Strategies for Choosing the Optimal Resale Approach for Your Business
In the current climate of mindful consumption and economic instability, it's no wonder the allure of secondhand goods has grown stronger than ever. With factors such as inflation, student loans, and escalating interest rates compelling consumers to gravitate towards pre-owned items, it seems the secondhand apparel market is poised for an unprecedented boom. In fact, the market is expected to grow an astonishing nine times faster than the overall apparel market by 2027, according to the predictions laid out in ThredUp's 2023 Resale Report.
This seismic shift towards secondhand is reshaping retail landscapes while sparking a movement among brands and retailers to dive headfirst into the resale market. An impressive 163 brands now boast dedicated resale shops, with big-name contenders like J.Crew and H&M joining mall staples such as American Eagle, as well as outdoor and athletic brands such as Smartwool and Beyond Yoga. By entering the resale market, brands reap numerous benefits, including capturing new customers, advancing sustainability initiatives, and bolstering their bottom lines.
However, the path to successfully implementing a resale model isn't always crystal clear. Two primary resale models have risen to prominence: managed resale programs and peer-to-peer (P2P) resale programs, both of which are operated by third-party providers. While these two models share a common purpose, the benefits they provide for brands and customers differ significantly. It's crucial for brands to recognize which model is best equipped to set them and their customers up for resale success.
Option 1: Managed resale program
Brands can choose a third-party provider like ThredUp's Resale-as-a-Service (RaaS) to administer their resale programs. In this type of program, the resale provider takes care of everything for the brand, from amassing and storing secondhand inventory to powering a white-label resale shop and handling all the behind-the-scenes tasks, such as processing, fulfillment, and customer service. While the brand should collaborate with the provider to ensure the resale experience aligns with their overall aesthetic and attracts customers, they need not invest heavily in managing the program.
The primary benefit for a brand in opting for a managed resale program lies in its ability to launch a sizeable, impactful resale program from the get-go. In fact, eight of the top 10 branded resale programs with the highest volume of secondhand inventory employ a managed service model. American Eagle's resale program, powered by ThredUp's RaaS, leads the pack with over 30,000 listings.
Consumers also appreciate managed resale programs due to the wider array of inventory options and the streamlined buying and selling experience they offer. Everything remains consistent from listings and photography to shipping and packaging, as well as the customer service experience, making for a cohesive and enjoyable shopping journey.
Alicia Chin, Director of Sustainability and Social Impact at Smartwool (a VF company), shared her thoughts on Smartwool's decision to pursue a managed resale model after exploring several providers offering a range of solutions from managed resale to P2P.
"With so many new players in the resale space and various options, navigating the landscape took some time," said Chin, adding, "Understanding which business model would best suit a smaller brand like Smartwool was a top priority for us. We chose a managed service model because we wanted to scale our program swiftly and bring in new customers to our brand."
The response to Smartwool's resale program, powered by ThredUp's RaaS, has been overwhelmingly positive, with the brand boasting a 99% sell-through rate of secondhand products on its resale shop during the first 90 days of operation.
Option 2: Peer-to-peer resale program
Another resale option for brands is to collaborate with a third-party provider offering a peer-to-peer (P2P) resale model, such as Archive and Treet. These platforms facilitate direct connections between a brand's customers for the purpose of buying and selling pre-owned apparel.
P2P platforms can inspire a sense of community among existing customers and entice user-generated content, social interaction, and even negotiation between buyers and sellers. Children's clothing brand Tea Collection's P2P marketplace serves as an example of this shift, with a community of buyers and sellers engaging in communication within the platform.
While these programs enable connections between brands' customers in ways managed programs cannot, there are a few significant points for brands to bear in mind. One key difference between the two is that inventory for P2P programs depends solely on the brand's customers, making it more challenging to scale and generate a significant impact. The average volume of listings for a managed resale program exceeds 5,000, while most P2P resale programs feature fewer than 300 listings. Brands also have less control over the resale process, as it relies on individual sellers to handle tasks such as photography, item descriptions, communication with buyers, and fulfillment. This process can result in inconsistencies that stray from the brand's messaging and tone.
Discovering the ideal fit
There is no one-size-fits-all approach to branded resale, and different offerings may suit one brand better than another. While ambitious brands can opt to manage their resale programs in-house, most retailers are not equipped to handle the intake, processing, pricing, and selling of millions of unique items effectively.
For brands weighing their resale model options, Chin offers some advice: "When you embark on this journey, start by reflecting on your brand's objective, your target audience, and the resources you have—or will require—to manage a resale platform."
- Despite inconsistencies in the secondhand market, the popularity of resale has surged due to factors like inflation, housing costs, and AI-driven predictions, leading to the explosion of the secondhand apparel market.
- Amid this growth, retail landscapes are being redefined as brands embrace the resale trend, with established names like J.Crew, H&M, and Beyond Yoga joining the fray.
- Navigating the resale market requires careful consideration, as brands must decide between managed resale programs and peer-to-peer (P2P) resale programs for successful implementation.
- In managed resale programs, third-party providers like ThredUp's Resale-as-a-Service (RaaS) handle all aspects, offering benefits such as a swift scale-up and high sell-through rates.
- Smartwool, for instance, saw overwhelmingly positive results from their managed resale program, achieving a 99% sell-through rate within the first 90 days.
- Alternatively, P2P resale programs facilitate connections among brands' customers, fostering a sense of community, but require more effort in terms of inventory management and consistency with the brand's messaging.
- When choosing a resale model, Chin advises considering the brand's objectives, target audience, and the resources needed to effectively manage a resale platform, as there is no one-size-fits-all answer in the dynamic world of mindful consumption, finance, and lifestyle business.
