yerdle think tank

Neiman Marcus recently announced a minority investment in Fashionphile, a reseller of luxury handbags and accessories. The industry touted the move as “innovative” and “bold.” The resale market is booming and there is a titanic shift taking place with the industry expected to reach $51 billion by 2023, according to ThredUp, especially with Millennials and Gen-Z shoppers who are adopting secondhand apparel two-and-a-half times faster than any other generation.

It’s not just ThredUp that is winning with the changing tides. The RealReal recently filed for an initial public offering after incredible success buying and reselling designer handbags, shoes and accessories.

This market is heating up and brands are recognizing the need to participate. All of this is great for Fashionphile. A partnership with Neiman’s gives the company credibility, drives traffic and, most importantly, a supply of preowned items.

But for Neiman Marcus, in my opinion, the move is astounding.

I spent more than a decade with Walmart, which began with the success of the Supercenter and inevitably ended by trying to keep up with Amazon. I was involved in the late Nineties when the web went from a marketing billboard to a customer channel. The lift to build anything beyond a basic web site was intense.

The easiest thing to do was to accept Jeff Bezos’ offer to have your storefront hosted on Amazon. Target did it. So did Toys ‘R’ Us and Borders. As a Target customer, you’d go to target.com and see a marketing landing page, and when you wanted to shop, you’d go to the Target tab on Amazon. I remember the executive feedback at the time, “Why invest millions over what will only ever be 2 to 3 percent of retail? Just leave that to Amazon.”

Years later, Toys ‘R’ Us, Borders and tons of other retailers who chose this path were out of business. Those who are still around today spent years painfully extracting themselves from Amazon. An incredible move for Amazon as they built traffic, a terrible move for retailers in the long term for retailers other than Amazon.

It’s only been a decade or so, but I am now watching Neiman’s and others follow the same path as those who satisfied their boards by cutting an easy deal with Amazon to keep pace with changing market conditions.

This seismic shift in resale is just as significant a change as e-commerce in the late Nineties. In discussing the Fashionphile partnership, Neiman’s chief executive officer Geoffroy van Raemdonck noted, “Over half of our customers already engage in pre-owned luxury, and this exclusive partnership exemplifies our commitment to providing our customers with services and offerings they want and need.”

He’s right. Retailers must either recognize and adjust their models or become irrelevant.

As far as reported, Neiman’s has no plans to sell pre-owned bags and accessories in their stores or on their web site. So what are they doing? They’re simply redirecting interested younger customers looking for this service to the Fashionphile site. The next time, these customers won’t even bother to stop by Neiman’s online storefront. No different than going to target.com in the Nineties and being introduced to Amazon.

Brands make a mistake when they invite a third-party player into their brand-customer relationship and allow them to collect data and create their own loyalty with these customers.

Neiman’s isn’t the only brand making this mistake. Looking at the retail landscape, Stella McCartney has an ongoing partnership with The RealReal, while many other brands are in talks right now with ThredUp.

The solution?

Take Patagonia’s resale program, Worn Wear, as an example of a brand innovating at the front lines and preparing for a new type of consumer. Online customers searching for pre-owned Patagonia end up at patagonia.com, not eBay or ThredUp or Tradsey. Patagonia controls the experience and ensures that it’s fitting of the Patagonia brand. There is authenticity, quality trust, great product detail and all items are backed by Patagonia’s legendary Iron Clad Guarantee.

Patagonia expects Worn Wear to become a crucial part of their business, predicting that by 2023 it will account for a double-digit percentage of overall revenue.

Re-commerce is the biggest change since e-commerce. As brands and retailers recognize these emerging trends, I’d urge them to own the experience and their customers. To do anything else is to repeat the mistakes we all learned over the past decade and a half. In a word: it’d be insanity.

Maybe Neiman’s will purchase Fashionphile for a higher price down the road. But until that moment (or the point Neiman’s decides they should bring the offering back in-house and evolve their model), they, and any other brand watching resale from the sidelines or halfheartedly engaging, are losing their future customers and putting their brands at risk.

Andy Ruben is the founder and chief executive officer of Yerdle, an end-to-end technology and logistics resale platform. Prior to Yerdle, Ruben was an executive at Walmart serving as Walmart’s first chief sustainability officer and leading the retailer’s e-commerce strategy, private brand and omnichannel businesses.

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