As the Resale Market Scales Up, How Can Retailers Take Advantage?

The rise of the resale market presents an undeniable shift in consumer behavior, as customers increasingly value sustainability and affordability alongside quality. With the global market for secondhand goods projected to hit $350 billion by 2027, as per the 2023 Resale Report by thredUP, there is a clear opportunity for retailers to tap into this burgeoning market and reap the benefits of the circular economy.

However, entering the resale market is not a decision to be taken lightly. Retailers must carefully analyze if it aligns with their brand ethos while also understanding the mechanics of this distinct market. From identifying key players to exploring various resale programs like buyback, consumer exchanges, and off-price programs, retailers need solid groundwork to successfully navigate this uncharted territory.

Here, we'll explore how retailers can take advantage of the burgeoning resale market.

Understanding How the Resale Market Works

The resale market operates on the principle of buying and selling used goods. Instead of discarding products once they've fulfilled their initial purpose, items are given a second life, thus embodying the concept of the circular economy. This system not only reduces waste and environmental impact but also allows consumers to access goods at lower prices, thus promoting affordability and inclusivity.

The resale market isn't new, however, and it didn't emerge with digital-first organizations. It originated at the local level with thrift shops and nonprofit brands like Goodwill. The latest resale companies simply took note of the consumer trend of buying used products, then digitized and automated it.

Key Players in the Resale Market

Several companies have emerged as leaders in the resale market. Platforms like thredUP, Depop, and The RealReal have revolutionized the way consumers buy and sell secondhand goods, with robust online platforms that cater to a wide range of product categories. They have fostered a community of conscious consumers and sellers, offering an alternative to fast fashion and promoting sustainable consumption.

Implications for Retailers

The growth of the resale market has significant implications for traditional retailers. It offers an opportunity to engage with the circular economy, whereby retailers can incorporate resale programs into their business models, thus extending the lifecycle of their products.

Retailers stand to benefit from increased customer loyalty and access to a wider consumer base that values sustainability and affordability. Additionally, participation in the resale market can enhance a retailer's brand image, positioning them as environmentally responsible and attuned to shifting consumer preferences.

Resale options also have sustainability implications. Any product that can be resold is prevented from being destroyed or entering a landfill. This allows retailers to recoup some of their costs, reduce waste, and reduce their carbon footprint.

By understanding the functioning of the resale market, identifying the key players, and recognizing the potential benefits, retailers can make informed decisions about whether to incorporate resale into their operations. As we move towards a more sustainable future, the resale market offers a viable path for retailers to thrive while contributing positively to the environment.

Determining if Resale is the Right Fit

Before diving headfirst into the resale market, retailers must conduct a comprehensive evaluation to ascertain if this move aligns with their brand ethos and business model. The decision to engage in resale shouldn't be made hastily, it should be based on a thorough understanding of the resale landscape and its potential impact on your operations, reputation, and bottom line.

Pros of Entering the Resale Market

1. Brand Loyalty and Customer Engagement: By engaging in resale, brands can strengthen their relationship with existing customers and attract new ones. It can create a sense of community among consumers who value sustainability and consciousness in their purchases, which can, in turn, increase brand loyalty.
2. Sustainability: Entering the resale market allows brands to contribute to the circular economy, reducing waste and their carbon footprint. This can enhance a brand's reputation and appeal to eco-conscious consumers.
3. Financial Incentives: Resale can provide additional revenue streams. When items are resold, brands can recoup some of their original investment, turning potential waste into profits.

Cons of Entering the Resale Market

1. Logistical Challenges: Managing a resale program can be complex, requiring substantial changes to existing logistics, inventory management, and customer service processes.
2. Quality Control: Ensuring the quality of used products can be challenging but is crucial to maintaining brand reputation.
3. Market Saturation: The resale market is growing at an unprecedented rate, raising concerns about market saturation and competition.

While there are both benefits and challenges associated with entering the resale market, certain types of companies might find it a more seamless transition. Retailers with a strong sustainability ethos, companies whose products have a relatively long lifecycle, and businesses with an existing base of eco-conscious consumers may be particularly well-suited to engage with the resale market.

Defining Goals for Resale and the Circular Economy

Before embarking on a venture into the resale market, defining clear and actionable goals is instrumental. Retailers must identify their objectives, which are typically a blend of financial, environmental, and customer engagement targets.

1. Financial Goals: Retailers should aim for a new revenue stream from selling second-hand items. By reselling, businesses can recover a portion of their original investment in the product, thus improving overall profitability. An important metric to track might be the percentage increase in total revenue or profit as a result of resale activities.
2. Environmental Goals: With sustainability being a significant driver of the resale market, setting environmental goals is paramount. These could include reducing waste and the company's carbon footprint. Retailers might aim to achieve a certain reduction in waste generation or CO2 emissions within a specific timeframe or aim to resell a certain percentage of their product output instead of discarding it.
3. Customer Engagement Goals: Participating in the resale market opens new avenues for customer engagement. Retailers should aim to engage more customers through their resale initiatives, increase brand loyalty amongst eco-conscious consumers, and attract new customers who are part of the resale market but not yet customers of their primary market.

Exploring Different Types of Resale Programs

As retailers continue to focus more on environmental sustainability and the resale market, a variety of innovative resale programs have emerged. Each type of program offers its unique advantages and requires different levels of commitment and resources from retailers. Here are some of the primary types of resale programs.

Buy-Back Programs

Buy-back programs are one of the most common types of resale initiatives. In these programs, retailers offer customers the option to sell their used items back to the store, often in exchange for store credit. These items are then resold at a lower price point, extending their lifecycle and reducing waste.

Retailers like Patagonia and The North Face have successfully implemented this type of program. However, it's important to note that buy-back programs require significant logistical planning and management. Retailers must be able to verify the quality of returned items, process them effectively, and reintroduce them into the sales cycle.

Consumer Exchanges

Consumer exchanges, or peer-to-peer resale platforms, are another popular type of resale program. These platforms allow consumers to sell or trade items directly to other consumers. While the retailer may facilitate this exchange, they don't purchase the used goods. Instead, they may charge a fee for the service or use the platform to drive traffic and engagement.

Consumer exchanges can be particularly effective for retailers with a strong community of loyal customers, as they can leverage this community to fuel the exchange. However, these platforms do require oversight to ensure quality control and fair transactions.

Off-Price Programs

Off-price programs involve selling products that are out of season, returned, or lightly damaged at a discounted price. These programs allow retailers to recoup some of the money they would lose from marking these goods as unsellable.

TJ Maxx and Nordstrom Rack are examples of off-price retailers. While this can be a profitable venture, retailers must strike a balance between off-price and full-price sales to avoid cannibalizing their regular sales.

Rental Programs

Rental programs have become increasingly popular, particularly in the fashion industry.

Retailers like Rent the Runway and Le Tote have built their entire business model around renting clothing to customers for a fee, then cleaning and renting them out again once they're returned. This type of program helps reduce waste by extending the lifecycle of products and promoting shared use.

Each of these programs has its own set of benefits and challenges, and what works best will depend on a retailer's specific circumstances, including its brand ethos, customer base, product lifecycle, and logistical capabilities. Understanding these various models is a crucial step towards determining if, and how, to incorporate resale into a retail strategy.

Start Leveraging the Resale Market

As the resale market continues its upsurge, retailers must astutely analyze its potential for their business. Ultimately, the key lies in aligning resale efforts with the brand ethos and customer needs.

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