As fast fashion sales slumped significantly during the pandemic, the resale of pre-owned fashion items soared. In 2020, with more time on their hands for online thrifting and a greater appetite for ‘conscious’ shopping, an extraordinary 33M new customers engaged with fashion resale
for the first time. With 76% of these first-time buyers planning to increase their second hand spending, the fashion resale industry is projected to double in size over the next 5 years.

As the sector scales up, fashion brands are recognising the threat – and opportunity – this resale surge presents.

In this article we’ll explore:

  • Whether brand-owned resale will follow brand-agnostic resale into profitability.
  • How fashion brands are getting involved.
  • The challenge of profitability in brand-owned resale.
  • Which segments of the fashion industry are leading, and what this really means for sustainability.

Interested in how re-sale and emerging technologies are being used to drive sustainability? Check out Part II of this article here.

Multi-brand resale goes mainstream

After years of venture-funded scaling, brand-agnostic platforms such as StockX, GOAT and Poshmark all broke even in 2020, dispelling industry concerns about resale’s profitability. With the confirmation of its commercial potential, investor interest in resale skyrocketed, making 2021 the year resale truly went mainstream.

Platforms including ThredUp and Poshmark went public, and private companies such as Vestiaire Collective and Grailed continued to attract investor attention with new funding rounds totalling half a billion dollars. And this was just the start.

Sensing an opportunity, a flurry of new entrants have emerged, aiming to differentiate themselves by doubling down on specific consumer niches. Platforms such as Queenly (prom dresses), Requipper (outdoors gear) and Dotte (baby clothes) curate their products to become the go-to destination for a specific subgroup.

This latest industry development indicates the growing maturity of resale, as second-hand fashion loses its stigma and consumers increasingly prioritise sustainability. With the overall resale market growing so substantially, industry insiders are bullish about resale’s potential. Historically, fashion brands have been more hesitant, but that’s changing

As resale scales, fashion executives react

Fashion brands are waking up to the potential threat of resale. As well as the opportunity. 62% of resale executives surveyed by ThredUp
said their customers were already participating in resale, and 42% stated it would become an important part of the business within five years.

With the market less saturated than traditional fashion, resale platforms aren’t competing against each other. Instead, with resale projected to grow 11x faster than the broader retail sector, resale companies are ‘stealing share from traditional businesses’, in the words of Dominic Rose, Founder of Dotte. Indeed, total secondhand sales are on track to hit $7.7Bn by 2025.

If you can’t beat ‘em, join them

Eager to seize the resale opportunity, fashion brands are developing their own resale channels. In response, several ‘resale-as-a-service’ companies have emerged to provide them with the software and services required to develop brand-owned resale channels. These recommerce software firms attracted $127M in equity funding in 2021, more than in the previous three years of funding combined, according to data from CB Insights.

One of the early movers in this space is Trove, which counts Levi and Patagonia as clients and has seen revenue growth of 1000% in the past three years. Trove manages the entire resale process by collecting, sorting, listing and shipping each preowned product as well as powering the digital storefront.

Newer entrants such as Archive and Recurate – both founded in 2020 – have developed more asset-light, peer-to-peer solutions. By allowing customers to sell second-hand products on the brands’ websites, they outsource the inventory management, content-creation and upload process to consumers.

They too are experiencing fast growth. Recurate has enjoyed consistent 50% quarter-on-quarter revenue growth for the past six quarters, while Archive has seen total transaction volumes across its merchant partners increase 20% month on month since it launched last February (2021). Despite this growth, these new models have yet to enable widescale profitability for their partner brands’ resale channels. So why are brands so keen to get involved?

Fashion’s latest marketing channel?

While brand-owned resale channels are not necessarily profitable, they are a powerful customer acquisition and loyalty tool, proven to re-engage existing or inactive customers.

Statistics from Recurate’s user base demonstrate that 50% of resale buyers are completely new to the brand, while 65% are former, inactive customers.

Return on marketing spend through traditional channels has decreased, making resale a compelling alternative. With secondhand losing its stigma and resale reaching the mainstream, incorporating resale into existing e-commerce experiences enables a broader reach. With brand-owned resale, customers browsing online may be tempted by the savings offered by secondhand. This broadens the resale market beyond the highly-engaged, early-adopting ‘thrifters’, to include a more mainstream audience looking for a firsthand-quality e-comm experience.

Resale is also a boon for a brand’s eco image. This angle – coupled with the accessible price points – makes resale a strong acquisition mechanism for Gen-Z and millennial consumers, who are forecast to account for more than 60% of luxury spending by 2026.

Partnerships: The Safe Solution

With 1 in 3 fashion executives believing a resale proposition is becoming essential the decision now is not whether to get involved, but how. Recognising the logistical challenge of resale, and their lack of capabilities in this arena, 60% of fashion executives plan on partnering with resale platforms.

Brands such as Burberry and Stella McCartney entered partnerships to collect, curate and sell second-hand items as early as 2018, but last year luxury resale collaborations hit the mainstream.

Kering Group brands such as Gucci and Alexander McQueen have both recently announced partnerships with consignment sites. Meanwhile, multi-brand retailers such as Yoox, Net-a-Porter and Harvey Nicholls have partnered with Reflaunt to open up resale to a host of new brands.

The earliest movers in this space have even begun adopting a portfolio approach, partnering with multiple resale companies to serve different customer profiles and needs. For example, while Trove powers Levi’s brand-owned retail experience, Levi’s has also teamed up with Grailed to promote their 501s – a streetwear style expected to attract more interest on the specialist platform.

For slower to engage mid-market brands, partnerships offer the safest way to explore resale. Since 2019 Madewell has developed a partnership with ThredUp, which now encompasses both online brand-owned ‘resale-as-a-service’, and a Brooklyn-based bricks and mortar secondhand boutique launched in September.

Also launched in September was H&M Canada’s Rewear initiative. Created in partnership with Reflaunt and hosted in a sub-domain of the H&M website, Rewear allows customers to upload H&M products for sale with the original eCommerce imagery, descriptions and recommended prices.

The technology uses built-in imagery retouch to ensure consistency and a ‘like-new’ shopping experience. Surprisingly, customers can also upload similar brands such as Zara, Vero Moda and Michael Kors. This approach enables H&M to boost its sustainability credentials while gathering important data and consumer insight across a range of brands. H&M even offers its customers the option of receiving payments in H&M store credit at a 20% premium, translating their secondhand sales into firsthand product purchases.

Investments and IPOs: Scaling at Speed

With US-based resale platforms reaching public markets, their European resale counterparts are starting to grab investor’s attention. Since 2019 there have been four major resale IPOs, with Poshmark and ThredUp both going public in 2021. Following close behind are European venture-funded companies such as Vinted and Vestiaire Collective, which have raised $303M and $210M respectively. Most interestingly, strategic investments from the likes of Condé Nast, Kering and Neiman Marcus show that the fashion establishment is starting to take resale seriously.

Acquisitions: Future-proofing Focus

Taking this a step further, fashion retailers are beginning to make acquisitions in this space, proving that resale is a key future revenue driver rather than a short-term tactical play.

Perhaps the most notable signal so far is Farfetch’s recent acquisition of Luxclusif. The new resale capabilities this brings will power Farfetch Second Life, and resale channels for a multitude of brands via Farfetch Platform Solutions, the white-label technology division which currently counts Chanel, Burberry and Harrods as clients.

The acquisition of earlier-stage entrants by established resale businesses signals the sheer scale reached by resale platforms in recent years. Etsy’s acquisition of Depop for $1.62B demonstrates the value attributed to a future-proofed Gen Z audience, an active reseller community and resultant lower customer acquisition costs.

Resale infrastructure and enabling technologies are also garnering interest. Viewed as the ‘dark horse’ of fashion resale, eBay has been doubling down on this category in recent years, notably through its November acquisition of Sneaker Con’s authentication arm. This follows a series of acquisitions in authentication and infrastructure technologies by the likes of StockX and Poshmark.

Luxury growth, mid-market squeeze

As the number of partnerships and investments in this space grows, patterns are beginning to emerge. We can already see different strategies, entry-points and paces unfolding, with luxury brands outstripping mid-market and fast-fashion brands in their speed of adoption.

In the luxury segment, resale is forecast to grow 15-20% year on year over the next five years, outpacing the single digit growth of the overall luxury market

Resale is an important customer acquisition tool for luxury brands, with fashion consumers frequently using resale as a channel to buy “up the food chain”. According to Maximilian Bittner, CEO of Vestiaire Collective, customers are trading firsthand mid-market brands for discounted premium, or premium for discounted luxury. “If you would usually buy Zara”, he says, “you might buy second hand Sezane.” On a large scale, this behaviour will squeeze mid-market fashion sales as luxury brands become available at more accessible prices. Forecasts show that mid-price market share is set to contract by 12% to 2030, as resale grows by 14%. This market dynamic has precedent in more mature resale markets such as the automotive industry, stoking fear amongst mid-market fashion brand executives.

Mid-market fashion brands have been slower to engage with resale, which presents less favourable economics for this lower margin sector. The high and fixed logistics costs associated with resale put mid-market and fast fashion at a disadvantage when compared to the high-margin luxury segment. Moreover, the lower quality of fast-fashion garments often means they are not in a fit condition to be resold after a few wears.

This is concerning for those hoping to build a more sustainable fashion industry. With more than 50% of fast-fashion items discarded within a year, this segment must play its part if resale is to truly drive sustainability. But with luxury fashion resale channels struggling for profitability, and even less favourable odds for fast fashion, is there enough incentive for it to invest in resale?

In the second part of this article, I’ll explore whether any emerging technologies could generate the efficiencies required to drive profitability, and therefore a more sustainable fashion industry.


Resale’s Loyalty Points

While brand-owned resale channels are not necessarily profitable, they are a strong customer acquisition and loyalty tool, proven to re-engage existing or inactive customers. In an incredibly competitive fashion landscape with slim margins, resale can act as a powerful way to keep customers close to the brand.

Up the Food Chain

The more accessible price-points of secondhand fashion are bringing younger consumers into luxury brand ecosystems, stealing market share from mid-market brands. However, fast-fashion is still predicted to grow, raising questions about resale’s ability to drive industry-wide sustainability.

Up-cycled, up-sold?

Rewarding customers who engage in resale with store credit has proven a winning strategy in increasing firsthand product purchases. This leaves us scratching our heads about the actual sustainability impact of resale.

Fast-Fashion Flaw

The lesser quality of fast-fashion items and slimmer margins make profitability in resale for these brands a huge challenge. For them to compete in this space they will need to significantly rethink their business model or find innovative ways of leveraging emerging tech.