Second-hand shopping is becoming a global phenomenon led by North America, with the US second-hand market expected to more than double by 2026, reaching US $ 82 billion. That follows a record growth year in 2021 for second-hand, up by 32 per cent.
Technology and online marketplaces pose as the key growth drivers of the US second-hand market – in fact, 50 per cent of total second-hand dollars are expected to come from online resale by 2024.
The demand for second-hand or pre-loved products is surging: industry watchers predict an annual growth rate of 10-15 per cent over the next decade, owing to the success of specialised digital trading marketplaces, fuelled by growing consumer and investor demand for more sustainable apparel alternatives.
Online resale platform ThredUp in partnership with GlobalData, has revealed in its 2022 Resale Report that the global second-hand apparel market is expected to grow by 127 per cent by 2026 – more than three times faster than the global apparel market overall.
With such rich rewards up for the taking, designers and brands are eyeing the market with interest, with some taking steps to invest in the concept. Others remain cautious with valuable brand identities as well as margins to protect. So there’s good reason to think carefully about the long-term payoffs of the resale sector.
For discerning consumers, brand involvement is an attractive prospect. For brands, the challenge lies in finding unique ways to add value to the resale shopping experience. But nevertheless, luxury resale is here to stay – and those brands that choose not to participate, risk missing out on a significant opportunity.
Around half the luxury resale trade currently consists of jewellery and watches, with handbags and shoes comprising just over a third; it is mainly oriented towards women’s fashion |
Customers for resale market
Overall, 75–80 percent of luxury consumers are still strictly new-product buyers. However, consumer behaviour and concerns are constantly changing, pointing many towards the pre-owned products market, generating interest in the process.
The preference for shopping in secondary markets has surged across all generations.
These patterns have been accelerated by the pandemic, by digitisation, and by the so-called ‘generational headwind’: younger buyers, namely Gen Z and Millennials, are significantly more willing than Gen X and the ones older than them, to purchase pre-owned products.
For customers, resale lets them afford aspirational brands, shop conscientiously, and – quite similar to traditional thrifting – find unique items.
According to a report released by First Insight and the Baker Retailing Center at the Wharton School of the University of Pennsylvania, Gen Z leads the way in sustainability and has outsize impact on older generations, especially their Gen X parents.
Purchasing or renting previously-owned apparel, shoes and accessories continues to grow in popularity as Gen Z’s influence over older generations on sustainability increases |
“At least 50 per cent of all respondents across generations prefer the resale/recommerce market for a combination of reasons indicating a concern for the planet and a preference for sustainability and circular shopping. Yet affordability is still very important to Gen Z, with nearly 30 per cent preferring to shop through recommerce based on price. Regardless of their reasons to shop through recommerce, 83 per cent of all respondents across all generations said that they will continue to purchase second-hand products,” Professor Thomas Robertson, Academic Director of Wharton’s Baker Retailing Center said as part of the report.
Gen X and millennials – the highest number of respondents – confirmed that they sell items to second-hand markets such as ThredUp and Poshmark, with 47 per cent of Gen X and 52 per cent of Millennials participating as sellers.
In addition to this, ThredUp states that the younger generation remains the most open to buying pre-loved fashion, with 62 per cent of Gen Z and millennials saying they look for a second-hand item before purchasing a new one.
The study also found that 58 per cent of consumers say second-hand shopping has helped them in some way during a time of inflation. Meanwhile, 25 per cent say they will consider buying more second-hand items if prices of apparel, footwear and accessories continue to go up.
Resale/secondary markets increasing by the day
While the trade still largely exists offline, secondary markets consisting of online marketplaces are cropping up at a much faster rate. So much so that specialised digital platforms for trading pre-used goods, with a 25–30 per cent market share, are driving much of the sector’s growth, with a predicted expansion of 20–30 per cent per annum.
This is another key reason influencing consumers to buy more second-hand clothes, with 70 per cent of respondents saying it is easier now to shop for pre-loved products than it was five years ago.
Online resale is the fastest sector of second-hand and is expected to grow by nearly four times by 2026 – ThredUp x GlobalData revealed |
Some notable secondary markets include resale sites such as ThredUp, The RealReal and Poshmark; peer-to-peer marketplaces such as Depop and Storr; and rental platforms such as Rent the Runway.
Buyers and sellers flock to these online marketplaces, attracted by the range of unique products and services offered ranging from pick-up, storage and delivery to repair and refurbishment; from authentication to price-setting advice; and from high-end photography and copywriting to virtual shopping events.
For these specialist services, platforms generally add a commission of 20-40 per cent on top of selling price.
With such a committed consumer base, it’s no surprise that certain high-profile brands are trying out their hand in the luxury resale market.
High street retailers and iconic fashion houses alike have stepped into resale in recent years with the likes of Hugo Boss, Ganni, Marks & Spencer, Lululemon and Pacsun, all announcing either the launch or expansion of their resale offerings in the last few months alone.
Additionally, Gucci is partnering with TheRealReal to recycle/upcycle garments, Richemont has acquired UK-based watch specialist Watchfinder, thereby gaining new distribution channels and becoming a retailer of rival brands, and Kering has invested in Vestiaire Collective, to enhance its customer experience and boost its sustainability efforts.
ThredUp has also released a monthly index set to be measured year-over-year (Y-o-Y). Dubbed the ‘Recommerce 100’, it tracks the adoption of resale initiatives as well as which brands have grown their projects in this area.
The report highlights that brands with resale shops increased 275 per cent in 2021 compared to 2020 with an estimated 41 brands with resale shops exhibiting 133,000 total listings.
22 brands launched resale shops in 2021 and 11 have already launched projects in the first three months of 2022, confirming the swift rise in resale. Amongst retail executives who currently offer resale, 88 per cent say it’s helping drive revenue.
Interestingly, small brands are ‘demonstrating leadership in resale’, with 25 of the 41 brands identifying as small, private companies. The report also points out areas that brands could expand on, such as the number of listings.
Furthermore, the report highlights the top brands with the most listings – Eileen Fisher tops the list, followed by Tea Collection, Lululemon and REI. Patagonia, Levi’s and Madewell have also made it into the top 10.
“At the current pace, the number of new resale shops launched in 2022 is expected to exceed the number of all other resale shops launched to-date,” James Reinhart, CEO and Co-founder of ThredUp, said.
“The last 10 years of resale were dominated by marketplaces, but brands and retailers are driving the next wave of second-hand. We’re still in the very beginning of this trend, but the acceleration of resale adoption is a positive signal with enormous benefits for the planet.”
Tap the resale/second-hand market?
The ability of a brand to sustain and engage in a secondary market reinforces a desirable aura of craftsmanship, durability and sustainability.
Four in ten buyers consider that brand participation will raise the market value of their own pre-owned products. Many also feel that luxury brands exert more control on their products this way, resulting in less counterfeiting.
The pre-owned market is no passing fad but presents a real and lasting opportunity. Those choosing not to take part in resale will have a smaller addressable market – while still seeing their goods traded on outside digital platforms.
For those that do step in, other considerations arise.
One of them being, how does this serve customer needs?
Brands might find ways to appeal to specific client segments. For discerning collectors of iconic pieces, brands could play a role in organising the market more efficiently, or by offering sought-after items. For those interested in buying new products only, the trade-in experience could be improved.
And for all buyers, of both new and pre-owned products, brands could provide superior authentication and guarantee services, with specialist insights and access.
Case Study: Eileen Fisher
Eileen Fisher was the first major retailer to start a resale programme in 2009. It began as a grassroots effort to collect employees’ used garments, resell them to customers and donate the proceeds to Eileen Fisher’s charity foundation.
Resale fits naturally into the company’s design ethos, which is built around a wardrobe of timeless, monochrome pieces that can easily be mixed and matched and last for many years.
Dubbed ‘Renew’, the programme became so popular that the company quickly expanded it from bricks-and-mortar stores to an online store in 2017. The programme even includes a line called ‘Not Quite Perfect’, which contains pieces with slight blemishes, like pilling or a small pull, which are sold at a larger discount.
Most resale programmes work similarly to Renew: if you have a garment you no longer want but which is still in a good condition, you can turn it in for store credit, and the brand will turn it around and sell it to someone else at a discounted price.
But store credits can be problematic if they only encourage customers to buy more new stuff.
Store credits incentivise customers to bring in their clothes, but not every programme allows the customer to use that store credit on another used item. Successful models are those which offer options to spend the credit on both new or used clothing.
“The whole point of recommerce is to prevent people from buying new clothes,” Marilyn Martinez, a Circular Economy Expert at the Ellen MacArthur Foundation said, adding, “but if you’re giving people a discount to buy more new stuff, it defeats the purpose.”
Eileen Fisher estimates that Renew has taken in more than 1.5 million garments since it started, and by replacing new purchases, it has saved more than 499,000 pounds of CO2. |
By selling their own second-hand clothes, brands are confronting retail’s biggest environmental challenge: how to keep making money without extracting new resources. But what’s likely propelling the trend now is that it just makes good business sense.
With more consumers turning to second-hand shopping, resale is proving to be a powerful solution to fashion industry’s wastefulness. Second-hand clothing displaced nearly one billion new clothing purchases in 2021, and nearly two in three consumers believe their individual consumption habits have a significant impact on the planet.
That being said, Resale alone can’t solve fashion’s environmental problem – it will have to be combined with other means of recirculating clothes, including repair, rental and recycling.
“Resale has emerged from the pandemic in an extremely strong position,” Neil Saunders, Managing Director of GlobalData said, adding, “More consumers are shopping second-hand, growth has accelerated, and the interest from traditional retailers has soared. The economic outlook remains uncertain, but with inflation driving apparel prices higher and higher, more shoppers appear to be turning to second-hand to make their budgets stretch further.”
The luxury resale market holds great promise for both customers and brands.
Leading the way, largely, are customers, who are eager for established brands to play a larger role. For brands, if they choose to participate, it is a way to expand their offerings, appeal to committed client segments, stay abreast of digital innovation and reinforce their sustainability efforts – if they can find ways to add meaningful value to loyal customers’ experience.