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Fashion Resale Basks in the Spotlight but Growth Could ‘Hit a Wall’

In a look back at the state of retail in 2019, the sector’s undisputed MVP is resale. Once the unglamorous underdog of the shopping space, the business of selling pre-owned goods has emerged looking better than ever.

Over the past year, popular online marketplaces have been catapulted beyond the fringe, lending unprecedented visibility to the art of selling secondhand clothing, footwear, handbags and accessories.

In June, luxury online consignment platform The RealReal raised $300 million in an initial public offering. The once marginalized secondhand market suddenly gained a captive audience of would-be investors and industry insiders looking to capitalize on resale’s starring role in retail.

A new generation of resellers has been able to tap into the invaluable benefits of e-commerce. Rather than thumbing through racks at their local consignment stores, consumers can filter based on size, brand, price and even color in the service of finding the product of their dreams—simply waiting to be plucked from someone else’s closet.

While the category has certainly demonstrated impressive growth over the past year—ThredUp’s widely circulated Resale Report revealed that to date, more than 64 percent of women have bought or are now willing to buy secondhand—some retail insiders doubt the category’s true potential.

Despite data showing that resale is slated to overtake fast fashion over the next decade, certain industry experts believe that it lacks the chops to truly disrupt established channels.

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Secondhand saturation?

Sucharita Kodali, vice president, analyst and e-commerce expert at market research firm Forrester, believes that while individual businesses stand to grow in the coming seasons, others may fall by the wayside as the space becomes saturated. Harnessing the power of e-commerce may not be enough to sustain an influx of new channels for buying used clothing, she said.

“In general, digitally native companies grow and then hit a wall,” she explained, adding that the “smart ones” are able to get the word out about their platforms quickly and effectively. Still, scaling these businesses presents a challenge because “the next layer of customer acquisition is very tough.”

While she acknowledges the burgeoning popularity of pre-owned products, Kodali said that the space presents inherent limits in terms of supply. The items that any one person has in their wardrobe that could be considered attractive to others is decidedly finite, she said. Plus, some of the most active buyers on these blossoming online marketplaces are also the most active sellers.

“They’re very good at arbitraging the platforms,” she said, intimating that the sites are simply perpetuating a circle of buying and selling within an insular group of users, instead of capturing and converting new consumers.

Rather than looking at online resale as a shiny newcomer, Kodali cautioned, retailers would be wise to remember that “consignment and used merchandise have been around forever.” Whatever enticing features these new platforms might have could be overshadowed by the simple fact that some people simply don’t want to buy used clothes.

ThredUp

San Francisco-based ThredUp has thoroughly shut out the voices of detractors like Kodali. The company is charging full steam ahead into 2020, following a decade of growth into one of resale’s most dominant platforms.

“ThredUp began 10 years ago with a mission to inspire a new generation to think secondhand first,” ThredUp spokesperson Samantha Blumenthal said. “We knew that to get there, we had to make shopping used just as easy, trusted and fun as shopping new.”

To the point that secondhand clothing only appeals to a certain subset, Blumenthal pointed out that ThredUp has been able to “convert the skeptics” by building a shopping experience that defies consumers’ expectations of conventional resale.

In fact, Blumenthal said, 72 percent of the site’s current customers had never shopped at a thrift store or bought used clothing before coming to ThredUp.

“Over the past few years, the stigma around secondhand has been dissipating,” she said, adding that 2019 is the year shoppers even started embracing thrifted gifts. The company’s data revealed that secondhand shoppers have already increased spend 56 percent this holiday season, and overall holiday season sales are on trend to climb 84 percent higher than last year.

ThredUp even debuted holiday gift cards this year, “to fight the waste of the holiday season and serve this rising wave of conscious consumers,” Blumenthal said.

After a decade in the space, ThredUp isn’t simply riding the wave of another consumer trend. The company sees itself as “the backbone of resale on the internet,” and it’s gunning to promote industry-wide change.

“Our vision is a world in which we reuse more than we produce new,” Blumenthal said. In the future, she believes every retailer will offer a thrift or circular component, whether that’s secondhand product being sold alongside new products in stores, or a recycling program that makes it easy for consumers to clean out their closets responsibly.

In service of that vision, ThredUp launched its Resale as a Service (RAAS) platform this year, allowing any retailer to plug into the company’s established infrastructure to power their own secondhand experiences for consumers.

Flagging department stores J.C. Penney and Macy’s are early adopters of the program, which allows them to sell curated selections of ThredUp merchandise in store. JCP launched its RAAS partnership in August with 30 stores, while Macy’s debuted ThredUp products in 40 of its national locations.

“We believe that resale and retail working together is the future of fashion,” Blumenthal said. “As we’ve seen with retailers like Forever 21, brands that do not embrace innovation and circularity will struggle to succeed in the coming decade.”

Yerdle

Former Walmart exec Andy Ruben has built a business on the concept of circularity with Yerdle, which helps brands build out their own take-back back programs and position pre-owned products for sale.

“I give players like The RealReal, Poshmark and others immense credit for validating this space,” Ruben said. Long term, though, Ruben believes that brands have an opportunity to capitalize on the secondhand market through their own internal programs, rather than relying on third-party platforms.

“The brands that we already know and trust have an immense advantage” in the space already, Ruben said. They’re able to authenticate their own products with ease, and provide a more consistent brand experience. “They know the items better, there’s an implicit trust, and shoppers are already there shopping,” he said.

Notably, Yerdle has helped Patagonia build on its Worn Wear program, which began as a nationwide tour to mend consumers’ damaged garments and has since grown to include a full e-commerce resale channel. Yerdle assists in collecting, authenticating and fulfilling orders for used Patagonia products through the company’s Worn Wear microsite.

Despite resale’s many wins this year, the category’s ascension hasn’t been without its hiccups. The importance of authentication is a struggle that Ruben deals with daily, and seeing luxury heavy hitter The RealReal’s latest round of bad press due to concerns about fake goods struck a chord with the Yerdle founder.

“Authentication is essential. If you don’t have trust in the product you’re buying, this space cannot exist,” he said.

Much of what has come out recently points to manual processes performed by employees without the depth of training to authenticate goods, Ruben said. Instead of relying on the naked eye to verify any product, his company uses a number of digital technologies in concert.

“There are ways to get digital fingerprints of the material and the stitching and the length of cotton fibers, and trace them back to the source,” he explained. “You can look at chain of custody, too. Together, you’re adding up a lot of 99-percent-effective ways of authenticating and providing a much higher degree of confidence,” he added.

Despite this year’s stumbles, Ruben believes that The RealReal’s black eye will fade quickly. And, there’s unlikely to be a “fall-off in consumer excitement for resale” as a whole.

Yerdle is gearing up for what Ruben hopes will be a landmark year for the space. “In 2020 we will see resale expand dramatically,” he said, adding that he’s fully confident in its ability to eventually surpass fast fashion.

“In the near term, [resale] isn’t a large enough substitution,” he admitted, adding that he expects to see the steady slowing of growth in fast fashion markets, “until they eventually shrink and go negative.”

Secondhand’s appeal is simply too great to go untapped by consumers hungry for newness, Ruben said. Instead of lusting after the latest fleeting trends, consumers will develop a taste for higher quality goods at fast fashion prices.

The closet of the future will likely include items that are rented and pre-owned, Ruben mused, and consumers will feel less compelled to stockpile clothing knowing they can refresh their collections thoughtfully with well-crafted products.

“You can buy a pair of Frye boots, enjoy them, and then sell them back and get the next pair of shoes you’re looking for. It scratches the same itch as fast fashion—but with better crafted items,” Ruben said. “Ultimately, there could be fewer items in the world, but we’d all get more out of them.”

Ruben points to ThredUp’s research, which indicates that the resale market is slated to grow from $24 billion to $51 billion in the next five years.

“I think that we will blow that number away,” he said.