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The recommerce industry is perfectly summarised by the age-old adage 'one man's trash is another man's treasure'.
And the industry of turning someone's trash into another's treasure is growing at an impressive rate. This growth is being driven by the consumers' increasing demand for sustainability.
A recent study by Cowen predicts that the growth of reselling used products will account for almost 15% of the apparel, footwear and accessory market by 2024.
In 2020, that share was less than 7%. Thread, a clothing-based resale platform, predicts that the apparel resale market alone will be worth USD 64b by 2024.
But there's more to recommerce than selling second-hand goods on Etsy, eBay and flea markets. Levis, Lululemon and Patagonia are now starting to see the financial value in re-monetising goods that they're already made a profit on.
On the other side of the coin, Trove is a company pioneering 'circular shopping' by authenticating, repairing and selling second-hand clothing of other brands.
So it's a safe bet that the industry of selling what one person no longer wants is an industry that's only going to keep growing - providing technology intends to step up and help the industry grow at the exponential rate it wants to.
In this article, we'll take a closer look at the world of recommerce.
Let's dive in.
What is recommerce?
Recommerce is the process of selling second hands goods.
To dive a little deeper, recommerce empowers the resale of second-hand goods but also renting it.
It can happen in several ways, from a flea market in a traditional marketplace to a digital marketplace like eBay or Etsy.
Informal reselling is the standard form of recommerce or second-hand selling that we're all familiar with. Spruikers sell used goods at stalls in a physical marketplace as buyers walk around browsing.
Informal recommerce also extends into the digital realm, thanks to digital marketplaces like eBay and Etsy (the latter focusing on 'vintage' second-hand goods) and classified listings like Craigslist.
Trade-in recommerce is a more scalable business model where businesses actively look for unwanted goods, buy them, and then restore or refurbish them.
Products here are whatever you can think of, from vintage vehicles to vintage video game consoles, clothing, electronics and kitchenware.
The main difference is that a level of refurbishment takes the product back to a 'near-new' condition.
There's usually some form of warranty or guarantee involved from the company that's reselling the product and reliable logistics to get the order to the customer. Such companies may also offer the correct disposal of goods that they can't refurbish.
Buy Back/Trade-in from Vendors
This model is usually seen in cell phone providers, but also car manufacturers and other electronic companies. They're willing to buy back their product from you and offer you cash or a discount on an upgrade.
Popular recommerce products
Typical products sold using recommerce include:
Books, CDs, DVDs.
In a world that's becoming more digitised, the demand for these physical items is going down.
However, amongst niche collectors, the demand for limited editions and rare versions is going up. This is specifically true for books - namely school books.
Second-hand jewellery has always been a profitable business, but as precious metals grow in demand, the value of the raw materials also grows.
Phones, tablets, consoles, nav systems and GPS cameras still demand a decent premium on the second-hand market.
Unused medical tests, such as diabetic tests, EpiPens and other non-perishable medical goods, are in demand on the second-hand market, especially for those in the US that can't afford them brand new and lack medical insurance.
Clothing pioneered the digital recommerce space and continues to do so. You'll find that most large corporations that are reselling their used goods are clothing and apparel brands.
The business model can be seen in other forms, too.
Ecological recommerce, for example, is where you donate your old cell phone for nothing in return, other than the knowledge that every part of the phone will be recycled accordingly.
Driving factors pushing recommerce
Recommerce has grown a lot and will only grow more in the future.
But why? What's driving this growth?
Consumers are becoming more conscious of where their product comes from and where it ends up once they're finished with it.
Eco-friendly products are being demanded in just as eco-friendly packaging, and consumers are willing to change their mind over such values.
While it's true that we're pumping more plastic waste into waterways than ever, Gen X and Gen Y consumers with disposable income are demanding brands align with their environmental values.
The recommerce business model resonates with the young generations as it suits their ethical and environmental needs.
One of the most overlooked benefits of recommerce is that it's simple. Everyone understands the difference between the words' new' and 'used'.
There's no need to explain complex subscription pricing models, annual vs monthly fees and so on.
For business owners, raw materials don't need to be sourced, a product doesn't have to be made, and fewer links in the supply chain can break. The model does have its challenges (adequate refurbishment, brand authenticity etc.), but it overcomes more hurdles than it creates.
Improves brand accessibility
For many low-income earners, owning a pair of Levi's is something you can only dream about. Recommerce might not put you in a pair of 501s, but it will put you in the next best thing.
Whether it's done through the original brands or from a third-party merchant, selling second-hand items can make that brand more accessible to the masses.
Potential for takeover
The scalable technology isn't there for most large enterprises to efficiently implement a recommerce model that resells their own products.
But herein lay the opportunity.
With the demand increasing and the technology not being able to scale quickly, a savvy entrepreneur that can solve the problem and have a successful business model is in a prime position to be brought out by the brand or a larger tech company.
Who buys recommerce items and why?
The second-hand industry is growing because consumers are driving it.
But who are those consumers?
Simply put, these consumers are everyone. ThreadUp's 2020 report shows that over 30 million people purchased second-hand clothing for the first time in that same year. Of those 30-odd million, over 75% say they'll start spending more on second-hand goods.
Looking closer, we can see that Gen Z (born between 1997 and 2012) is driving the demand in the recommerce industry.
Refurbished, second-hand goods meet the demands of Gen Z consumers in terms of both affordability and sustainability.
As a result of the pandemic, 25% of Gen Z aren't concerned about having the 'latest and greatest and are instead opting for a less is more lifestyle.
Exacerbating this fact is that both Gen Z and Millennials are starting to value high-quality products that can stand the test of time.
It's worth noting that the above statistics represent digital recommerce.
Those surveyed purchased second-hand goods on an online marketplace, be that 'as is' or something that's been renewed or refurbished.
Given the number of flea markets and other physical marketplaces that sell used goods, it's near impossible to calculate the number and value of used goods that move through these unregulated channels.
Global brands offering second-hand goods
A massive part of the recommerce model is empowering existing brands to buy back and resell their goods using their existing marketing, sales and distribution channels, leveraging the concept of 'omnichannel retailing'.
Let's look at the outdoor wear brand Patagonia and their 'Worn Wear' segment.
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The brand does several things to keep its products in use longer:
- Teaches customers to repair basic damage on their garments
- Offers a trade-in, refurbishment and resale model
- Repairs their own products for customers
These are three separate business models to break down that can’t be done in this article, but the premise is this:
Patagonia is unlocking more value in its second-hand products by selling a product to a customer for a second time.
Patagonia’s site says:
‘Why extend the life of gear? Because the best thing we can do for the planet is cut down on consumption and get more use out of stuff we already own.’
This attitude appeals to the values of eco-conscious consumers, and it doesn’t hurt that this model can be monetized, too.
This isn’t a bad thing. It’s good for the environment, and it’s a profitable model, such as the nature of recommerce.
Patagonia isn’t alone.
Arc’teryx and Taylor Stitch are other fashion labels offering similar services to re-monetize their goods.
What’s glaringly evident is that all of these examples are clothing and apparel. The lack of other brands taking ownership of their second-hand goods is alarming and an opportunity to step up.
Digital marketplaces are nothing new. eBay pioneered the idea of a ‘digital yard sale’, making it easy to buy anything you could take a photo of, new or used.
In time, Etsy picked up on this and expanded into the world of ‘vintage’ goods after establishing itself as a handmade craft marketplace.
But niche competitors have popped up - unsurprisingly, in the world of second-hand fashion and apparel. The Real Real and 1st Dibs are two brands that make second-hand designer products accessible to the used market.
The consumer electronic market does benefit from the refurbishment and resuscitation of used goods.
For example, Raylo is a British telco company offering new and refurbished cell phones, tablets and laptops.
It’s worth noting that one of the struggles of recommerce is ensuring your own brand’s integrity while selling another company’s product.
Luckily, Raylo managed to overcome this hurdle with the use of custom-designed packaging and high-quality branding.
People are the driving factor behind recommerce, and here are several reasons why they like it so much.
The majority of resources, both recycled and virgin, are used to manufacture and distribute a product. The reuse and refurbishment of a product significantly outweigh the benefits of recycling that product.
Gen Z and millennials, who will make up over half of the purchasing power available in the next ten years, value sustainability.
Recommerce is a business model that doesn’t care about new sustainable materials or new eco-friendly options.
It’s built around reusing what’s already out there—in turn, lowering the demand for new anything and keeping what’s already in circulation alive for longer.
It’s easy to see how this can work with clothing, but it’s important to remember that recommerce is more than just selling second-hand clothing.
The furniture industry is responsible for the thinning of old-growth forests in North and Central America. Refurbishing and reselling a sofa set that’s already in circulation lowers the demand for those trees to be logged.
Refurbished white goods like fridges and washing machines lower the stress on the supply chain for these large and heavy products. Buying second-hand reduces the demand to ship more from one side of the planet to the other.
Recommerce attacks the sustainability problem at its core by lowering our dependence on new products made from virgin materials.
Leverage the image of other brands
Entrepreneurs can build a recommerce marketplace on the products of other brands. It empowers a business to gain loyal followers and generate revenue by selling the names of big brands.
What’s more, the negative connotations of a brand’s image are often (but not always) washed away when that brand’s product is available on the used market. The ‘recycled’ factor outweighs the negatives at times.
Lower operational costs
For products that have been replaced by digital versions (books, CDs etc.), sourcing the physical product isn’t overly costly.
Once your brand has passed the product through a comprehensive quality check, a premium can be added, and the product is then resold.
For clothing and more oversized products, an entire rebuild or refurbishment may be necessary. Providing that you can pass the initial purchase and restoration costs onto the customer and still make an acceptable profit, your business model is (relatively) sound.
Lower costs for the consumer
For price-sensitive consumers, buying second-hand makes well-known brands more accessible and often presents better value for money. If a product has been refurbished well, it also helps them afford a reliable product for a competitive price, rather than buying brand new.
Warranties and guarantees on second-hand items only make the model more appealing for consumers that are price sensitive.
Second-hand buyers are also more likely to try a new brand as they can do so at a lower price point.
A teen looking for an emerald green prom dress can get more value for money and access more options by more brands by looking second hand rather than buying it new.
More data for more prominent brands
Established brands can unlock value by monitoring the distribution and demand of products on the second-hand market.
In 2018, Fendi noticed more influencers creating content featuring the brand’s second-hand goods with a logo phased out 20-odd years beforehand.
Fendi’s autumn/winter 2018 range featured a limited rerelease of the old logo to tap into the growing demand for the vintage look.
Data is becoming more important, and monitoring trends involving your brand in the second-hand market can give you valuable insights into customers’ buying patterns and behaviour.
The industry isn’t without its challenges and setbacks, though.
Sourcing products with higher profit margins, like brand name clothing and vintage products that don’t need restoring, can be challenging.
Products need to be taken care of before being resold, which only increases your product’s final sales price.
This potentially higher price does two things - lowers your profit margin and negates the biggest drawcard of buying second-hand - lower prices.
A recommerce brand still has the exact same technical costs as a traditional D2C or ecommerce brand, such as custom-sized boxes, marketing and operational costs. Therefore, the cost of getting a product found and listed can fluctuate dramatically.
Authenticity for brand names
Proving the authenticity of a product made by another brand can be a challenging task as a reseller.
No one knows that product better than the brand that created it, so any claims you make about a product being genuine should be backed up if you’re to make those claims at all.
Innovation away from fashion
There are many second-hand goods available on the market that don’t fit in an average-sized mailer box.
It’s straightforward to sell used clothing, home decor, and apparel, be it P2P or through the brand itself, but the technology and infrastructure isn’t there for larger goods.
Innovation is required to sell white goods, bikes, furniture, and so on with the same ease that smaller items are resold.
This is most evident in a logistical sense - who delivers these second-hand goods, where are they stored and dispatched from, how are they quality-assured before being resold?
The potential is there, but the ball needs to start rolling for the recommerce model to leverage a broader range of goods.
Big tech threat
Amazon’s recommerce/trade-in model is still in its infancy but shows that the giant understands the potential of reselling used goods.
Facebook’s marketplace continues to grow while eBay, Etsy, and Craiglist continue to see more listings, sales, and traffic year over year.
There’s an opportunity to innovate before the tech giants genuinely sink their teeth into the business model. However, the demand for second-hand goods and the growth of the market isn’t slowing down.
The future of recommerce
Throughout this article, you’ve seen examples of recommerce predominantly in the form of clothing. And this is one struggle that the industry needs to overcome if it’s to revolutionize the way we buy products.
For medium and small brands, technology has to arise that makes it easier to authenticate their products, both in-person and remotely.
It’s also paramount that a brand creates a tailored experience for a customer buying a second-hand product, the same way that experience is designed for a customer buying something that’s brand new.
Technology is the enabling factor, but it’s currently restraining the recommerce industry.
There are innovators, but the threat from big-tech giants like Amazon and Facebook to step up and take control is prevalent.
One man’s trash is, and always will be another’s treasure.
The way that individual finds said trash is sure to change with innovation and the uptake of digital technology, but the playing field is ripe to be shaken up.
Thanks to sustainability and price sensitivity, the second-hand market in all its forms will only grow.
The way that we find and purchase used items will grow and develop thanks to technology, so brands of all shapes and sizes will prosper if they consider how they can help their products have a second life.
Interested in selling second-hand goods under your own name? See how Packhelp's custom packaging can help you with branding and marketing.