The sale of pre-owned items is a tradition as old as the marketplace itself. But like all shopping, it has evolved over time and now spans a full spectrum of needs and wants.
A little history
The high-value market for antique art, furniture, and other curiosities became popular during the renaissance. Later, it led to the rise of high-end auction houses, like Sotheby’s and Christie’s, founded in the 1700s.
The 20th century saw a boom in more modest offerings. It was the era of thrift stores, used car dealers, and the humble garage or yard sale. Then came the internet.
The launch of eBay and Craigslist in 1995 completely disrupted the market. Suddenly an individual reseller could tap a much larger customer base. This meant demand, even for obscure items, increased. But not everyone wants to sell their own stuff. And there is always the issue of trust. With low-price items, the risk is low. But with higher value items, the stakes rise. What if the products buyers receive don’t meet expectations? Enter the consignment specialists.
US-based TheRealReal and French-based Vestiaire Collective are examples of luxury consignment retailers. Complete with staff trained in counterfeit identification. Their value proposition? Sellers get top dollar for their pre-loved items, while buyers feel protected so they can shop with confidence. But while the second-hand market is great for buyers, what about brands? How do they feel about the second-hand market? Some are getting in on the act.
For example, in March 2020, Kering, the owner of Gucci, Bottega Veneta, Alexander McQueen, Balenciaga, and others, acquired a five percent stake in Vestiaire Collective. Many fashion retailers saw their business shrink last year. Vestiaire grew by more than 100 percent. Meanwhile, in the United States, brands outsourcing recommerce.
Recommerce as a service
Since 2017, Trove has provided ‘circular shopping’ as a service to many leading brands. The list includes Nordstrom, Levi’s, Eileen Fisher, Patagonia, and REI. Patagonia used Trove to launch their Worn Wear digital storefront. How does it work? Customers return their ‘still functional’ clothes to a store or by mail and receive a credit in return. Meanwhile, Levi’s used Trove to create Levi’s SecondHand. Both are great examples of how brands can enable their fan base to keep clothes from ending up in landfills.
Why consumers love recommerce
There’s a clear benefit to people who resell on sites like thredUP, TheRealReal, and Poshmark. Cash. But there are several benefits to buyers too. For example, they can:
- Save money: Pre-owned items come at a discount price. It also gives luxury brand lovers on a smaller budget a way to access out-of-reach collections.
- Save the planet: Buying used is better for the planet. Given that fashion manufacturing uses so many resources, this makes consumers feel good. What’s more 73% of millennial consumers said they prefer to purchase from sustainable brands. So retailers will need to find new ways to court them—including recommerce.
- Save space: Conscious consumption is all the rage. So is small space living. In short, consumers don’t want as much ‘stuff’ in their lives. Yet feel guilty if they throw things out. So recommerce gives them a sustainable way to clean out their closet.
Recommerce has become so popular that the pre-owned products market is currently worth approximately $28 billion and is projected to reach $64 billion by 2024.
Let’s take a look at why more brands should embrace it.
Recommerce by the numbers
The projections of recommerce growth are huge. But if you drill down you’ll find that there are two key driving forces. Higher-end goods and young consumers. Consider the following:
- The luxury secondhand market is growing four times faster than the primary luxury market, at 12 percent per year versus 3 percent.
- According to Coresight Research, merchants in the recommerce industry are growing five times faster than off-price retailers and 20 times faster than the broader retail market.
- According to the 2019 Annual Resale Report from GlobalData, Gen Z has the highest growth rate for reverse commerce. People under 40 love to scoop up secondhand handbags, jewelry, clothing, and shoes.
- Nearly one-third of Generation Z expects to buy one secondhand clothing item, shoe, or accessory in 2020 alone.
- While the younger crowd may be driving the trend, a recent study revealed that 56% of people across generations would be willing to pay more for sustainable products.
- The equivalent of one garbage truck of textiles is sent to a landfill or incinerated every second, according to The Ellen MacArthur Foundation, a U.K.-based charity that promotes the circular economy.
- Consumers, especially younger ones, want to shop at environmentally conscious brands. thredUP, for example, estimates that it has upcycled 65 million articles in the past five years—21 million in 2018 alone—saving these items from landfills.
Recommerce processing options
One of the biggest challenges of recommerce is handling the returns—often treated as a blind return. This is reverse logistics at its essence. The question is, do you do it in-house or outsource?
TheRealReal has a custom multi-step process that validates whether items are genuine or knockoffs. Retailers like Patagonia use a service (Trove) to process returns and operate a separate microsite for used goods. So which should you choose? Here are some questions to consider:
- How many items do you expect to receive?
- Where will you process them?
- What is your capacity for processing them?
- How many steps are there in the process? Will it include cleaning and repairs?
- Will the credit you issued to the customer be dependent on the condition of the item?
- How will you determine the sale price?
- Do you want a fully integrated brand experience (list used items alongside new) or sell used items on a separate microsite?
What’s the role of an Order Management System in recommerce?
For retailers who choose to handle recommerce returns in-house or just outsource parts (like cleaning and repairs), a flexible order management system (OMS) can help. Just like any other fulfillment process, you can use it to orchestrate every step, for example:
- Initiate a blind return
- Consolidate items for shipment to your processing facility
- Manage manual steps like quality checks (in a similar way to Value Added Services)
- Track items throughout the process
- Trigger events in other systems (such as your ERP or CRM)
- Trigger notifications to staff and customers
- Automatically make the item available online when it’s ready for resale.
That way, you can craft the process that best fits your business and your customer expectations
How will you explore recommerce?
The precedents are out there. Young shoppers value sustainable brands. While high-value customers like to trade in items so they can buy your latest collection. So the question is, do you want to own the process or use a third-party service?
With the right Order Management System, you can handle all the reverse logistics elements that make recommerce possible. The hard part is processing used merchandise. But once you iron out the details, you’ll have a unique opportunity: to create lifelong relationships with customers who care about what happens to garments after they’ve enjoyed them.
For more information on how Fluent Order Management can help you with recommence, Request a Demo today.