Why are brands giving up their resale activities? – WWD

In 2001, when I was leading Walmart’s strategy, a well-respected retail executive told me that e-commerce was “nothing more than a mail order catalog on a screen.” These catalogs have never accounted for more than 3-5% of retail sales, he explained, and neither has e-commerce.

Obviously his prediction was… a little wrong.

E-commerce continues to disrupt retailing on a massive scale, and its share of sales has only accelerated since the start of the pandemic. But until two decades ago, the fundamental differences between e-commerce and print catalogs were apparent. The executive I spoke with and many other retail executives simply missed them – or chose to dismiss them. They had too narrow a view of how a new channel and buying behavior would change the industry and what they needed to do to take advantage of the opportunity before them.

Many in the industry today make a similar mistake with reselling – because there will be a day in the not-too-distant future when reselling accounts for one in four items sold, and possibly more in some categories.

According to Cowen, recommerce will account for 14% of clothing, footwear and accessories sales by 2024. The Boston Consulting Group estimates that the resale market for these categories has reached $ 30-40 billion globally in 2020 and that ‘it will grow at a compound annual growth rate. 15-20% through 2025. GlobalData predicts the second-hand market for clothing, footwear and accessories to reach $ 64 billion in 2024 in the United States alone, making resale channel fastest growing retail sales today.

Almost all of this growth is happening online, made possible by a multitude of new direct-to-consumer markets that make it easier for consumers to trade and purchase second-hand items. The venture capital dollars that have poured into space over the past three years are reason enough to know the resale channel is poised to continue to grow – and for good reason.

Resale drives discovery, value and sustainability

It’s not hard to see why customers choose resale. The cultural barrier between new and used has largely evaporated and many young shoppers actually prefer to shop second-hand for the thrill of the hunt. A recent BCG survey found that among used shoppers, 66% had discovered or purchased a brand for the first time while shopping, making resale an invaluable discovery channel for brands. Resale now also offers all the features that ensure a great retail experience, including stunning photographs, detailed product descriptions, two-day shipping, easy returns, and great value.

In addition, resale has a huge appeal for those looking for more sustainable trading options. In an age when consumers on average wear half the amount of items they did 10 years ago, buying a used item of clothing rather than a new one can reduce an item’s carbon footprint by around 40%.

Consider a Patagonia jacket worn by four kids over the past 10 years. The resources to produce the jacket are spread over many more ski trips, hikes and walks to and from school than if it were worn by a single child who would overtake it after two seasons. And this one Patagonia jacket replaces several other inferior jackets that never need to be bought, produced and shipped around the world. Resale allows all of us to use what we have done a lot more.

High engagement brands will be the biggest resale winners

Positioning the brand in the resale market will help determine the big winners and the big losers, just as it has in e-commerce for the past 20 years. The online channel has long favored beloved heritage brands – those with loyal following and high-quality, desirable products that hold up against similar fakes that shoppers find on Amazon or the Walmart Marketplace. This trend is even more apparent in the resale market, where brands increasingly compete with their own products from previous seasons that are promoted on third-party platforms. In many ways, this is alarming for brands and retailers, who fear being disintermed by marketplaces.

This fear is not totally unfounded. Unlike wholesale or discount channels, brands have no say in who sells their used products or how they are sold. Marketplaces source their supplies from consumers – and they earn by developing their own customer base and raising awareness of their own third-party platform. In the short term, it may appear that the markets selling second-hand items are aligned with the brands that originally produced these items, but the platforms’ priority is to add new buyers, not to protect reputation. hard earned brands and customer relationships.

In the early 2000s, brands justified entrusting their e-commerce sales to Amazon by saying: “These are the experts. It’s too much work to sell online on our own and it’s not at the heart of our business. Today some retailers and brands are saying the same thing, working with a third-party marketplace is like selling through a wholesaler.

The problem is, this is simply not true. At best, these are business relationships of convenience. The long-term incentives of brands and platforms are not aligned and while the relationships work for the markets, they will end up hurting each of the brands that have chosen to cede their resale channels to a third party.

That’s why brands need to control the resale experience and, more importantly, the trade-in experience. Brands such as Patagonia, Eileen Fisher, Levi’s, REI, Arc’teryx and Lululemon are among the sustainability visionaries who are already offering their customers the ability to exchange items they no longer wear for credit. And they make it easy for customers to do so online and in-store. In doing so, they reinforce the idea that their high-quality products have a long lifecycle and establish the expectation that customers will be rewarded for helping to create a more circular fashion economy. Equally important in the long run, they maintain control over their heritage and branding by ensuring that their products do not end up in resale markets.

Premium brands that take control of their trade-in channels can choose where and how to resell their own items and generate net resale margins similar to their core business. As with e-commerce, new opportunities are opening up for brands to accelerate the transition to resale, attract new customers, and retain existing customers while doing so.

For brands that produce quality items, the obvious question is: why sell an item once when you can sell it multiple times?

Trove CEO Andy Ruben.

Takeaway meals

Looking back, there’s no doubt that Walmart and nearly every other mainstream retailer would have chosen a more aggressive ecommerce strategy in the early 2000s if they had accurately assessed the growth potential of the channel. While Walmart launched its own e-commerce platform in 2009, many other retailers and brands have simply decided to let Amazon handle their customers and sales online.

In retrospect, it seems crazy that major players like Toys “R” Us and Barnes & Noble have handed over the reins of their e-com to a third party. But today, appallingly, too many retail executives are making the same mistake with reselling. The truth is, reselling is here to stay, just like e-commerce was – and for brands, controlling where and how their product is picked up and resold, along with its pricing and customer experience, has never was also important.

Andy Ruben is CEO of Trove, which provides white label technology and end-to-end operations that fuel the circular purchases of high-end brands, enabling them to take control of their resale markets, build customer loyalty. and generate new profits.

More from the outside view:

The Outward View: What Facebook Meta-Rebranding Signals For Ecommerce

The external point of view: “Z brands” could be the next direct disruptors

The Outside View: Reading Fashion Data Science Tea Leaves

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