The Next Wave of Resale: Why We Believe Brands Will Drive the Second Wave of Secondhand

It’s hard to miss the growth and success of independent used good marketplaces with public offerings and private rounds valuing many at over $1B. However, the trend that has been more subtle (until now) is the move by retailers and brands to embrace the resale category and launch their own offerings directly. Here we share more about the rise of reCommerce in the last decade and why branded reCommerce represents the next big wave in the market.

Wave 1: The Thrift Store

Riding on the coattails of late eighties grunge fashion and the growing cultural disillusionment with materialism, thrift shops like the Salvation Army and Goodwill quickly expanded in the United States. While embraced by some, wearing second-hand was still stigmatized due to its association with charity and was not widely accepted in the fashion mainstream.

Wave 2: The Growth of Online Marketplaces

Modern secondhand brands like Poshmark, ThredUP, and The Real Real (all of which are public companies as of this year) have changed the game by going digital and catering to widespread and increasing consumer demand for sustainability. The market is massive ($31B in 2020) and it’s growing even more rapidly with projections for 2023 hitting $61B.

While the major secondhand players are household names now, it took over a decade since their founding to gain consumer trust and create the widespread interest that we see today. Moving resale online meant expanded inventory availability across geographies, an improved shopping experience through simpler browsing and searching, and convenient at-home delivery. These modern brands gave resale a new contemporary look, with digital-first shopping experiences, sleek subscription packages, and easy closet cleanout kits, winning over Millennials and Gen Zs by looking more like trendy D2C offerings than outdated vintage stores.

Furthermore, these brands indulged consumers’ practical sides with a focus on environmental consciousness. Sustainability began to take hold in the retail space in the early 2010s with the emergence of “transparent” and “clean” brands like Everlane and even H&M’s conscious collection launching in 2010. With Gen Zs and Millennials being the most likely generations to make purchasing decisions based on values and principles, retailers scrambled to create compelling offerings with ethical value.

Lastly, the younger generations lived through the financial crisis at a unique time in their lives and were even more price-sensitive than previous generations. With the rise of reCommerce platforms, these shoppers could shop for significantly price-reduced items from the brands they loved and generate income from their own supply — all with the added bonus of contributing to a more sustainable economy.

Wave 3: Brands and Retailers Embrace the ReCommerce Opportunity

While customers consistently embraced reCommerce, traditional brands and retailers have had a more nuanced journey. Both initially pushed back based on fears of fraud, inconsistent brand experiences, and revenue cannibalization. Today, those same brands and retailers have worked through these issues and are aggressively adding resale to their physical and online experiences. Their goals are to increase revenue, attract new customers, reduce their environmental footprint, and deliver a used goods experience that is consistent with their brand and delightful for their customers.

Concerned about the disruption in brand identity that resale could pose, many brands opted out of engaging in the growing secondary market of their goods. However, as platforms like Poshmark, Depop, and others gained major revenue, brands could no longer ignore being boxed out of secondary sale revenue share and loss of consumer loyalty.

Loss of control and lack of authentication was particularly relevant for the resale of high-end goods. One prime example is the highly scrutinized legal battle between Chanel and The Real Real; the luxury retailer argued that the Real Real’s marketing practices falsely insinuated an affiliation with the brand and claims that Real Real customers should not trust Chanel products to be authentic. The resale platform refuted Chanel’s lawsuit as “nothing more than a thinly-veiled effort to stop consumers from reselling their authentic used goods,” aimed at “prevent[ing] customers from buying those goods at discounted prices,” and thereby, “stop[ping] the circular economy.”

Over the past few years we’ve seen highly successful launches by Patagonia, REI, Lululemon, and others — and believe that this is only the beginning. We expect that independent marketplaces will continue to succeed, but if given the choice, many customers will choose to purchase and return their used goods with the brands/retailers they know and trust.

We identify four key advantages that brands can leverage in the battle for the secondary market:

  1. Brands Already Have Consumers’ Trust: Consumers will always have some hesitancy about quality and authenticity when buying used goods. Independent marketplaces have had to build consumer trust from the ground up to overcome this issue. Brands selling their own used products will already have established this trust and credibility
  2. Cheaper Customer Acquisition: Brands/retailers already possess high intent customer lists that can drive sales and product supply without the raw customer acquisition costs that independent marketplaces must overcome. This is important for both the sale of used goods, but also the efforts to collect used goods to be listed on their platforms.
  3. Product Familiarity: Unlike digital challengers, incumbent brands are deeply familiar with their product catalogs, making the ingestion and tagging of products more efficient and accurate. They also possess the ability to authenticate and repair products in a way that marketplaces would struggle to replicate.
  4. Physical Footprint Is Ideal for Product Take-Back: Brands and retailers with physical store footprints have sufficient presence to encourage trade-ins and returns. Consumers have a significant bias towards returning goods in person — in fact, this is why the Real Real opened physical stores, not to sell products but to receive them.

Brands have become acutely aware of how serious of a threat (or opportunity) the rise of reCommerce is to their business. Today they face three decisions: engage with companies that can enable resale capability like Trove, build out their own reCommerce functionality, or altogether avoid consumer demands and forgo secondary sale profits.

As the market continues to evolve, we believe brands must either find a way to participate in this significant trend or face the consequences of shrinking relevance to the modern consumer.

Early-stage venture capital firm investing in technology innovators in the retail and financial services eco-systems.