When the race to the bottom hits…well, the bottom (read: when there are no more costs to cut and when pricing cuts into margins) there is now a rapidly growing new channel of distribution. Apparel brands and retailers can either continue their race to the bottom, or they might actually find this new channel as a path back to robust and profitable growth.
Re-commerce, pre-owned, used, resale, secondhand or whatever you wish to call this channel, is growing faster than all of apparel sales. In fact, this channel has grown 21 times faster over the last three years, according to research firm GlobalData. It will be a $51 billion market in five years, up from $29 billion in 2018. And get this. Resale will exceed the size of fast fashion retail by 2028, reaching $64 billion, or $20 billion more than the estimated fast fashion sales for that year of $44 billion.
What’s Going on Here?
Fad or a trend: 64 percent of women bought or are now willing to buy pre-owned products, up from 45 percent in 2016. And an even greater confirmation that it will stick and may one day become the market share leader is the fact that millennials and Gen Zs are driving its growth, at 2.5 times faster than other age groups.
And the final and immutable indicator that the pre-owned market will become dominant is that this environmentally committed youth culture will continue to demand it. Tell any one of them that half a trillion dollars’ worth of excess apparel inventory is dumped into landfills, the ocean or on barges sent to third-world countries every year — then check the looks on their faces. Horror, anger and determination to do something about it are obvious.
What Do Automobiles Have to Do with It?
Hey, in 1898, the Empire State Motor Wagon Company in Catskill, NY was one of the very first American used-car lots. Today, according to Statista, of the roughly 60 million automobiles sold in the U.S. in 2018, about 20 million were new vehicles and about 40 million were used. And over the last decade, the new car market has been relatively flat, while the used market continues to grow. So, sales of autos and apparel have more in common than one might think.
Who’s Jumping In?
Patagonia has been a leader in reducing its environmental footprint. It buys back customers’ products if they are in good enough condition in exchange for store credit. Recently Patagonia opened its first physical store solely for its resale business as a pop-up in Boulder Colorado. It carries its online brand, Worn Wear (great name) and their ReCrafted Collection — clothes made from apparel beyond repair. It also hosts repair and upcycling workshops. I have to believe that the Patagonia pop-up is a toe in the water where they will find that the pre-owned market is worth a serious strategic discussion about a national roll-out of stores.
In its release, Patagonia stated, “Repairing clothing and keeping gear in play as long as possible has been part of Patagonia’s business model since the 1970s. Today, Patagonia repairs more than 100,000 items each year in 72 repair centers globally and in Reno – where the company owns and operates the largest apparel repair center in North America.” They also have mobile repair units that travel around to ski resorts, colleges and specialty stores. The mobile stations have traveled to over 135 locations and will fix products from any brand.
The performance wear icons walk their talk in terms of sustainability. In 2018, the North Face launched The North Face Renewed, repairing and reselling old TNF goods at a discount. REI updated their used gear website last August and introduced a gear rental option.
Resale models are also increasing in the mainstream apparel and luxury markets. ThredUp has become a fast-growing brand and has recently created resale partnerships with Macy’s, JC Penney and Madewell. It’s a win-win for each: increased traffic for the stores, as well as street cred among its younger customers for being environmentally sensitive, and more growth and recognition for ThredUp. And of course, the luxury market’s poster child, The RealReal is growing like crazy. In October they launched a partnership with Burberry.
The Burberry move may have very well been triggered by Neiman Marcus’ earlier acquisition of a stake in Fashionphile, an online and brick-and-mortar secondhand luxury retailer. In my April coverage I pointed out that with the acquisition, Neiman’s was the first in the luxury sector to launch a resale model within its stores. Its acquisition of Fashionphile (founded in 1999) gives it a leading edge with the overnight inventory of 15,000 pre-owned ultra-luxury handbags and accessory items with “best-in-class authentication.” As opposed to The Real Real and Poshmark, two other pre-owned competitors who are solely digital and operate as consignment models, Fashionphile buys the pre-owned luxury goods and owns the inventory.
Neiman’s is a pioneer among major retailers to initiate one element of circular fashion, in one product category and in one sector. The repurposing of apparel and accessories products by recycling, upcycling, reusing, reselling, swapping or just plain giving away the stuff to people in need is an example of circular fashion that is “low-hanging fruit” because it is relatively easy to execute and more importantly, there is a ton of research and data that tell us that the new gens are clamoring for preowned products.
The next gen’s desire for earth-saving, social and humane values, along with wanting access over ownership, is real. It’s gaining speed and it will leave you at the station, if you don’t figure out how to adapt and transform your business model to fulfill those desires.
The train is leaving the station, and the caboose is in sight.