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Recommerce: A retail opportunity or a threat to brands?

Blog

Sep 30 2020

As most of the world slides towards a deep and lasting recession as a result of the COVID-19 pandemic, consumers across the globe are tightening their purse strings. We have already seen consumer spending contract and retail industries suffer in most cities across the world, and as jobs and incomes remain volatile, consumers may be permanently turning to recommerce models as a means of replacing their traditional shopping habits.

Yet recommerce offers a glimmer of hope for the troubled retail industry. The secondhand apparel market has boomed over the past 5 years, more than doubling in value from 2015 ($14 billion USD) to 2020 ($33 billion USD), and is set for further exponential growth estimated to reach $64 billion USD by 2024 (Statista).

Gone are the days when secondhand was solely the realm of op-shops, charity stores or eBay. A plethora of new recommerce businesses have popped up within the last decade to capitalize on the boom. This growth has been driven by the secondhand luxury market, including sneaker resale platform StockX and luxury consignment e-tailer TheRealReal, who both reached significant milestones in 2019 with StockX achieving unicorn status and TheRealReal going public.

So, does recommerce pose a threat to brands? It depends on a brand’s ability to adapt. On the one hand, recommerce retailers may be cannibalizing consumers’ sales, offering a brand’s goods at a lower price and more accessibly. Yet recommerce also presents the opportunity for brands to diversify their offering, reinforcing their position amongst consumers as a sustainable and conscious retailer of choice.

A new recruitment channel for brand fans

Luxury brands make up a significant proportion of re-sold goods. Recommerce can act as a viable channel to recruit new brand fans who may not yet be able to afford buying first-hand – yet procuring a brand’s goods through recommerce channels initially may leave a lasting impression on consumers and turn them into lifelong brand fans. As a consumer’s income and buying power grows, they may be more likely to trade-up to firsthand goods from the brands they previously bought via recommerce.

A thriving recommerce marketplace may also reduce barriers to purchase for firsthand luxury consumers, with 44% of luxury consumers considering the resale value of the goods they purchase when they buy – a figure that is even higher amongst Gen Z and millennials, at 57% and 50% respectively (BCG). Therefore, the prevalence of recommerce may be a win-win for all, acting as a stepping-stone for first-time luxury shoppers while also increasing willingness to purchase amongst current luxury consumers.

A profitable source of business

Recommerce is not only good for third-party retailers – it can also add another layer of profit to a brand’s bottom line, boosting their competitiveness in a rapidly changing retail market. We have started to see some retailers adopt ‘buy-back’ schemes, with consumers donating their pre-loved items back to the brand in exchange for cash or store credit. The brand then has the opportunity to sell these lightly used goods back to more price-conscious consumers, extending the lifetime of the product and boosting brand loyalty. This is the strategy adopted by outdoor clothing retailer Patagonia through their Worn Wear initiative, where they buy-back customers’ used products in exchange for credit, then repair and resell the products via their website.

Recommerce can also be an efficient way for retail businesses to sell-on their out-of-season, returned or faulty products, as we have seen when sustainable luxury retailer Stella McCartney partnered with recommerce platform TheRealReal to sell her past season collections that were no longer relevant for the brand to carry in-store. This not only opens up an additional value driver in the retail product lifecycle where brands can unlock revenue that didn’t exist previously, but it also avoids diluting the brand via heavily discounted sales on their main commerce channels.

A key sustainability driver

Aside from price, perhaps the most attractive benefit that recommerce offers is sustainability. Recommerce allows consumers and brands alike to tap into the ‘circular economy’, reducing waste and encouraging the continual use of resources. We know that sustainability is increasingly affecting consumers’ purchase decision making, with 64% of millennials and gen Z reporting that they are influenced by sustainability when making a purchase (BCG).

Recommerce is set to have a significant impact on the fashion industry in particular – as one of the biggest waste-producing industries, fashion accounts for 10% of carbon emissions and nearly 20% of wastewater globally (BBC). Retailers who tap into recommerce may reap the benefits in consumer loyalty amongst the rapidly growing segment of eco-conscious consumers.

As the world continues to evolve in the wake of the coronavirus, recommerce may become a worthy pillar for brands and retailers to consider incorporating into their business model, acting as an antidote for the retail industry’s sustainability woes while also addressing the current tightening of wallets amongst consumers.

At Tag, we create marketing campaigns designed for tomorrow’s consumer. Backed by the knowledge of our team of retail experts, we are uniquely positioned to support brands in building retail brands for the next decade. We provide digitally-led marketing solutions backed by data and insights, enabling our partners to stay relevant and agile in today’s constantly changing marketplace.

Schedule a call today to discuss how Tag can support your changing marketing needs.

Related reads:

eCommerce in APAC: 2020 regional report

Livestream shopping, group buying and social discovery: The boom of social commerce

Why direct-to-consumer brands are winning retail in 2020

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