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The Opportunity Of Resale As A Service. What Are Retailers Waiting For?

ADVERTORIAL
By Sponsor

Feb 22, 2021

Retail

Today, vintage and resale are becoming an established and formal element of the fashion industry. A recent report indicated that resale has grown 21x faster than traditional retail over the past three years. By 2023, the market is set to reach $51bn, growing at an annual projected rate of 16%. In 2020 the market beat those projections, with vintage sales growing 67% from the first to the second half of the year.

This growth is driven by a number of factors including a change in perception of second hand clothes. Customers now place more value in vintage products. Research shows that 40% of consumers under 30 consider the resale value of an item before buying it. Another striking figure is the large number (35%) of high-income shoppers involved in second hand trade. This number reveals that the growth of the second-hand market is more driven by ethical and environmental concerns rather than financial gain. Consumers are more interested in decluttering their lives than in simply making an extra buck.

Considering this significant consumer behavioural change, it is surprising that brands and retailers are still disconnected from this market. It is indeed astonishing to think that brands are not capturing any value from the resale of their own products.

The latest Report published by TheRealReal outlines how many pieces are retaining their value on the second hand market. Iconic bags such as the Hermes Kelly or Gucci Marmont retain respectively 92% and 74% of their retail value. It is also known that designer sneakers are retaining great value from their retail price such as 66% for Dior, 63% for Balenciaga or 72% for Louis Vuitton. What is less known is how many ready-to-wear pieces also keep a lot of their value. For example, Bottega Veneta Trench Coasts (+75% YoY) or Gucci loafers (+25% YoY).

As it currently stands, it looks like brands are leaving this market to third party players. A few years ago, the digital shift showed market players like Farfetch or Net a Porter taking the greater part of the online market to the detriment of brands themselves. As time goes by we may draw a parallel between what is happening in the second-hand market now and what happened then with the online transition. Retrospectively we can surely admit that if brands had taken the digital change more seriously they would have retained a bigger share of the market.

Could we be witnessing the same process with the second-hand market? Are there solutions for brands to turn the tide?

Last year some retailers started partnering with established second-hand market players such as Depop with Ralph Lauren or Vestiaire Collective with Selfridges. But these initiatives took the form of temporary popups. Which makes us wonder, is any retailer looking at more fully integrated services?

More recently some brands such as COS, Ba&sh and Balenciaga have pushed a more integrated resale model integrated within their after-sale services. The service provider behind those initiatives is a newcomer technology company called Reflaunt.

Reflaunt is a technology company that provides tailored resale services for fashion brands and retailers. The company provides different approaches to allow any type of retailer to find the right model for a fully integrated in-house resale experience.

Their approach allows brands to capture value from the second-hand market without having to incur any of the upfront investments and risks associated with building this new business model. One peculiarity of the Reflaunt model is that they leverage the existing global ecosystem of resale marketplaces, each with their customer base and regional leadership, to provide the most effective sell-through possible. It is also interesting to note that the resale model is built around a vouchering scheme made to boost customer retention for the brands while rewarding shoppers for extending the life of their garment.

The results of the first roll outs are already quite interesting. Thanks to Reflaunt’s global marketplace network, over 50% of the pieces are sold within a month. They have seen on average 2.5 items listed per customer. And 45% customers have chose brand vouchers versus a payment in cash.

Reflaunt’s resale service model brings significant value to the brand’s customers. The main one being the ease of putting an item for sale: Reflaunt sources the product description from the brand database to simplify the listing process. The listing process is a seamless journey where customers can create their product listing in a few clicks. The other and considerable value for the customer in this model is the additional financial return they receive in store credit. The store credit scheme gives the customer the option to be paid in cash or receive a higher return in store credits, making it more interesting to resell via the brand rather than reselling on their own. This approach enables customers to unlock the value they have tied up in their garments, and support a fundamental change in how they view and engage with the brand.

On the retailer side, the value in offering resale services is evident. At first sight it is clear that retailers are eager to get their share of the second hand market. But beyond the financial opportunity, the resale service can be used strategically as an opportunity to re-engage existing customers in a clever and meaningful way, boosting customer retention and reaching new audiences with a sustainability-driven mindset. The other plus of having an integrated resale experience is that the retailer owns the customer journey, as customers remain on their website for the entire process. This also allows the retailer to maintain the standard of the brand experience.

Looking at this opportunity, while knowing the staggering environmental footprint of the fashion industry, we must ask ourselves why brands and retailers are not yet taking ownership of the after-sale cycle of their business. When faced with more than 70% of garments ending up in landfills and a viable business opportunity with recommence with readily available solutions, we may wonder: what are retailers waiting for?