Sustainability has been a buzzword for many e-commerce companies for a few years. We are increasingly seeing that resale has become a permanent component of sustainable strategies.

A GlobalData report shows that the global resale market has grown 11 times faster than traditional retail, and will be worth EUR84 billion by 2030. Fast fashion, however, is more cautious than traditional retail with a forecast of only 40 billion. These data suggest that the resale industry is growing faster than the demand for sustainable fashion.

According to the report, 118 million people will be selling second-hand products for the first time by 2021. This compares to 36,2 million people in 2020, which represents a 226% increase. Consumers are more likely to choose second-hand products (or resale) over new sustainable-labeled products (made with sustainable fabrics, or a sustainable manufacturing method). This is because the supply chain is not transparent and consumers can’t rely upon the product’s sustainability claims because of “greenwashing“.

It’s not surprising that many large retailers now focus on resale and how to integrate it into their business models to increase their revenue stream.

IKEA is currently testing its resale platform. Zalando uses outdoor ads to promote its resale ventures. H&M joined hands with Selly to create a resale portal. Even Gucci now offers resale, and views it as an opportunity for new (mostly younger Gen-Z) clients.

This strategy may seem to be only for big brands. However, it is not. Any brand can incorporate resale into its business model, especially now that technical solutions make it possible.

98% believe that brands are responsible for inciting positive change.

(Source: Futerra consumer research, June 2019. Respondents: 2,400 people in India, the United States, and the United Kingdom.

But why this change of heart?

There are several reasons brands should target the resale marketplace right now. First, you may have noticed there is a lot of secondhand trade. Vinted and The Next Closet platforms are increasing in popularity and traffic rapidly. Marktplaats trading and second-hand Facebook groups are very popular.

Consumer needs are changing. Consumers still want to purchase items at a high price but also want to be able to reuse and reduce emissions. All those requirements can be met by resale. MUD Jeans Clients receive a discount when returning their jeans. The jeans are then recycled to avoid the use of sustainable raw materials ending up in a landfill. Denham offers repairs that extend the life (and sustainability!) of its products. These brands see resale as a way to build long-term relationships with customers and revive their brand’s ethical values.

It is huge that a new or used product has a different environmental impact. The carbon footprint of a second-hand product is 82% lower.

Is Resale a part of my Brand Strategy?

Resale is a part of a brand’s sustainability strategy. However, it can also be used by the brand to increase the customer lifetime value (CLV) and increase the frequency of purchases. It is easy to imagine customers wanting to sell their old bag or ottoman to get a new one. This trade-in discount, which we have seen in the automotive industry, allows them to purchase brand-new items. Customers may have changed sizes and want to sell their L for an M. This customer data is extremely valuable for communicating with customers (segment). This data can be used to improve your online marketing. Win-win!

You can determine if reselling your product will be worthwhile by looking at what other people have sold your product on various marketplaces. Are you seeing your product on Vinted, eBay, or in a Facebook group that is being sold second-hand? This is a great opportunity to get the data and cash flow to your portal and connect with the customer.

How do I get started? What business model should I use?

Interior and fashion consumers are used to purchasing new items and will often buy second-hand products. Multiple studies have also shown that Gen Z values resale products that are more durable and less.

You can choose from a few business models to use in your sustainability strategy.

• Peer-to-peer: You connect the seller and buyer

• You can either own or manage an existing resale platform.

• Buy-back: The seller or a third party purchases the product back. This can be a risky financial move as you don’t know if you will ever sell the item you bought back.

• Consignment: The seller or a third party buys the product back and handles all the handling. Only when the product is sold again is the transaction final.

These models are more frequent for luxury brands.

After you have chosen the right business model for you, it is time to decide whether you will set up a resale operation yourself, hire someone to do it, use software, or partner. Partnering is important because they can handle the buying, shipping, and repair of your items. It’s easy!

1. Peer-To-Peer

Peer-to-peer is very similar to drop shipping. You act as a facilitator between the buyer and seller and facilitate the shipment and transaction. This has the advantage that you don’t need to have stock. This can lead to customer service activities. However, you can have this happen directly between the buyer or the seller, as is the case with Marktplaats. Peer-to-peer settlements are only possible after the buyer has received their product.

Example: NAKD.com is a peer-to-peer platform that has been incredibly successful. NA-KD immediately replenishes stock for a customer who wants to sell an older season’s product. NA-KD then creates a packing slip and facilitates payment back and forth. They also have the opportunity to display their returns and/or out-of-season products. You can also buy second-hand and new items at NA-KD. Although this may seem obvious to the consumer, it is quite a feat technical-operationally.

Accurate.consists European Shopify merchants in setting up a peer-to-peer resale environment within their Shopify store. They offer brands the chance to resell customers’ items through Shopify as an agency. You may be wondering how that works. The customer logs in to her account and sees her order history. She’ll then be able to click on the button to sell the item. Once all information has been uploaded (including the product’s condition, suggested retail price, and possibly photos), the brand will receive a notification about registration. The product can then go live. Accurate is fully integrated with Shopify. The customer can purchase both a “pre-loved” and a new product at the same time.

This is where resale can be a good option. It will ensure that you have a customer who returns and with whom you can continue to build long-term relationships.

2. Own or use an existing platform

You can also offer your resale products via your existing ecommerce platform like NA-KD or create a separate ecommerce platform like Axel Arigato or Patagonia. You can also set up targeted marketing activities around the product/customer group by using a separate e-commerce environment. The data collected there is only for resale purposes.

3. Buy-Back

Buy-Back allows you to buy back second-hand products directly from customers. This gives you a greater margin for selling products and/or remunerating customers directly with store credit. This encourages customers to purchase new products. You are taking a chance on the item you bought back since you don’t know if you’ll sell it again.

You have the option to handle all aspects of the buying and selling process yourself or hire a partner who will.

It may be more expensive to invest in the entire process of buying back, cleaning up, repairing, and shipping. However, you will have greater control over the outcome. This can be a lucrative revenue stream if your growth expectations are met. This can also impact your brand and customer experience. It can be very beneficial to keep this in-house. However, it’s much more costly and difficult to attract new customers than to retain existing ones. Resale is a great way to build a lasting relationship with customers.

Patagonia is one example. They cleverly combined both loyalty programs, so that customers can also exchange loyalty credits across both platforms.

Patagonia & Trove – A Circular Powerhouse

Patagonia owns an online shop with resale items but has outsourced all of its back-office operations to Trove. Trove purchases the products back, repairs and cleans them, takes new photos, and fulfills the orders. Store credit is available to consumers for the purchase of new or used products. Patagonia does this to ensure that the company’s money is kept in the company, very intelligently and sustainably.

Shopify Solution: You can create a separate store to sell your resale products. You can also link store credit and a voucher from Shopify’s backend to your account. LoyaltyLion and Smile are two examples of loyalty credits that you could use to reward your customers. We know of no European party that can handle the collection, repair, and cleaning of goods as well as fulfillment. Trove contacted Code and informed us that they are looking at expanding to Europe in 2023. This is something to look forward to. 

4. Consignment

Consignment works almost the same way as the buy-back model. Consignment is different because the final payment can only be settled after the buyer has paid the seller and the seller has approved. You don’t need to pre-finance products. However, your margin will be lower and you won’t be able to reward the seller with their store credit. You will have to wait until the seller has sold to allow her to redeem her store credit. Reflaunt is a pioneering company that offers peer-to-peer, consignment, and buy-back options for major brands.

Reflaunt.com offers software that will quickly set up your resale model. Reflaunt.com also offers Shopify integration. Reflaunt also works with 25+ resale platforms (including Farfetch, and Net-a-Porter), and can sell your products there. This is a fantastic opportunity to promote your brand to new clients! Reflaunt has all three business models. They aim to remove any burden from brands regarding resale. They offer peer-to-peer, consignment, and buy-back models.

Reflaunt is currently in conversation with us to discuss how their solution could help our clients integrate resale within their existing business models. Do you want to stay informed about Reflaunt’s potential? Send an email to coen@code.nl. Be sure to include Reflaunt as the subject line

Summary

The resale train is on its way and will not be stopping soon. It is now the right time to decide if and how resale should be part of your sustainability strategy. Particularly Gen Z likes resale items. It is becoming easier to offer resale products and make them a business. There are many platforms and software that can help you do this. This allows you to build a deeper relationship with your customers and to give them a service. They can also earn store credit which they can use at your store.