Old clothing is finding renewed potential in the resale market.
What was once reserved for discount shoppers and unfashionable castoffs is quickly becoming the go-to destination for shoppers as the stigma behind secondhand wears off. And the trend has only just begun. Some industry experts say the total resale market’s value will more than double — from $24 billion to $51 billion — in the next five years.
“We’re really at the tipping point where resell behavior is moving away from niche behavior and really becoming the standard,” Charles Gorra, founder and chief executive officer of Rebag, told WWD earlier this year.
Even luxury shoppers are buying vintage on platforms like Farfetch and Rebag, which offers hard-to-find designer goods for a fraction of the price.
“Resale appeals to this generation’s desire for frequent fashion updates (so as not to be caught on social media wearing the same outfit twice), their interest in developing a ‘sharing economy,’ coupled with their eco-consciousness and passion to live sustainably,” according to a Retail Thrift Industry report by Cascade Alliance, a business development firm.
It’s a market that’s also being closely watched.
Chanel brought two high-profile legal challenges to luxury resale companies. The fashion house’s suit against What Goes Around Comes Around focuses on trademark infringement claims and how the reseller promotes its products, while its suit against The RealReal accuses it of selling counterfeits.
In April, a Chanel executive addressed the lawsuits during a conference in New York, rejecting criticism that the suits are a ploy to suppress the secondary market.
“I can’t stress enough that we aren’t trying to shut down the secondary market,” Robin Gruber, vice president of global brand protection at Chanel, said during the Fashion Law Institute’s annual fashion boot camp conference at Fordham Law School. “We want the secondary market to be a good place, a good experience for consumers. Chanel wants these sites to be good sites; that’s why we’re suing.”
The RealReal has denied Chanel’s allegations. “The RealReal puts all items offered for consignment and resale through its own unique rigorous, multipoint and brand-specific authentication process before it accepts them,” The RealReal spokeswoman Christine Heerwagen said in a statement. “We stand behind that authentication process for everything we sell.”
It turns out there are many parts to the resale puzzle. Here are some basics to keep in mind.
1. It’s growing fast.
The total market was worth roughly $24 billion in 2018, according to ThredUp’s 2019 Resale Report, which also anticipates the market will more than double in the next five years to reach an estimated $51 billion.
Go five years backward and that same market was worth only $12 billion. That’s a 15 percent compound annual growth rate.
Nearly half of the resale market is in soft lines, or things like apparel.
The sneaker resale market is also growing. John Kernan, senior research analyst at Cowen & Co., wrote in a note that the size of the sneaker resale market in North America is “north of $2 billion,” and has the potential to top out at more than $6 billion by fiscal-year 2025, as the trend spreads around the globe. He highlighted mainland China as a market for anticipated growth.
What’s more, as resale continues to grow faster than traditional retail — with brick-and-mortar retailers and department stores closing physical locations at record rates — the resale market is taking a bigger share. Wells Fargo analyst Ike Burochow said resale could take up as much as 10 percent of the total retail market by 2022 as more people shop secondhand.
“We estimate 40 percent of consumers’ closets will be ‘used’ by 2022 [up] from just 24 percent today,” Burochow wrote in a note.
2. Buying used is now hip.
Consumers are losing the shame of shopping used as thrifting moves into the mainstream.
“There is no stigma behind what is essentially a thrift shop for luxury goods at the high end of the market,” said Simeon Siegel, senior retail analyst at Nomura Instinet.
And while the naked eye may not be able to tell if a garment was purchased along Fifth Avenue in New York City or on a secondhand web site, shoppers are more comfortable than ever admitting they bought their threads from someone else.
Twenty-four percent of shoppers admitted to buying used in 2017, according to ThredUp. The company anticipates that number will jump to around 40 percent by 2022.
“Consumers see unmatched value in purchasing name-brand goods at drastically reduced prices, even if those goods are secondhand,” Burochow wrote. “These mind-set shifts were a distinct win for resale start-ups that were just beginning to gain traction — the appeal of the online resale market loomed large for consumers.”
3. Shoppers buy different things from the secondhand market for different reasons.
High-fashion sneakers and luxury pieces are thriving in the resale market because the original items are in short supply. Shoppers wanting Supreme hoodies or hard-to-find Adidas Yeezy sneakers can find them anywhere in the world via their computer. Same goes for luxury pieces with names like Birkin and Gucci; brands that were once unattainable for the average consumer are now for sale at a fraction of the price.
Meanwhile, resold apparel is the new fast fashion. Shoppers can easily mix-and-match, changing up pieces and reselling them when they’re done. This saves consumers money, creates newness in their closets and supports an eco-friendly mentality.
4. Everyone is shopping vintage, but the trend is most noticeable among Millennials and Gen Z.
According to ThredUp data, 27 percent of Millennials buy secondhand, while 37 percent of Gen Zers, those roughly 18 years old or younger, shop used. But even Baby Boomers are getting in on the action: 19 percent of Baby Boomers reported shopping vintage in 2019, up from 16 percent two years earlier.
5. The biggest players.
Market research firm IBISWorld identified the three biggest players in the industry as Goodwill, Winmark Corp. and Savers in a February report. ThredUp said in its report that it’s one of the biggest players — along with The RealReal and Poshmark. Either way, there are plenty for consumers to choose from. Among them are luxury platform Farfetch, Stockx, Ssense and old favorites like eBay and Amazon. Handbag lovers can get their fix on Rebag. Shoe fans might head to Goat or Stadium Goods, which is now owned by Farfetch.
6. Record money raised.
Goat, the online resale sneaker platform, got a $100 million investment from Foot Locker earlier this year. The RealReal has secured about $290 million in private equity investments. Rebag has nearly $60 million. Stadium Goods, which was acquired by Farfetch in 2018, raised $250 million. Clearly, investors are betting on resale as the next big thing.
In April, Neiman Marcus Group bought a minority stake in used fashion site Fashionphile for an undisclosed amount. Neiman Marcus said it won’t be selling used goods anytime soon, but some Neiman locations may serve as drop-off spots for Fashionphile customers wanting to sell used luxury handbags, jewelry and other accessories.
7. Sustainability is part of the trend.
In recent years, consumers have started to question the impact fast fashion has on the environment. This has been a game-changer in determining how often and where they shop.
“Fortunately for these businesses, Millennials emerged into adulthood highly accustomed to online retail and with a consumer psychology that valued environmental-consciousness (in part due to the highly publicized environmental toll of fast-fashion throughout the 2000s, also causing consumers to shift more toward a ‘fewer, better’ shopping philosophy),” Burochow wrote.
Market research firm Euromonitor International called the new wave of shoppers “conscious consumers,” or those who are trying “to make positive decisions about what they buy and look for a solution to the negative impact consumerism is having on the world.”
In addition, ThredUp reported 59 percent of shoppers want clothing that is sustainable. The same report found that among the younger set — 18- to 29-year-olds — 74 percent of shoppers prefer to buy from sustainable brands.
Shopping recycled fashion automatically adds to a consumer’s eco-friendly street cred.
8. Consumers also like that they’re saving money while keeping up with the latest trends.
Resale lets shoppers save money while outfitting themselves in clothes that are new to them. This has becoming increasingly popular with the rise of social media. In fact, having a photo on Instagram in a new dress is almost better than owning it.
9. Meanwhile, the “sharing economy” has never been stronger.
Consumers can share anything these days: cabs, office space, apartments. Ikea recently revealed plans to rent furniture. It was only a matter of time until apparel was added to that list.
Rent the Runway, which is now valued at more than $1 billion, disrupted the traditional retail model when it started allowing shoppers to rent clothes without the commitment of buying. The company also recently unveiled plans to expand its assortment to home goods — think bedding and pillows — and children’s apparel.
Reselling unwanted clothing is only an extension of a sharing economy, as shoppers move from an owning mentality to borrowing mind-set. In fact, 40 percent of shoppers think of a product’s resell value before buying, according to the ThredUp report.
And since Marie Kondo showed up on Netflix earlier this year, the tidying artist who advocates the less-is-more approach, consumers seemed determined to buy fewer things. According to the ThredUp report, consumers now have an average of 136 items in their closets, down from 164 pieces in 2017.
“Certainly [Marie Kondo] helps the resell ecosystem,” Rebag’s Gorra said.
10. Luxury is not immune to the resale market.
In his note, Wells Fargo analyst Burochow pointed out that Bain, a different investment firm, estimates the luxury resale market to be worth $6 billion. Vestiaire Collective, a luxury resale site in Europe, estimates the resale industry is about 8 percent of the 260 euro billion luxury market, which the company said will likely double in size by 2022.
“The current online luxury resale market is still in its nascent stage and we are seeing new industry players enter at a rapid pace to take advantage of the untapped market opportunity,” Burochow wrote.
Luxury resale is growing, in part, because consumers know they can resell their goods when they’re done with them and get some of their money back. Rebag, the platform that resells luxury handbags, has the Rebag Infinity program, which allows shoppers to resell bags they bought through Rebag within six months of purchase for a guaranteed 70 percent of the original price.
11. But resale does have some losers: accessible luxury.
Accessible luxury, brands like Coach, Michael Kors, Kate Spade and Tory Burch, might be some of the losers in the space. That’s because online resell platforms serve up high-end luxury bags at an affordable price. Bags like Prada, Gucci and Louis Vuitton. Suddenly, with the resale market, an elusive Hermès bag can be purchased for a fraction of the price. High-end luxury fashion is now accessible to a larger market. Those same people who once couldn’t afford to sport Valentino may be less inclined to spend their money on entry-level luxury.
Burochow pointed out that Tapestry’s Coach and Kate Spade brands, along with Michael Kors bags, all had negative comps in the fourth quarter of 2018, while the entire accessible luxury handbag market remained soft in the third quarter.
At the same time, sales at Gucci grew more than 60 percent in the first half of 2018, Hermès sales were up 40 percent, and sales at Chanel, Celine and Christian Louboutin were also up around 30 percent in the same period.
That’s because a greater number of consumers have access to high-end luxury products by way of sites like The RealReal. “The model introduces luxury brands to new customers who couldn’t afford full-price product[s] before and it illustrates how luxury brands carry real value… it shows consumers that a luxury purchase has resale value,” Burochow wrote.
The analyst added that luxury resale isn’t a threat to accessible luxury resale — yet.
“Given the digital luxury resale market is still developing, we don’t think there has been a significant impact on the accessible luxury space thus far; however, long-term it could lead to pricing compression in the industry,” Burochow wrote.
12. Resale apparel is impacting regular apparel sales, too.
In the old retail landscape, a consumer bought something, then threw it away when he or she was done with it, taking it out of the retail eco-sphere and simultaneously creating a need to replenish the supply. The new model revolves around circular fashion, where a garment may no longer be desired by one person, but can be resold to someone else. That means it stays in circulation longer — and shoppers have less of a need to buy from traditional retailers.
This has the potential to “cannibalize full-price sales to a degree,” Burochow wrote.
And it’s already begun. While the non-resale apparel market continues to grow, it’s not growing as fast as it once was because of the resale market.
“Though most of these platforms are still relatively small today, they are growing rapidly — and perhaps even more importantly, they have high levels of customer engagement,” Burochow wrote.
The numbers behind resale.
• The $24 billion resale market is expect to reach roughly $51 billion by 2023, according to ThredUp.
• 50 percent of resale is in apparel.
• The resale market could take as much as 10 percent market share of the total retail industry by 2022, according to Wells Fargo.
• 37 percent of Gen Z shops resale; 27 percent of Millennials, and 19 percent of Baby Boomers.