As brands continue to adapt to fast-changing consumer habits, they’re finding themselves providing unique offerings that go against the traditional “buy and sell” mentality of Main Street’s brick-and-mortar stores. With the explosion of e-commerce and DTC brands flooding the market, brands are getting more creative in their interactions with shoppers: We’ve seen pop-up stores that offer nothing more tangible than a brand experience, and others that serve as “fit shops,” but carry no inventory.
The latest trend is around re-commerce – the concept of businesses upending the traditional retail landscape by offering the rental and resale of used items. While consignment shops and thrift stores are nothing new, sites like The RealReal, which recently saw a successful IPO, are bringing second-hand clothes to the mainstream masses. “Upscale Resale” is a growing trend, according to Forbes: “Given investor interest in the model and the fact that the category is expanding at 5X overall apparel sales, expect other major fashion brands to enter the fray.”
Meanwhile, major retail brands like REI are starting to get in on the action by offering quality used items as well as rentals for higher-consideration items like tents and kayaks. While REI’s foray into rentals and second-hand gear is true to its brand promise of sustainability, it’s also opening up opportunities for repeat customers who not only come in-store to rent, but also to return, increasing the likelihood for in-store purchases.
Sustainability drives re-commerce
For brands like REI and Patagonia, resale and rental speak to their customer values. According to the EPA, landfills received 10.5 million tons of textile waste in 2015, comprising 7.6 percent of all municipal solid waste landfilled in that year. By reselling quality used apparel, these companies are diverting textiles away from the landfill. Eileen Fisher Renew, designer Eileen Fisher’s eco-inspired re-commerce initiative, receives 4,000-6,000 used items each week. If the garments aren’t in good enough condition to resell, the fabric is recycled to create new items.
The benefits of re-commerce also extend far beyond sustainability. For apparel companies who’ve jumped on the resale bandwagon, offering sales of used items is also a way to foster customer loyalty and build community. It builds trust by proving that the brands stand behind their products. “Patagonia gets additional revenue at a good margin. They get new customers. They get amazing brand loyalty. They have built a lot of momentum around what is a brilliant brand already,” says Andy Ruben, founder of re-commerce platform Yerdle.
Re-commerce attracts new audiences
For some higher-end brands, re-commerce makes their products accessible to customers who struggle to afford their luxury wares. Sites like Rent the Runway, Poshmark and thredUP offer designer clothes at deep discounts or on a subscription basis, making higher-end brands available to more shoppers. And, interestingly, a Patagonia executive shared that shoppers who buy their used items are usually ten years younger than those who purchase new. That’s a powerful indication that this trend attracts an entirely new audience to all of these brands, many of whom have the potential to become lifetime customers.
Re-commerce attracts major brick-and-mortar retailers
Major retailers are seeing re-commerce as the future. Neiman Marcus, which has partnered in the past with The RealReal, recently purchased a minority stake in Fashionphile. “Together, [Fashionphile and Neiman Marcus] will reimagine how both buyers and sellers participate in luxury and drive increased access to the most coveted brands on the planet,” promised Sarah Davis, founder and president of Fashionphile. If that’s not proof enough of the promise of the re-commerce market, consider that many fashion brands are viewing it as an option vastly preferable to factory outlets.
And that leads us to the other key benefit of the re-commerce trend: a new revenue stream. According to The Shelf, the resale industry, including online and offline players, is worth $20 billion. That number – nearly half of which is represented by the apparel market – is expected to double in size to $41 billion by 2022. A huge part of that growth is driven by younger shoppers who love “thrifting.”
The way many of these re-commerce programs work is that customers deliver their used goods back to the store, and the retailer then issues store credit in exchange. That store credit enables the customer to either purchase another second-hand item or buy something new. According to WWD, “With more than 10 percent of shoppers coming into the stores to make a purchase after shopping on a brand’s third-party re-commerce platform, the benefit may be in the frictionless logistics and brand incentives.”
When paired with location data to drive store visits, the “re-commerce” economy holds a clear advantage for increasing footfall — but its greatest benefit may be in the loyalty of customers made (and kept!) for life.