That 2015 Balenciaga teddy bear faux fur coat that I decided against haunts me to this day. While the luxury resale market is expanding along with the rest of the category, that coat in my size is still hanging in someone else’s closet. It is not alone; a recent report from BoF Insights estimates that approximately 95 percent of resaleable fashion inventory is hanging in the homes of the original buyer, much of it sitting idle.
Pay It Forward
The global addressable inventory represents $2 trillion in potential earnings for resale platforms and sellers, according to Rahul Malik of BoF. Charles Gorra, CEO of Rebag, comments that the greatest challenge for competing resale platforms is inaction, “We are fighting against a dormant market for merchandise. It is an individual decision for the seller.”
Resellers are working to streamline the consignment process, and brands are surrendering to the irresistible allure of that untapped potential as they reluctantly recognize the increasing entrenchment of resale in the marketplace.
Brands Are the New Player in Resale
RaaS, or Resale-as-a-Service, is in step with the growth of scaled online resale platforms. This business-to-business capability develops infrastructure designed to encourage and organize resale functionality for established brands. Stephanie Crespin CEO of Reflaunt, a RaaS startup, comments on brands’ nascent embrace of the market, “Brands are the new player in resale, they are well-positioned to remove friction from the process. They have the product information, the images, and can sell the product in a few clicks. Resale is now restructuring the customer journey to unlock the real value of a product.” During the initial sales process, Crespin suggests that brands inform the customer of the value in the secondary market and create a clear roadmap to the product’s final value at the end of the journey. She feels that brands are at an inflection point. “Brands have moved from the position of ‘Is this right for us to how do we do it?’” She describes a customized approach for brands entering this market, “One resale model does not fit all. Unit economics per product is one factor. For Balenciaga, we focus on customer experience and the level of service offered. More mass-market brands leverage the community that is already aligned with the brand.”
Global addressable inventory includes $2 trillion in potential earnings for resale platforms and sellers.
BoF describes the Balenciaga resale process, “When a Balenciaga customer wants to sell a pre-worn Classic City bag, she would upload photos of the product and list its condition just once through the brand’s resale service, powered by Reflaunt. Then, using its automated technology, Reflaunt lists each item on nearly two dozen resale partner marketplaces around the world. When the item sells, both Reflaunt and the marketplace get a commission, and the customer can opt to receive the rest of her profit in either cash or shopping credits at Balenciaga. The latter option comes at a premium of 20 percent, so shoppers are incentivized to turn their sale into new purchases with the brand.” Reflaunt just announced a similar resale partnership with Harvey Nichols, the British department store.
Resale platform thredUP now offers RaaS service partnerships to retailers leveraging its logistical expertise and warehouse efficiency as a channel for growth. The company is promoting the service as it works to normalize the practice.
The thredUp 2021 Annual Resale Report states:
- 60 percent of retailers are now open to offering secondhand to their customers.
- One in three retail executives say resale is becoming table stakes for retailers.
- 42 percent of retail executives believe resale will be an important part of their business within five years.
thredUP has a growing list of resale partners including Madewell, Reformation, Walmart, Abercrombie & Fitch, and Rent the Runway. In an interview with Vogue, Jennifer Hyman CEO of Rent the Runway reveals the rental-to-resale model powered by thredUP, “This is another way for customers to engage with us for the first time. There’s a very broad audience of people who want to consume secondhand, but potentially didn’t come to our platform in the past because they weren’t ready to subscribe, or they didn’t have an upcoming party or event.” Hyman explains the value proposition for both the company and the consumer, “Because we monetize the product through subscription, by the time we’re selling something, we may have already rented it a few times and made money on it, so we don’t have to charge as much as some of our competitors who only have one opportunity to make their margin. There’s a value to the customer that she’s likely going to find better pricing on our platform.”
thredUp CEO James Reinhart says that resale as a service needs to demonstrate to retailers that the platform offers an economic benefit at scale. He believes in that benefit and doubles down on the importance of resale to the market, “Forty years ago T.J. Maxx opened and that was a disruption. This (resale) is a disruption that will play out over time, and it will rip up the industry if you don’t pay attention.” Rebag’s Gorra confirms the logic, “Resale is a one-way street. Your only choice is to get on board.”
The New Deal
Dealmakers have been active as well as brands in recognizing resale’s potential, although profitability remains elusive in the sector. Esty magnified its resale profile by striking a $1 billion, all-cash deal with the London-based Gen Z darling reseller Depop in early June. thredUP, after going public early in 2021, spent some of its cash to buy Remix. Yahoo Finance reports, “The U.S.-based resale platform announced today that it plans to acquire Remix Global AD, a major European fashion resale site that posted a total revenue of $33.9 million in 2020. The move marks the start of thredUP’s commitment to international expansion in Europe, where the secondhand market is expected to grow to $39 billion by 2025, according to GlobalData research cited by thredUP.”
The Resale Zeitgeist
The increasing sophistication and scale of online resale platforms have created an accessible value option for every tier of the consumer demographic at a moment when resale has achieved a high plateau of social acceptance. The values of millennials and Gen Z, the ascendant consumer class, is consistent with the sustainable nature of resale. Brands now have an opportunity to strengthen the relationship with existing customers by offering a resale option, while establishing a lower-priced on ramp for curious customers whose relationship with the brand might otherwise sit idling.