Traditional Retailers Have a Change of Heart Regarding the Value of Resale
What is old is becoming new again for traditional retailers looking for added revenue streams. That’s because the secondhand clothing, handbag and footwear market has been gaining an unprecedented amount of traction with store owners.
According to the “2019 ThredUp Resale Report,” the resale market in the last three years has grown 21 times faster than the traditional retail-apparel market. In 2018, 12 million more women bought secondhand products than in 2017, an increase from 44 million to 56 million.
“The resale customer is no longer somebody else’s customer. They are everybody’s customer,” James Reinhart, the co-founder and chief executive of ThredUp, wrote in the report. “Mass market or luxury, if people can find a high-quality product for much less, they’ll choose used. As the line between new and used apparel blurs for consumers, a powerful transformation in retail will unfold.”
Compared with shopper priorities from five years ago, San Francisco–based ThredUp, a fashion resale website, found the number of consumers who think about the resale value of the products before buying has increased nearly twofold, to 40 percent, which shows a greater interest in reselling from the initial point of purchase.
While 51 percent of consumers surveyed are moving toward more secondhand shopping within the next five years, the luxury resale market is showing extraordinary growth with a 16 percent projected increase.
“The luxury-consumer mindset has changed. We’ve seen that consumers shopping retail want to know the resale value of designers and items before they make a purchase,” explained The RealReal’s chief merchant, Rati Levesque, whose San Francisco company has consignment locations in New York City, Chicago, Dallas, Miami, San Francisco and Washington, D.C., and sites that also sell goods in Manhattan’s SoHo neighborhood and in Los Angeles. “They make purchases now knowing they will eventually consign it and make a significant portion back on the original cost—it’s an investment.”
This shift toward consumer demand and recognition of the secondhand, high-end-goods market as an important segment was noticed by Dallas-based luxury retailer Neiman Marcus. It recently announced it was investing in Fashionphile, a luxury reseller in Carlsbad, Calif.
“Our investment in Fashionphile is an exciting step in a five-year increase of Neiman Marcus Group’s transformation into a luxury-customer platform as we work to better serve our customers, continue to shape the future of luxury, and position Neiman Marcus for long-term and sustainable growth,” said Geoffroy van Raemdonck, chief executive officer of the Neiman Marcus Group, in a statement.
Specializing in the online resale of luxury handbags and accessories, Fashionphile executives saw Neiman Marcus’s minority-stake investment as the perfect way to celebrate the 20-year anniversary of the reseller’s launch.
“A company like Neiman Marcus partnering with a company like ours is really a dream,” Fashionphile founder and President Sarah Davis said. “We’ve been working on this for so long and trying to build the company in a way where we are focusing on our brand so we would be thought of in circles like that.”
With growth over 50 percent year over year, Fashionphile experienced great success as a pioneer of luxury resale, allowing the online reseller to open four storefronts over 10 years. Beginning with the launch of its Beverly Hills location in 2008, followed by San Francisco, San Diego and a Manhattan storefront in 2018, Fashionphile created an opportunity for resellers to easily sell their goods. Through the partnership with Neiman Marcus, Fashionphile should soon have two pilot locations within the retailer’s stores and five additional shops by the end of the year.
“We don’t sell bags at our stores—we buy your bag and we sell online,” Davis said. “You can bring your bag to our Beverly Hills store; you walk out with a check and we ship your bag to Amsterdam [for example]. That is the strategy.”
As a reseller that has enjoyed its own pop-up partnerships with retailers such as Stage, Bealls, Goody’s, Palais Royal and Peebles, ThredUp is reporting that secondhand shoppers are increasingly moving away from shopping exclusively at traditional retailers for new products, with 72 percent of consumers revealing that they shifted their spending toward previously owned goods.
The ThredUp report found that 22 percent of value-chain customers who shop stores such as Walmart, Target and Old Navy are also purchasing secondhand goods, and 25 percent of department-store customers engage in buying preowned items. At 26 percent, a higher number of premium-brand shoppers who buy brands such as Gucci, Chanel and Prada are in the market for secondhand pieces.
“The last few years of growth in the resale market have been driven by the early adopters (the same ones who first adopted Airbnb or Lyft or DoorDash), but now the skeptics are starting to come around,” Reinhart said in the report. “At ThredUp, we’re seeing first-time thrifters coming to platforms like ours in droves.”
By reselling previously owned items, retailers are able to generate more opportunities to sell their new goods, which in turn will build a stronger retail economy. When consumers invest in quality pieces with the intent of eventually reselling to another shopper, they will need to replace those items with new premium goods and bring their business to luxury retailers.
“The more people are able to participate in this, the more they are able to get the money out of their investment pieces and they’ll spend more in the primary market,” Davis explained. “In Japan, they have a sophisticated, decades-old secondary market. That country is the No. 1 consumer of luxury goods in the world—their secondary market helps fuel that.”
As more executives of traditional retailers recognize the opportunity that lies in embracing the resale market, they will generate revenue streams for their companies. Within the resale report it was revealed that 96 percent of senior retail executives want to fortify circular-fashion initiatives by 2020.
“Primary market brands have started to realize that consignment players are helping extend the discovery, reach and ‘covet-ability’ of their brands,” Levesque said. “An item with a strong resale value can strengthen the brand as a whole.”
Beyond increasing revenue, retailers can also build their sustainability efforts through contributing to a circular economy that decreases waste when goods enter the resale market. The move towards tapping into the resale market could prove an extraordinary, unexpected win for retailers.
“This is a legitimate sector. There is a lot of good it’s doing,” Davis said. “There is money to be made and it’s such an economically and eco-friendly, green way to shop that everyone should be involved in it.”