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How Are Brands Taking On the Resale Stalwarts?

The re-commerce revolution has been underway for some time. But the dominance of resale and rental platforms might be shifting.

Back-end retail technology and logistics companies have been working behind the scenes to help brands take on third-party marketplaces and curated rental platforms, bolstering their ability to provide these services themselves. The result is that more labels are offering consumers the ability to buy pre-owned items or lease their latest looks.

“Every brand will have a resale channel at some point,” Andy Ruben, founder and CEO of end-to-end re-commerce solution Trove, believes. Now serving brands like Patagonia, Lululemon, REI, Levi’s, Eileen Fisher, and more recently, Allbirds and On Running, the 10-year-old company formerly known as Yerdle has sold brands on the importance of owning re-commerce, instead of letting platforms like eBay, ThredUp, The RealReal and Poshmark eat up secondary-market sales.

“Their items, whether they participate or not, are being sold on these marketplaces,” Ruben said, but now “brands have the opportunity, as a growth strategy, to not just have the first sale, but to sell the items that they’ve designed and made and put into the world multiple times.”

Patagonia spent 10 years developing incredible material science to make the Nano Puff [jacket]—why wouldn’t they be the ones to make the money on the second, third and fourth sale?” he added.

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Trove powers the e-commerce and logistics infrastructure that allows its partners to take back and re-sell their own inventory. Owning resale isn’t just about capturing revenue, Ruben said. It’s also about taking control of the consumer experience and developing long-term brand loyalty—something marketplaces aren’t positioned to do for brands.

Nonetheless, these players continue to dominate, expand and proliferate as consumer appetite for pre-owned goods grows. Amazon recently announced a partnership with What Goes Around Comes Around, tapping into an audience of luxury vintage shoppers. Meanwhile, Walmart’s third-party sales platform saw gross merchandise volume balloon by 500 percent in 2021, largely on the back of fashion offerings. And in October, 120-year-old nonprofit Goodwill tossed its hat into the re-commerce ring, launching a secondhand site that features goods from mass market and luxury players like Zara, Nike, Louis Vuitton and Rag & Bone.

Like any other meaningful shift in the way consumers shop, there are risks in opting out of the trend, Ruben believes. He pointed to the luxury market’s slow start with e-commerce as an example of missed opportunity. “When brands are not engaging, they’re simply allowing this market to exist other places,” he said, and that can ultimately threaten brand image.

“We often say to a brand, ‘Don’t let someone else speak for you,’ so it’s vitally important that brands own their IP.” In creating their own on-site or in-store channels for used goods, brands are able to communicate directly through attractive merchandising and compelling marketing. “They’re able to stay in touch with existing customers and bring in new customers,” Ruben said.

The chatter surrounding circularity has also reached a fever-pitch. Brand-owned resale gives companies a way to keep their goods out of landfill, and capture concrete data about their impact in the process. “Being able to get more use of things we’ve already made is one of the very few paths forward for fashion for sustainability,” Ruben added. Brands must adopt strategies that prioritize emissions reduction while promoting growth.

Amid continued production and logistics slowdowns, geopolitical struggles and inflation, the founder said that some clients are coming to view consumers’ closets as a viable inventory stream. “We are working with a handful of brands right now that actually are looking at this as a strategy for growth to replace the linear model,” he said. In today’s environment, sourcing goods from shoppers could actually prove a simpler, more cost-effective process than getting them from overseas.

Shoppers can trade in pre-owned goods at a brand's physical retail store.
Shoppers can trade in pre-owned goods at a brand’s physical retail store. Courtesy

Whether they’re concerned with bolstering their bottom line or their sustainability profile, brands that take on re-commerce themselves are winning, Ruben said. Lululemon’s foray into branded re-commerce has stunted the brand’s growth on third-party marketplaces, “because shoppers are coming to their own program.” Patagonia’s own resale program has achieved the same resonance. “When you can buy pre-owned from Patagonia, why would you go anywhere else?” the founder added.

“We choose to launch with brands that are ready to really engage in a way that they’re going to profitably scale a significant portion of their business,” Ruben added, pointing to On Running, which is incorporating resale into its sustainability platform that already includes rentals. According to Ruben, On is hoping to grow pre-owned product sales to represent up to 20 percent of its overall business.

Trove has helped its partners launch take-back programs in more than 700 stores across the U.S., and has grown its client roster by more than one-third year over year, with several launches in the works for the coming months. “We look we look for the brands that are ready to really make this a meaningful part of how they’re going to make money,” he added. “This space is growing, so every brand we work with is growing. It’s a rising tide.”

Similar motivations are prompting brands to explore rentals, taking on industry leaders like Rent the Runway, Nuuly and FashionPass. “First and foremost, they want to grow their relationships with consumers, but it has to be done in a way that is profitable,” according to CaaStle founder and CEO Christine Hunsicker. “I think that those are the main motivations, but they’re not going to go invest $100 million in building out their own reverse logistics setup.”

CaaStle, which stands for “Clothing as a Service,” is a plug-and-play solution that allows brands to offer their own subscription-based rentals or borrowing capabilities on single items. The platform works with several dozen brands including Rebecca Minkoff, Loft, Dress the Population, Nicole Miller, Vince and Eloquii. The company is also beginning to partner with tastemakers and curators, like Modern Luxury magazine, which launched an edit featuring products from CaaStle clients to its subscriber base last week.

From the brands’ perspective, it’s easy to achieve liftoff on rentals. They contribute a broad, but shallow, assortment of goods to the program, dedicating minimal inventory to the effort. Meanwhile, “They’re getting increased engagement, they’re able to re-engage lapsed consumers, they’re able to take the bottom-quintile spenders and turn them into top-quintile spenders,” Hunsicker said. “And they’re able to use it to bring in a number of new prospects who may have looked at the brand as aspirational previously, but now have an accessible way to interact.”

The bottom line is that engagement—even through clothes that go back to the brand—ultimately leads to sales. “The big thing that we’ve seen is that when people rent clothing with any of these brands, they actually end up buying a lot more, which may be a little counterintuitive.” While subscribers may choose to rent novelty items like printed tops or brightly colored sweaters, they will turn to the brand when it comes time to purchase a wardrobe staple like black trousers. “The reality is, that brand is top of mind.”

Rentals serve as an extended try-on session for garments. “You know the sizing and you know exactly how things fit, so you’re more likely to make your purchases from a brand that you’re renting from,” Hunsicker said. There’s a heavy “cross-pollination” between the branded rental subscriber and the e-commerce purchaser, averaging out to a 20-percent revenue boost from rented items that end up as sales.

Hunsicker said most CaaStle partners view sustainability as “an added benefit” rather than the primary objective in pursuing rentals, but the concept resonates with conscious shoppers. The average renter tends to be “fashion engaged”—meaning that they spend $1,000 or more on apparel every six months. “They tend to be digitally native, live in cities, and they’re mindful about the environment,” she added. They view renting as a means of refreshing their wardrobes without creating waste, “and they like that it’s a better alternative to fast fashion.”

The biggest challenge for brands is in marketing their rental schemes effectively, and to the right audience. When they speak to shoppers through campaigns or emails, they have to decide whether they’re going to prioritize pushing sales or introducing them to borrowing. “And that’s the biggest challenge—how these two very different interaction paradigms live together.” To prompt a consumer to adopt a new behavior, the messaging must be targeted and nuanced, she believes. “It’s much more about getting deeply into the consumer journey, and not thinking about the consumer base as a monolith.”

For example, a shopper who just made a purchase will likely not do so again for at least 45 days—and that has proven the optimal period to reach out with news about rentals. There’s an opportunity cost to missing the mark, and Hunsicker believes it will take brands time to tighten marketing segmentation so that it’s most effective.

Standing up to established fashion subscription players like Rent the Runway requires that the quality and selection of the goods offered by CaaStle partners must be stronger, along with the terms of service. For example, CaaStle partner Vince offers four garments per box and unlimited swaps per month for a $160 fee, and most of their “latest and greatest” items are eligible for borrowing, Hunsicker said. By contrast, RTR did away with its Unlimited program during the pandemic, and a similar monthly fee gets subscribers eight garments per month without exchanges. “I think for a lot of people, the brands that they’re signing up to rent from are brands that can anchor their wardrobe,” she added, “and if you’re participating in a multi-brand rental system, you’re only getting access to a small number of styles that that rental service has chosen to buy.”

Ultimately, though, the market is still in its nascent stages, and the CEO believes there’s room for both types of platforms to coexist. “You have combined total of 600,000 people renting across [rental] platforms, and an addressable market that’s in the tens of millions,” she explained. “So we have a long way to go before we start worrying about cannibalization.”

Arrive Outdoors, which began in 2017 as a platform that helped brands like Arc’Teryx and Yeti facilitate camping gear, sporting equipment and outdoor apparel rentals, has spent the past two years developing its resale chops with the goal of devouring some of that market share. But instead of soliciting pre-owned inventory from shoppers, the retail technology and logistics provider is tapping into returns.

The company has launched its first branded resale experience with Eddie Bauer, which uses Arrive to power its rental program. ReAdventure, which launched this year as a microsite indistinguishable from the brand’s existing e-commerce, is furnished with products that, once deemed unsalable, have been refurbished, graded and re-listed by Arrive.

As brands and retailers have struggled with supply chain challenges in recent years, “It started to become apparent to us that this glaring problem-slash-opportunity was around returns, and particularly unsellable returns,” co-founder and CEO Rachelle Snyder told Sourcing Journal.

Typically, an item sent back to a retailer’s warehouse or 3PL partner is re-shelved or trashed due to imperfections—a deodorant stain, a scuff mark, a blemish. Products are sent to landfill, incinerated, or in rare cases, recycled. “We took this as an opportunity to say, ‘Hey, you can turn this cost line on your balance sheet into a profit line by utilizing existing products that you’ve already manufactured,” Snyder said.

The CEO sees returns re-commerce as the other side of the resale coin, destined for similar adoption to the consumer-facing take-back models popularized in recent years. “Operational resale” is a term Snyder uses to describe Arrive’s program with Eddie Bauer, wherein inventory is generated from excess product, returns, or rentals that have passed their prime.

This month, Arrive officially launched a returns assessment program that provides brands with concrete and digestible metrics to illuminate how much they stand to gain by addressing the issue. Brands send the company a pallet of about 100 randomly selected products that have been sent back by shoppers, and they are graded and priced based on condition. “That gives brands enough ammo to go to their executive team say, ‘We’re missing out on a million-dollar, or $10-million, or $50-million opportunity here with our returns,’” the founder explained. “Most of the returns we see are in pretty good condition, even if they’re they can’t be sold as new.”

Finding a solution to the returns conundrum, and taking responsibility for overproduction and waste more broadly, is becoming a brand imperative. “The consumer focus on sustainability has completely exploded over the past five years,” Snyder added. Consumers are demanding more conscious offerings, and “they’re thinking about fabrics, about sourcing, about resale and all of the things they want directly from a brand.”

But fashion firms’ core competencies lie elsewhere—in “making products, acquiring consumers and building a brand.” They’re not skilled at a number of functions that they outsource, from manufacturing to logistics, she said. A single-SKU business model like resale, where each product that comes in is different from the next, is daunting for a brand to tackle on its own. “They’re not set up to identify individual units of product in a scalable way, and then be able to resell those products in a really premium experience.”

The cost of doing business is growing each day, and the future of the fashion supply chain remains uncertain. Brands can’t afford to ignore a potential revenue stream, Snyder believes. “They’ve already allocated COGS to these products, spent the money to produce manufacturers ship those products across the ocean, get them to their 3PL partners, send them out to consumers—and then bring them back” as returns, she said. “They’ve put a lot of money into these products. We help them to recoup that money, and make a strong margin on top of that.”