The fashion retail industry is fueled by innovation and trends. Often, we see advertisements designed to persuade customers to buy the newest and best products to avoid having an “outdated” wardrobe.
With the disruptive second-hand apparel market gaining traction in the global fashion industry and new information out on consumer trends, more and more brands are starting to recognize that heavy promotion of first-hand goods may not be the direction retail is going in. Trends like increased awareness of environmental sustainability are driving brands to reconsider their positioning and analyze how much profits they are missing out on by not directing official second-hand reselling practices.
To capitalize on shifting consumer preferences, many brands are considering making the move to control their second-hand product offerings and distribution. Consumers are showing sustainable alternatives to fast fashion practices can reduce environmental footprint and introduce new channels for purchasing/selling clothes that are just as trendy as first-hand goods!
From strategic partnerships to in-house purchasing, restructuring, and reselling, we are going to cover how the second-hand apparel market works, how brands could derive value from embracing their second-hand market, and how analyzing consumer trends that guide purchasing behaviour can help brands assess the financial value of expanding into the second-hand market. Let’s get started!
It is no secret that second-hand fashion stores have been around for decades. But with the rise in globalization and improvement in mobile technology tools, second-hand shopping is more accessible than ever before and competition is heating up. In fact, the apparel resale market is expected to cross 40 billion within the next 4 years.
So, what is exactly is the second-hand apparel market?
We could agree that most brands want a return on their investment and most consumers want to have some sort of need satisfied. But when it comes down to it, how can brands really determine which method of embracing their second-hand market is best and if it is even worth it for them to pursue this extension in the first place?
First, we need to evaluate the reasons why many major fashion brands have been a little bit late to join in on second-hand market profits.
There are several second-hand businesses in industries outside of fashion that has found success. Take automotive brands, for example. Instead of paying full price for a brand-new model, many companies offer pre-owned vehicles that often exhibit the same qualities and performance somebody would expect to find in a newer vehicle. Leading in the second-hand technology market right now are tech retailers like Apple, Microsoft, and HP, who frequently encourage customers to bring in old products so they can refurbish and sell again.
So, why is it that these industries have been quick to pivot in an age of rapidly changing consumer trends, but the fashion industry is now just accelerating?
Many brands are hesitant to make the move towards second-hand markets due to these potential downsides:
Because the fashion industry thrives on creative intellectual property and clothing is relatively easy to alter and redistribute (as opposed to a large vehicle or intricate tech framework), all of these are very understandable and serious concerns for brands to be aware of. In the next section, we’re going to discuss the opportunities that address these concerns and provide great incentives for brands to enter the resell market.
Despite the potential risks associated with expanding, both regular and luxury retailers are gradually making moves to embrace second-hand sales. The second-hand market represents a profitable opportunity for brands to appeal to rising consumer sustainability awareness trends, grow and retain first-hand buyers, combat counterfeiting issues and gain insights into unique purchasing patterns from larger target markets. Let’s break these down further:
So far we have covered potential threats and opportunities of expanding. Let’s cover some of the most recent trends shaping this major movement.
Many fashion brands are mapping consumer purchasing factors and trends to strategically alter targeted consumer segments in order to transition into a more inclusive business model that will have the ability to successfully expand into the second-hand goods market.
By analyzing the different factors that affect target consumer’s decision making when purchasing products, brands can gain a better understanding of how to successfully expand into their second-hand markets, if it is worth it for them to do so.
Once brands have a thoroughly reevaluated their target customer segments and weighed the potential risks and opportunities, it is time to examine different channels to determine which would align best with their vision, their customers, and their product offerings. Keep on reading to learn more!
A ) Buy/Sell Items to Consignment Shop Businesses: Consignment shops are fashion retail stores that accept items for sale and agree to pay the seller a percentage of the proceeds, either up front or at the time of the final resale. If they choose to, brands work directly with consignment shops to release collections and restructured collections. At the time of sale, the brand earns a percentage that is split between them, the consignment shop, and the customer making the purchase.
Example: Thredup is a popular, more thrift-based consignment shop. Luxury consignment sites, like The RealReal and Vestiaire Collective are marketplaces for customers to shop specifically for second-hand luxury items. Gucci recently partnered with The RealReal and featured an exclusive Gucci e-shop of consigned products in addition to merchandise pulled directly from the Italian fashion house.
B) Buy/Sell Items to Brand Directly: Buying a product directly from the brand is the first step in a second-hand good’s journey. These items are sold at full price and offer the highest selling point based on the expected standard of quality. Some consumers may have the option to sell their product back to the original store they purchased it from. This of course depends on the brand and if/what type of channel they chose.
Example: Nordstrom made headlines when they announced one of their latest projects: See You Tomorrow: A Resale Shop. Consumers had the choice to shop used items directly on Nordstrom’s website or come into the store. If they wanted to sell their items back to the brand, they could drop the products off or mail them in and receive up to 60% of the value.
C) Buy/Sell Items to Consumers on Peer-to-Peer Online Platforms: Platforms like Poshmark and Mercari connect users to a marketplace where they can buy and sell a variety of pre-owned fashion goods. Resellers on these types of platforms earn profits by selling to each other, not through profits given to them by the website based on the quality of their good. So, the main differentiator is the seller chooses the price point, rather than the middleperson.
Example: Poshmark & Mercari
D) Rent from B2C Fashion Service Brands: Business-to-consumer fashion service platforms that provide customers temporary access to high-end luxury designer items for a rental fee. As opposed to spending a significant sum of money on evening attire for one night, users can rent the pieces and return for a fraction of the cost. This model provides financial incentives for the sellers as well due to the sustainable nature of the process.
Example: Rent the Runway
The second-hand fashion market is growing rapidly. Although consignment shops and thrift stores have been around for ages, the emergence of new consumer trends are forcing traditional retailers to adapt to new practices.
As attitudes towards ownership and sustainability continue to evolve, the momentum of the resale market will most likely continue to rise. Other consumer trends that will likely play a role in the growth of the resale industry include:
Whether brands opt for strategic partnerships with resellers or attempt to ramp up resale efforts on their own, the benefits of expanding into resale markets include:
We hope you enjoyed this article and found it to be informative on second-hand apparel markets!
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