4 Reasons Why the Resale Clothing Market is Growing Fast

Photo of a shipping bag from ThredUP
 

By Tricia McKinnon

Why buy new when you can buy used? That’s the question consumers are increasingly asking themselves when it’s time to freshen up their closets. Instead of going to the local thrift store and hunting for hours for that perfect outfit it has never been easier to buy secondhand or preowned clothing online. Websites like poshmark.com and thredup.com have created marketplaces for buyers and sellers to meet and consumers are loving it.

The ease of shopping on these sites has created a fast growing segment of retail with the market for secondhand apparel growing from $28 billion in 2019 to an estimated $64 billion by 2024. This growth will likely come at the expense of off-price, fast fashion and department store retailers. Here are some of the reasons why the market for secondhand clothing is taking off.

1. High quality shopping options exist. More than a decade ago while on a shopping trip, a friend of Julie Wainright, the CEO of resale site The RealReal, commented she would never buy luxury items on a site such as eBay because there are too many counterfeits. Instead Wainwright’s friend chose to shop at a small store she trusted. 

That small observation became the beginning of a new business, The RealReal. Today, a decade later, The RealReal has a market capitalization of $1.3 billion. The RealReal, Vestiaire Collective, Rebag and Fashionphile are among several sites where consumers purchase preowned luxury merchandise. For quite a while the luxury sector shunned these businesses preferring customers who buy new, full priced items. But the growth of this industry has made luxury brands rethink elements of their strategy.

Take Kering. Earlier this month Kering, which owns Gucci, revealed it had taken a 5% stake in Vestiaire Collective. “Pre-owned luxury is now a real and deeply rooted trend, especially among younger customers,” said François-Henri Pinault, Kering’s CEO. “Rather than ignoring it, our wish is to seize this opportunity to enhance the value we offer our customers and influence the future of our industry towards more innovative and more sustainable practices. This fits naturally with our entrepreneurial spirit, our pioneering sustainability strategy, and our modern vision of luxury.” Last October Gucci established a partnership with The RealReal where Gucci provides secondhand products, such as bags used in photoshoots, for sale on the platform. 

There are also resale platforms which target a broader range of price points including Poshmark and ThredUp. Last May Walmart announced a partnership with ThredUp which allows secondhand clothing to be sold on its marketplace. ThredUP’s deal with Walmart involved placing 750,000 items across clothing, footwear and accessories from ThredUp on Walmart’s website at: www.walmart.com/thredup. “You’re seeing the old guard get involved, and that’s always an indicator of their perception that this is here to stay ,” says ThredUp CEO James Reinhart.

2. It targets price conscious consumers. One of the underlying trends casting the fate of many retailers is simple economics. As the Payscale Index writes: “since 2006, wages have risen 17.4% overall in the United States. But when you factor in inflation, ‘real wages’ have actually fallen 8.5%. In other words, the income for a typical worker today buys them less than it did in 2006.”  This disparity means that for many it’s hard to find enough money to put food on the table.  

If consumers were already struggling before COVID-19 hit the pandemic only served to make things worse. Pew Research Center found that: “one-in-four adults have had trouble paying their bills since the coronavirus outbreak started, a third have dipped into savings or retirement accounts to make ends meet, and about one-in-six have borrowed money from friends or family or gotten food from a food bank.”

If there is still any taboo surrounding shopping secondhand it is quickly being erased as consumers try to look their best while spending the least. Poshmark’s revenue increased 27% in the fourth quarter of 2020 to reach to $69.3 million. That is quite the accomplishment since during the first eleven months of last year the clothing sector was down 28.5% in the United States experiencing the largest decline of all major retail categories. "Resale has been doing very well through the pandemic," said Neil Saunders, managing director at GlobalData. "Consumers in general love getting great brands, including high-end luxury brands, at bargain prices."

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3. Sustainability is a core attribute. More and more consumers are focused on social causes. One cause that is near and dear to the hearts of many is protecting the environment. 1.2 billion tons of greenhouse gas emissions are produced each year because of textile production. An estimated 20% of water pollution in the world is due to wastewater created by clothing manufacturing. 

To make just one new T-shirt 700 gallons of water is used. Then there’s what consumers often do after that t-shirt is made. They often throw away their unwanted clothing leading to more than half or 64% of the 32 billion garments of clothing produced each year, ending up in landfills.

A survey of resale platform Vestiaire Collective’s members found that 54% purchased or sold an item on its site because they wanted to shop in a more sustainable manner. ThredUp has found that the amount of consumers planning to spend more money on sustainable brands is increasing, quickly, up from 18% in 2018 to 43% in 2019.

The COVID-19 pandemic has only heightened the focus citizens are placing on the environment with a BCG study finding that 70% of those surveyed said they are more aware since the pandemic that human actions are a threat to our climate and harming the environment is a threat to the human race.Donating or reselling clothing is an easy way for consumers to counteract these issues. 

4. The secondhand consumer starts at a young age. Secondhand clothing is especially popular amongst millennial and Gen Z consumers who buy secondhand items more than twice as much as the average consumer. A survey conducted by Piper Sandler found that 46% of teens hailing from upper income households say they have bought secondhand clothing and 58% of those teens have sold their used clothing to someone else. The survey also found that consignment and thrift stores are ranked by teens as their 13th favourite brand or retailer up from 44th in 2019. This indicates the growing popularity of this segment with young people. 

Poshmark’s user data also shows the salience of this sector with a young audience with 80% of the active users on Poshmark being either Millennials or Gen Z.

But all of the hype within the resale sector comes with challenges. The RealReal has yet to make a profit and Poshmark made its first quarterly profit last year. Both of these companies have been in business for a decade. “The cost of merchandising and posting the item online are usually quite scalable, because if I have 50,000 units of a particular type of jean then the cost of photographing and posting it online is distributed over those 50,000 units, whereas if you are selling secondhand you have ones and twos of an item,” says Bernstein analyst Aneesha Sherman. In the luxury resale business costs are also incurred to authenticate preowned merchandise as real making profitability harder to achieve.

Tricia McKinnonTrendsComment