Adapted from the 2022 “State of Green Business,” published earlier this month by GreenBiz Group. Download the report here.
When it comes to addressing the climate impacts of the fashion industry, resale sits among a suite of solutions, including rental and repair. Resale has been around for decades as vintage or thrift. But thrift, in particular, had negative connotations attached to it, stigmatized as a lesser than or cheap option to find used apparel or shoes.
More recently, resale has donned a trendier, climate-conscious persona. Three benefits of resale are often cited: It keeps garments out of landfills. It displaces the carbon that would be needed to manufacture new clothes. And it saves consumers money.
“Right now, resale is the belle of the ball,” says Caroline Brown, managing director at Closed Loop Partners (CLP), a circularity-focused investment firm.
Resale: back and better than ever
A lot has happened in the past five years to put fashion resale in a place poised for growth, and at least three companies in the space — ThredUp, Poshmark and The RealReal — have gone public since 2019. That has put resale squarely in the sights of investors and consumers.
Consider ThredUp. Since launching its resale-as-a-service offering in 2018, it has partnered with more than 20 retailers and apparel manufacturers, including Adidas, Madewell and Gap, to take back used items from customers — with incentives, of course — and make them available to other shoppers.
It’s becoming big business. By 2024, the secondhand market — which includes traditional thrift and newer resale models — is expected to grow to $77 billion from $36 billion in 2021 in the United States alone, according to the 2021 resale report from ThredUp. The analysis noted that two in five thrifters said they were replacing fast-fashion purchases with secondhand clothing. And younger people seem to be driving that push: More than 40 percent of Gen Z and Millennials shopped secondhand in 2020, compared to 23 percent in 2016.
“Consumers are refreshing their closets and turning to resale as a way to sustainably discard garments and acquire new ones,” says Neil Saunders, managing director at GlobalData, in the ThredUp report. “Retailers recognize this shift, which is why so many of them are now looking to get into resale.”
A mindset shift
To meet that shift, the industry will need to put some attention on its recapture mechanisms, such as blockchain technology that allows garments to be tracked through their life cycle and QR codes that validate their authenticity. Sixty percent of U.S. retailers have or are open to offering resale to their customers, according to GlobalData’s Fashion Retailer Survey, conducted last spring. Madewell, Lululemon and H&M are examples of retailers that have launched resale programs.
“The data really reflect the strong growth of resale and the desire of many mainstream retailers to jump on the secondhand bandwagon, both to generate growth and to meet the needs of their shoppers,” says Saunders. “Of course, more retailers coming on board will also help the secondhand sector grow as it expands choice.”
But how to do it? Today, retailers face three decisions, as noted by Commerce Ventures, an early-stage venture capital firm: “Engage with companies that can enable resale capability like Trove, build out their own recommerce functionality or altogether avoid consumer demands and forgo secondary sale profits.”
For retailers and brands alike, setting up resale isn’t as simple as other e-commerce activities. In many parts of the world, there is a lack of infrastructure — think physical waste recovery, reuse and recycling facilities that allow for the necessary processing to get items from one person to another and digital technologies that enable connection between value chain actors — to support circular business models.
And because retailers aren’t experts in reverse logistics — the systems needed to capture returned items, catalog and warehouse them — they’ll likely partner with companies that have already proven themselves as trusted partners, such as ThredUp or Trove, to get duds from one customer to the next. Even then, some returned items won’t be resellable. A whopping 5 billion pounds of returned goods end up in landfills across the United States each year, largely because they need to be cleaned or repaired before being returned to the shelves. That’s not always cost-effective for companies. It costs more to process a return than to sell it.
What will it take?
To make resale work, resellers will need to add more steps and complexity to the way they do business. Reverse logistics is one of the biggest hurdles but also an area where CLP’s Brown expects to see companies making headway in 2022.
In addition to long-time resale players, other companies, such as Treet and Recurate, are stepping out to help companies succeed at resale by doing what they don’t have the capacity to handle.
Apparel is at the center of the action, but other industries are making resale moves as well. For example, Back Market, a refurbished electronics marketplace, in May announced a $335 million investment round led by General Atlantic. Patagonia has for a few years offered a resale option for its gear — in addition to apparel — through its WornWear program. Home textile brand Coyuchi has a takeback and resale program for its linens. There’s also IKEA, which signaled its desire to make its takeback program a permanent fixture, including in the United States.
With consumers being less resistant to secondhand goods, brands and retailers have the opportunity to capture even more market share. Resale has the potential to grow significantly over the next decade but whether it makes up a significant portion of the retail landscape is to be determined.
For the projected $77 billion market value to become a reality, merchants will need to make resale easy and accessible for customers, both online and in stores. They’ll also have to make secondhand goods a larger portion of their offerings. Simply put, resale needs to become part of the new normal in retail.
Key players to watch
Depop — Etsy acquired the resale platform last summer, calling it “the resale home for Gen Z consumers.”
IKEA — the furniture manufacturer and retailer has launched several resale pilots in the last few years. Those experiments put it in a position to make resale permanent.
Lizee — the recommerce software company is on a mission to “transform the retail industry from linear to circular.”
The Renewal Workshop — in July, it moved into a 30,000-square-foot factory in Oregon, tripling its space to accelerate resale.
Thrilling — its online marketplace hosts more than 400 thrift and vintage stores in more than 100 U.S. cities.
Original Article: greenbiz.com
Episode 316: ESG Ratings, EV Charging, Circularity Chat
Where Do ESG and Sustainable Finance Go From Here?
Episode 315: Meet the VC Firm Advised by Leo DiCaprio
This week’s run time is 41:37.
WEEK IN REVIEW (5:40)
Meet the firm advised by Leo DiCaprio and Bill McDonough (25:15)
Regeneration.VC is dedicating $45 million to early-stage companies embodying regenerative and circular business models. Dan Fishman and Michael Smith, general partners of the venture capital firm, talk about what differentiates its investment thesis and how the firm will work with large corporations.
*Music in this episode by Lee Rosevere: “4th Ave. Walkup,” “Try Anything Once” and “Southside.”
Original Post: greenbiz.com
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