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Watch Out Retail, Re-Commerce Could be Off-Price’s Next Competitor

While full-price retailers remain in a rut, secondhand clothing for resale, also known as re-commerce, is gaining momentum in the retail space.

According to a Fung Global Retail & Technology report, “Deep Dive: Fashion Re-Commerce Update-12 Catalysts for Apparel Resale Growth,” the total garment resale market, including brick-and-mortar and online outlets, is project to grow at a compound annual growth rate (CAGR) of 13 percent, climbing from $18 billion last year to $33 billion in 2021.

[Read more about the resale market: Why Secondhand is the First Choice for More Shoppers]

Apparel, accessories and footwear make up nearly half (49 percent) of total U.S. re-commerce sales, as second-hand shopping becomes a popular activity of consumers nationwide. Since the perspective of buying and selling secondhand clothing has changed greatly over the past few years, the re-commerce boom has led to the rapid evolution of the online resale marketplace and apps for re-commerce peer-to-peer marketplaces.

Convey, a certified apparel licensing platform, is one example of how re-commerce is snapping at the retail space. The XRC Labs startup currently enables consumers to return and resell their gently-used apparel for brand credit.

Other key re-commerce players, including ThredUP and The RealReal, have also addressed consumer demands for unique and affordable wardrobe options that are often missing from traditional stores today. ThredUP serves the low-to-mid-price re-commerce market, while The RealReal operates a digital luxury consignment space.

Reselling peer-to-peer marketplace apps, like Depop, Letgo and OfferUp, enable more consumers to take part in re-commerce as well. These apps provide consumers with an easy listing and selling process for pre-worn items, while enforcing security and transparency by publishing reviews and past transaction information.

The report also highlighted eight key factors contributing to the rise of re-commerce, including cost savings, a better shopping experience and a competitive proposition compared to off-price retailers.

Cost savings

Value and cost savings remain key with re-commerce and according to a ThredUP survey, roughly 94 percent of American women rarely purchase clothing that isn’t discounted. With an average discount of 80 percent for most items on ThredUP, consumers could save an estimated $2,129 annually by shopping on the re-commerce site.

Digitally-savvy millennials

Most millennials are tech experts and are tapping their devices to buy pre-worn garments. ThredUP said millennials are most likely to shop for pre-worn apparel compared to other demographics, and that roughly 30 percent of 18- to 24-year-olds purchased secondhand clothes in the past year, while 21 percent said they intend to shop for secondhand clothing in the future. Seventy-nine percent of ThreadUP’s sales are also conducted on mobile devices, further demonstrating that digitally-savvy millennials are driving re-commerce growth.

The RealReal also showed similar results and said roughly one-third of its consumers were millennials, who prioritized quality and a bargain for the site’s luxury goods inventory.

The treasure hunt

Constant product rotation and deals keep consumers coming back to re-commerce websites and apps. Seventy-six percent of shoppers said the fun factor is one of the top reasons why they shop secondhand, while roughly 63 percent of respondents agreed that resale shopping is thrilling for its surprise element.

Getting over the stigma of used

Re-commerce disruptors, like ThredUP and The RealReal, hone in on gently-used, brand-name, and higher-quality products for a more personalized product offering. ThredUP evaluates items with a three-point inspection process and usually lists only 40 percent of received garments. Close to 150,000 products are sent to The RealReal monthly, where they are authenticated and inspected before being shipped to consumers. Most of The RealReal’s items are barely worn and some still contain price tags.

Decluttering wardrobes and becoming socially-conscious shoppers

Today’s consumers are trying to buy less and be more resourceful, as environmental concerns continue to mount.

According to a recent OfferUp report, roughly 50 percent of Americans think they have more than $1,000 worth of unused items at home, while 41 percent haven’t cleaned out their closets in over a year. What’s more, $220 billion of unworn women’s merchandise can be attributed to the average American woman, who doesn’t wear 60 percent of the items in her wardrobe.

As such, more consumers are engaging in thrift shopping and trimming their wardrobes. Resale fosters more sustainable consumption by recycling clothing. Re-commerce websites and platforms provide a place where secondhand clothing could have a second life.

Making extra income

Consumers can also make extra money by selling their gently-used items on re-commerce websites and apps. Over the past five years, ThredUP has paid $58 million to consignors and lets sellers keep 5 percent to 80 percent of the item’s resale value, depending on its final sale price.

A competitive proposition compared to off-price

While department stores reel, off-price retailers have been enjoying much better success in retail. That success is a result of two factors shared with online re-commerce: branded products are offered at a discounted price, and a constantly-rotating array of products add to the treasure hunt experience. Unlike online re-commerce, off-price retailers generally don’t sell online, which could be a disadvantage for their business. Although off-price retailers add thousands of items to their assortments on a weekly basis, they don’t have e-commerce platforms, where consumers could search for prices and buy items instantly.

What’s more, roughly 50 percent of ThredUP shoppers said their secondhand purchases replaced the ones they made at off-price stores.

New demographic opportunities

Re-commerce isn’t only for millennials. Over the past few years it’s opened its doors to new demographics, including high-income shoppers and men. According to ThredUP, roughly 77 percent of its shoppers are working professionals. The RealReal has also expanded beyond its typically-female demographic. Approximately 20 percent of The RealReal’s shoppers are men, who shop luxury items for themselves and experience lower purchase return rates.

Brick and mortar possibilities

Although digital re-commerce companies are doing well online, some are considering the big move to brick-and-mortar. ThredUP opened its first store in Texas this month, with five more locations on the way, while The RealReal plans to open its first outpost in New York soon.

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