns. The fast-fashion industry churns out clothing at an alarming rate, contributing to pollution and waste. By opting for pre-owned pieces, you’re sidestepping this cycle of overconsumption, reducing your carbon footprint in the process.
Moreover, delving into the world of second-hand clothing opens doors to unique finds. Vintage treasures, once forgotten, are making a comeback. Shoppers can embrace their individuality by donning distinctive pieces that stand out from the mass-produced mainstream fashion.
As good as this formula seems, things could be better in many ways. For starters, there have been reports of companies scamming the system of recycled clothes.
In the last decade, there has been a surge in pre-owned clothing sales, with celebrities endorsing swaps and sales and online platforms booming. But behind this cool facade lies a stark economic truth: Most companies are barely making ends meet.
Retailers like UNIQLO have integrated sustainability with fast fashion to start helping our planet while still making a profit. There are also many fashion apps that offer convenient marketplaces for second-hand products as well as high-end e-commerce sites focused on promoting the resale of used clothes.
In Europe, statistics reveal a growing trend: 67% of U.K. millennials shop second-hand, while Gen Zers’ closets boast two in five pre-owned items. ThredUp’s 2023 Resale Report predicts a near doubling of the global fashion resale market value by 2027, reaching $350 billion. In the U.S., ThredUp expects the market to reach $70 billion by the same year. Yet, profitability remains elusive.
Even giants like ThredUp and The RealReal struggle to turn profits, with stock prices plummeting below IPOs. Poshmark’s acquisition for a fraction of its IPO valuation and Vinted’s pre-tax loss of €47.1 million in 2022 illustrate this struggle.
This economic challenge isn’t limited to big players. From U.K. thrift shops to New York consignment stores and Ghanaian markets, the story is the same: high labor costs and declining clothing quality eat into profits.
The root cause? A glut of cheaply produced clothing flooding the market. According to a study from 2023, a Swedish charity incinerates 70% of donated clothes due to low quality. Meanwhile, Ghana, as the “world’s largest importer of used clothing,” ends up getting rid of about 40% of the average bale of donated clothing as waste.
Processing second-hand clothes is labor-intensive and expensive, leading companies like ThredUp to charge for their “Clean Out Kit” service. Rising costs could push second-hand prices higher than new products, challenging consumer expectations of thrift shopping.
Moreover, the industry’s eco-friendly image often masks its reliance on new clothing sales. For instance, according to eBay sellers’ statistics, “80% of products sold on eBay are new.” Economist Thomas Bauwens argues that in a growth-based economy, companies that implement sustainable practices like “take-back, repair, resale and recycling” struggle to compete. He says they are “quickly outpriced and driven out of the market by cheaper, non-circular competitors.”
Experts propose solutions like government funding for sorting and recycling infrastructure to reduce labor costs and regulations mandating technology adoption to enhance efficiency.
Reducing clothing oversupply is crucial. Liz Ricketts, co-founder and executive director of The Or Foundation, calls for a 40% reduction in new clothing production to make second-hand and recycled products competitive. “I don’t see a world where second-hand and upcycled and recycled products are going to be competitive if we don’t reduce the production of new clothes,” she says.
Whether the second-hand clothing market is a bubble or a goldmine, one thing is clear: The current model is unsustainable. As Rachel Kibbe, CEO of American Circular Textiles, puts it, “We need infrastructure, we need labor, we need capital. Because how else are we going to solve this thing called the climate crisis?”
Discussion Questions
How can retail leaders balance profit and sustainability in the second-hand clothing market, particularly in light of challenges like high labor costs and declining clothing quality?
What innovative strategies can CEOs employ to address the economic viability of second-hand clothing businesses, considering factors like consumer expectations, production costs, and environmental concerns?
How can business models transform the fashion industry to meet the dual goals of economic viability and environmental sustainability in the second-hand clothing market?
Poll
Loading …BrainTrust
Paula Rosenblum
Co-founder, RSR Research
Zel Bianco
President, founder and CEO Interactive Edge
Some of the newer secondhand retailers are still scaling. thredUP has been gradually moving closer to profitability and should soon break even; indeed, it probably already does in the US but is pulled down by its more embryonic European operation. As it applies more technology to labor intensive processes its margins should strengthen further. This story isn’t all doom and gloom! As for reducing the oversupply of clothing, aside from better buying and planning, this is a cultural thing and requires a step change in consumer habits.
There is a wonderful consignment shop near where I live. The selection is curated, displayed better than most chain stores, and the prices are fair. I have watched consigners haul in piles of clothing that will need to be sorted, steamed, priced, etc. It looks exhausting, and coming from a retailer like me that says a lot. But people love it and the store is profitable.
Resale is a tough business, but saying it will not be profitable unless we reduce the flow of new goods sounds like an excuse. The industry has momentum, maybe it needs a new marketing focus. Climate change isn’t sexy. Critically important, yes, but maybe not the reason we’re shopping resale..
Like any form of retail, there are going to be those that figure out the model and how to make it work and those who don’t. I’ve been in some secondhand retailers that seem to do a brisk business, especially with more challenging economic conditions impacting shoppers.
The available statistics on what happens to used clothing are eye-opening. However, the statistic that grabs me the most is that 40% of retailers’ apparel inventory is never sold. FORTY PERCENT??? Obviously, the mindset of most retailers is still “stack it up.” That is a very poor business model. How did we get there? The penalty for overbuying isn’t enough.
As for second-hand…I don’t see it as a fad. I also beleive that young people embrace this trend for environmental or cost reasons. Habits we adopt when we are young will often stay with us throughout life, so there is a future for the recycle. In the near term, thrift is a better business model than consignment. The key, of course, is getting the inventory for free.
Will technology solve the problems? To a degree, but with retailers overbuying, the impact will be minimal.
You are correct. Second-hand, refurbished, call it what the industry wants to call it, is not a fad. It has been happening for 65 years that I can remember (yes I can remember that far back). Now, it’s being commercialized at scale. It’s good for those customers who aspire to own/wear something that they could not otherwise afford at regular price, it is good for the environment, and it provides an additional source of revenue for retailers. Hopefully, not a the expense of independents. Controlling the pricing of a product requiring labor intensive go-to-market process is complex. Technology will help (as my colleagues state) but only to a point.
The clothes will come in new and start off at full price. They’ll then move to discount, further discount and maybe to off-price. Eventually they will be written off and destroyed or donated. If at all those stages they cannot be sold, the buying decision must be absolutely terrible!
More sustainable fashion is an important element of the circular economy. Having previously worked with The Salvation Army’s Thrift Stores, there is huge untapped value in resale than can be unlocked by more retailers.
We absolutely must do something about the sheer amount of apparel we discard in America. We must think about the future of our children and grandchildren. We all want to do what is best for them, so even if we insist on buying new clothes, we can at least donate the items we want to discard. If the second-hand industry were to implement a program where the consumer could trust that the second-hand items were cleaned thoroughly, more people might opt for this choice.
Resale is challenging, especially when fast fashion allures with the current trend, rather than classics. I think the end of the story has yet to be written, however. Of course, I always wish retailers would buy less, for more reasons than I can count….but we have to see a change in consumer attitudes.
It is interesting that there is a strong overlap between those who shop for secondhand fashion and those who shop for fast fashion. Often it’s the very same people!
Before we say the incineration rates are high for a couple individual thrift retailers, I’d like to know what they are for non-second hand retailers and other second-hand retailers. Archival fashion is having a huge moment though, and I don’t see that going away. If anything, I think we’ll only continue to see it become more and more fashionable to wear older items. Further, second-hand retail isn’t the only way to be sustainable. We need more standardized, environmentally-friendly practices in general.
The customer can buy an amazing array of new choices from any number of discounters. New, but from a discounter. Or, they can buy second-hand from a more limited number of retailers and brands. The discounters are profitable and will be with us for a long time. The second-hand businesses needs to figure out their profitability. And then the customer will vote. Brands and retailers that make themselves available in discounters will have a difficult time operating a second-hand business at the same time. Brands and retailers that are not available in discounters will have an easier time, but will still face competition from the discounters. Less expensive new or less expensive used. Then the customer has to make the environmentally informed decision. The abundance of product continually available at discounters is not healthy for retailing or the planet. We are once again back at over production and over buying as a root problem.
Just what, exactly, does “sustainable clothing” mean? Sustainable is fast becoming a marketing term that sounds righteous but does not mean anything.
Does reselling clothing make sense? Sure it does. But there is inherent risk (unless you are making something to order, like a suit from a Saville Row tailor) in getting size / style /color wrong. That is why you sometimes see 75% off sales.
These fast fashion retailers are serving the market. The rhetoric around sustainability and helping mother earth is mostly marketing driven.
I wear my pants and shirts and coats until they wear out, and when I buy new I consider “does this brand’s products hold up well for years?” Zippers, buttons, belt loops and seams is where investment in quality will result in far less material going into the landfill. Have high hopes that weave-to-order tech will actually result in fewer pieces of clothing needing to be manufactured in the first place.
There are contradictory business models and ambitions at play here. On one end, we have ThredUp and Real Real, along with the rise of the consignment businesses, and on the other end of the spectrum, there are the extreme fast fashion giants Temu, SHEIN, H&M, Zara, and the rise of disposable clothing. Considering the infrastructure, supply chain capabilities, and distribution network requirements, it has been very challenging for ThredUp and Real Real to drive a profitable operating model.
The most significant challenge for both sustainability and resale initiatives is that it will take a 40% reduction in new clothing production to make second-hand and recycled products a profitable operating model.
Conscious consumerism has its impacts, especially as you consider these sobering statistics about what the fashion industry is responsible for:
10% of human-caused greenhouse gas emissions20% of global wastewaterUses more energy than the aviation and shipping sectors combinedProducing one cotton shirt takes about 700 gallons of water. That’s enough water for one person to drink at least eight cups per day for three-and-a-half yearsIt takes about 2,000 gallons of water to produce a pair of jeans. That’s more than enough for one person to drink eight cups per day for ten years
Fueled in part by a movement to counter the wastefulness of fast fashion, secondhand style might now be at risk of defeating its own purpose. A glut of secondhand finds are being resold at markups that are reportedly too rich for young and price-conscious shoppers, the sector’s traditional core market. Ahhh, capitalism.
There are a myriad of issues at play here. Apparel overbuying has a lot to do with maintaining stocks across size ranges; forecasting sales at the item/store level in apparel is extraordinarily difficult. So, the process is to overbuy while considering clearance sales in the forecast upfront. For the second-hand market, even if there is no expectation of finding a specific item, it is, after all, more of a treasure hunt; the ability to scale the sorting and merchandising of these items is a challenge. I do believe that the demand is there, and there are retailers who will figure this out. The market wants it, and demand is there.
I think there may be a bit of conflation going on. First of all the second hand clothing, thrift store fashion, boho, shabby chic or whatever you like to call it “trend” has been going on for decades now. The target consumer market for these stores ranges from actual poor people to the so-hip-it-hurts. Then there is the issue of fast fashion which is demand driven. That there is the question of circular fashion economies and sustainability. And, but probably not finally, there are those celebrity-endorsed “pre-owned” sites. The one thing that most of them have in common – with the obvious exception of circularity – is that most of he retailers are primarily concerned with a main course of profit with maybe a veneer of sustainability on the side. The fashion industry is a major polluter. The waste numbers and air, water, and land pollution stats will make you cry. So, why does it go on? Because consumers continue to drive demand for the new. Color me cynical, but I think nothing significant will happen until more nations copy France where it is illegal to just landfill or otherwise destroy clothes. And those regulations will come if we want to continue living on this planet.
“So hip it hurts” I think that’s going to be the title of a new demographic behavioral group in our segmentation tool.
Very real sustainability issues taint the entire apparel industry, as called out here by Brandon and Ryan. I don’t think the resale concept can make much of a dent, since most of today’s garments are made to be worn only a few times.
Sure, some high-fashion clothes present a decent re-sale market, but the supply of those items is not consistent enough to sustain retailing at a large scale.
If the apparel industry wants to get serious about sustainability it needs to attack the head of the snake – wasteful manufacturing processes. Focusing on the tail end – a tiny percentage of clothes that can be re-cycled – is ultimately a small business. More of a performance than a solution.
Overall, the circular economy has a circular problem: this industry is born of good intention (mostly), but good intentions are not enough to generate profits when the cost of labor is so high; business with good intentions but without good profits become unsustainable, yet the moral intent is to help our environmental sustainability; which seemingly cannot be helped much without profitable and sustainable business.
It’s unlikely that fast fashion is going to slow down and pull back production. It’s unlikely that retailers are going to curb buying the next shiny object for fear of missing out on new sales–until and unless demand changes for said shiny object.
There is light at the end of the resell market tunnel with GenZ and their universal affinity for environmentally sustainable initiatives. However, whether or not the current resell market will contine to thrive while GenZ matures into full buying power is the question.
I do believe there is a sustainable future for the resell market but rebalancing the demand equation between fast fashion and sustainable goods will be key.