The resale market is booming – growing 11 times faster in fact than the wider retail fashion sector, and predicted to be worth $84 billion by 2030, more than double that of the fast fashion market’s $40 billion expected valuation for the same year. The pandemic has undeniably driven two key trends that are powering this resale revolution: e-commerce and thrifting.
Legacy retail needs to join the resale revolution
2021 was a year of big moves in the world of peer to peer resale and rental – Vinted reached 45 million users and a $3.5bn valuation, and Etsy bought Depop for $1.6bn. Meanwhile, Rent the Runway went public with an IPO that valued it at $1.7 billion, whilst a funding round into the luxury marketplace Vestiaire Collective raised its valuation to a similar amount.
Consumers’ love affair with secondhand shows no sign of slowing – and this trend represents a significant threat to traditional retailers, as pre-loved encroaches on traditional fast fashion territory. But it is also an enormous opportunity. Brands are, by and large, currently not capturing value from the resale of their own products. By expanding their relationship with customers to include both initial sale and resale, fashion brands can monetise a garment’s journey over a longer period – selling something not only once, but two or even three times.
Building a resale offering
It is useful to consider the two models by which retailers can build-out a resale focused business. The first sees the retailer take on a more direct role, by purchasing goods from their customers and reselling them on. This requires significant physical infrastructure – such as the ability to receive or collect goods from customers wishing to sell them on, the means of laundering and even mending them, before eventually posting them out to new buyers after they have sold. With this model, the retailer can offer the customer the option of money for their preloved goods, or a higher value in store credit. The latter option encourages additional spend in-store and can help to foster further loyalty with the brand.
The second model does not require the retailer to physically handle the secondhand goods – instead, they build and operate a digital platform that enables peer to peer resale, which in turn can help build a loyal brand community.
Whichever method that a retailer opts for, shifting to a circular commercial business model understandably comes with challenges – such as the need for significant investment and infrastructure, delivering on exceptional customer service and recreating both the ‘treasure hunt’ experience of secondhand shopping, and the ease and convenience of e-commerce.
Tapping into an existing ecosystem versus custom build
Whether handling secondhand goods directly, or focusing on peer to peer sales, legacy brands can approach building a resale offering in two ways:
- Resale-as-a-Service and platform partnerships
Partnering with an existing resale platform is likely the simplest way for a legacy brand to approach resale – Ralph Lauren and Benetton have both partnered with Depop, for example, and Mytheresa with Vestiaire Collective, although partnerships such as these tend to focus on limited, vintage collections. Brands could alternatively partner with a resale-as-a-service company – which offers an integrated, in-house resale experience without the need for large upfront investments. Net-a-porter, COS, H&M and Harvey Nichols are just some of the brands working with RaaS tech businesses.
- Custom built platforms
Other brands might opt to build and launch their very own resale platform – working with a technology partner to deliver on an app or website that connects with the existing retailer’s online presence. In doing so, retail brands also give their customers the choice to sell their secondhand clothing with them, instead of with a third party platform.
Tech has a fundamental role to play in supporting legacy fashion brands to grow their own resale offering. Whether tapping into an existing ecosystem or developing a custom-built product, customer-centric technology holds the key to both delivering a world-class, personalised customer experience, and to enabling the operating model to ensure that data-driven decisions guide the business.
A new fashion economy
The new fashion economy isn’t just about digital platforms and resale ventures. Technology can also help to power a circular fashion industry – one at scale, that marries both economic and environmental return to eliminate waste and maximise product life cycles. Digital ID systems can help consumers to identify how and where goods are made; virtual fitting rooms can help shoppers to find the right size and style of an item in order to reduce return rates; whilst other platforms can help users to build digital wardrobes, mend their garments, and / or rent out their clothes.
Resale and rental propositions tap into a strong and necessary desire for fashion to become less wasteful. This is a golden moment for fashion retail to evolve its business model – a crucial activity for survival and growth in the 2020s. In order to carve out a space in an increasingly competitive resale market, brands must approach the task with a more disruptive, agile mindset – and make the right technology decisions to help achieve sustaining innovation.