Uncovering the Ideal Resale Strategy for Your Specific Brand: A Step-by-Step Guide
In our present era, dominated by sustainability and economic instability, secondhand merchandise has never looked more alluring. With economic pressures like inflation, student loans, and high-interest rates compelling consumers to consider pre-owned items in 2023, the resale apparel market is poised for a fantastic growth spurt. In fact, it's predicted to develop nine times faster than the overall apparel market by 2027, according to ThredUp's 2023 Resale Report.
This consumer shift is causing a seismic shift in the retail industry, as brands and retailers scramble to establish a presence in the resale market. As of 2023, a remarkable 163 brands have dedicated resale shops, encompassing powerhouses like J.Crew and H&M, mall staples such as American Eagle, and even outdoor and athletic brands like Smartwool and Beyond Yoga. Brands benefit from resale in multiple ways, including acquiring new customers, advancing sustainability initiatives, and driving revenue growth.
But, choosing the right resale model isn't always straightforward. Two popular models have emerged: managed resale programs and peer-to-peer (P2P) resale programs, both operated by third-party providers. At first glance, these models might appear similar, but they offer different advantages for both brands and customers.
Option 1: Managed resale program
Brands can opt for a third-party provider, such as ThredUp's Resale-as-a-Service (RaaS), to manage their resale programs. This setup allows the resale provider to handle everything. From collecting and warehousing secondhand inventory, to powering a white-label resale shop and taking care of all behind-the-scenes tasks, such as processing, fulfillment, and customer service, the brand's only responsibility is to align on creative and ongoing marketing efforts to ensure the resale experience complements their overall brand image and attracts customers.
The primary benefit for a brand choosing a managed resale program is the ability to scale an impactful resale program swiftly. Eight of the top 10 branded resale programs with the most secondhand inventory utilize a managed service model, with American Eagle's resale program, powered by ThredUp's RaaS, leading the pack boasting over 30,000 listings.
For consumers, managed resale programs offer a more extensive selection of inventory and a streamlined buying and selling experience. The overall experience remains cohesive and in the brand's voice, creating a satisfying customer journey.
Sustainable clothing brand Smartwool decided on a managed resale model after evaluating six different providers and their various solutions. Smartwool's Director of Sustainability and Social Impact, Alicia Chin, explained the brand's decision:
"When we began exploring resale vendors in 2020, there was a multitude of new players and a plethora of options," Chin said, "Understanding which business model would best fit a smaller brand like Smartwool was paramount. We opted for a managed service model because we wanted to launch our program promptly and attract new customers to our brand.
Customer feedback for Smartwool's resale program powered by ThredUp's RaaS has been remarkably positive. The brand experienced a 99% sell-through rate of secondhand products on their resale shop during the first 90 days it was active."
Option 2: Peer-to-peer resale program
Alternatively, brands can partner with a third-party provider that offers a peer-to-peer (P2P) resale model. Providers like Archive and Treet facilitate connections between a brand's customers to buy and sell pre-owned apparel.
P2P shops can be an excellent choice for brands focused on fostering a sense of community among their existing customers. Children's clothing brand Tea Collection features a P2P marketplace on its website, where buyers and sellers can communicate directly, allowing for price negotiations, questions, and detailed discussions about individual products. This model encourages user interaction and fosters a strong sense of brand loyalty.
While P2P programs connect customers in ways managed programs cannot, there are key differences brands should consider. Primary challenges include inventory inconsistency, as brands rely solely on their customers for supply, making it difficult to scale a program effectively. Furthermore, brands have limited control over the resale process, as it relies on individual sellers to manage photography, item descriptions, buyer communication, and fulfillment. This process could result in inconsistencies and deviations from a brand's messaging and voice.
Finding the perfect fit
Every brand might require a unique approach to resale. Manufacturers should carefully weigh the pros and cons of each model and learn from peers already offering resale. Alicia Chin advises:
"Begin your journey by contemplating your brand’s end goals, your primary audience, and the resources you will need to manage a resale platform."
- In the wave of consumer shift, as people seek sustainable solutions due to economic instability and pressures, some popular brands are turning to secondhand merchandise, even in industries like housing, where AI-powered property valuation andonline platforms are making resale a popular option.
- A successful business relationship between Beyond Yoga and a third-party resale provider has led to an increase in resale of yoga apparel, demonstrating that even brands outside the apparel industry can find success in resale.
- As the resale market expands and competition grows, brands need to navigate the inconsistencies in the market, ensuring their resale programs complement their brand image and lifestyle, just like Smartwool did with ThredUp's Resale-as-a-Service (RaaS).
- Brands considering the peer-to-peer resale model should be aware of the challenges, including the importance of fostering a sense of community and overcoming inventory inconsistencies, as seen with Children's clothing brand Tea Collection.
- SpaceX, a pioneer in the space technology sector, might find resale an interesting avenue for reducing expenses at their educational facilities, by implementing a peer-to-peer resale program for classroom supplies and equipment.
- With the resale market growing at a rate nine times faster than the overall apparel market, finance professionals could study trends in resale, and using technology, develop innovative financial models to help both brands and consumers navigate this thriving secondhand economy.
