The Future of Resale

0:07Hello and welcome to The Debrief from the Business of Fashion, where each week we delve into our most popular BOF professional stories with the correspondents who created them. I'm executive editor Brian Baskin. And I'm senior correspondent Sheena Butler-Young. And today we are talking all things resale. We are a long way from the days when resale meant hunting through thrift shops. Today, secondhand clothing is, depending on how you measure it, a$50 billion business in the U.S. alone. But it feels like sometime in the last year or two, we crossed a threshold where a critical mass of consumers no longer distinguish between new and used.

0:44It's gone from being a marketing gimmick to a real business for many brands and independent platforms. I even had someone who works with a lot of luxury brands tell me recently that one reason they've been so confident about raising prices is they know a lot of their customers are thinking about selling that$5 ,000 handbag even as they're buying it. We're going to talk to retail editor Kat Chen about how we got here and just how big resale can get. And later, we'll talk to e-commerce correspondent Malik Morris about a different kind of resale that is changing how retailers handle your returns.

1:17First off, thank you for joining us, Kat. Thanks for having me, guys. Excited to be here again. So we're going to get into all the big players in this category and what's going on. But first, I wanted to ask you, what is your personal relationship with resale? Do you shop secondhand? Yeah, absolutely. I would consider myself a pretty big secondhand shopper. I've been shopping secondhand for the past 15 years. When I was in high school, you know, my friends and I were shopping at the Salvation Army. And this was that hipster Tumblr era when old stuff was cool and ironic. But that's the big difference between now and then.

1:55Now, in 2024, secondhand fashion is no longer just a niche interest, right? It's become totally mainstream. It's funny because I have a version of what Kat just shared, like a different version of that story. I remember I was interviewing for my first fashion editorial job in New York a little more than a decade ago. And I didn't have a ton of money. I didn't know what I was going to wear, but I wanted it to be like something designer and conversational. So I went to a thrift shop. I was going to be covering footwear. So I went to a thrift shop and I got a pair of, this is kind of corny, but Manolo Blahnik pumps.

2:30and I was going to wear them. I thought it would be like a nice conversation starter. I did wear them. But ahead of my interview, I told a friend of mine that what I had done, she said, oh, that's going to be embarrassing for you. They might judge you that you didn't go to the real brand and support it, but you went to a thrift shop instead. And it's funny because I think that's the opposite. And this was a decade ago. Kat talked about being in high school about 15 years ago, but I remember that feeling. I had to wear them. I had nothing else, but I feel like that's so different today. Oh yeah, absolutely.

3:01When did that stigma start to go away? What changed? It's hard to say because personally, that like very snooty attitude toward, oh, well, where'd you get that? It has felt so tone deaf to me personally for a very long time. But I do think though the de-stigmatization of resale, a large part of the equation is how easy it is to shop and sell secondhand. I think today, secondhand fashion is ubiquitous. You go on the subway and you see ads for Mercari or for eBay. And there are dozens of platforms that do peer-to-peer shopping options where you can buy something secondhand at a fraction of the cost of retail.

3:53Or you can sell something that you've had for a while. And if I want to buy a pair of boots. There's Vestier Collective, Poshmark, Depop. Brands are selling their own secondhand pieces powered by B2B companies like Trove and Archive. And all of these options are available to me for both when I want to buy or when I want to sell. And so when resale is, you know, top of mind like that, I think the market adapts to that acceptance mentality. I feel like sustainability or the idea that it is more sustainable has also helped destigmatize it. It went from this idea that you're not supporting a brand by going and buying it on the secondhand market to actually you're doing good for the planet.

4:35Is that a factor? I think so. Although I feel like it's less salient than we would like to believe it is. We've covered this idea of cognitive dissonance among shoppers, right? Shoppers say they want to be sustainable. They want to be more conscious about what they're buying. And yet you see fast fashion growing at an insanely rapid pace. But I think that it's a confluence of things, Sheena. Sustainability is definitely part of it. I mean, people love to be rewarded or to feel rewarded for a purchase that they've made. And I think the narrative of resale being sustainable certainly serves that good feel moment when they buy something secondhand rather than primary.

5:22Whether resale is sustainable, actually sustainable, whether it has had an effect on fashion's overall carbon footprint, that has not been proven. That has not been demonstrated. And some people argue it may even be encouraging people to consume more because they, as I was saying before, they're so confident they can resell whatever they're buying, that they're buying new and resale and they're not really reducing consumption at all. Oh, absolutely. The narrative of it all is the perfect word. I don't think I saved the planet with my Manolo Blahnik purchase. Oh, I think you did, Sheena. For sure.

5:58I mean, I think that's the most interesting question about the resale sector today is, could resale ever replace even a fraction of the volume of primary apparel production? Because in order to demonstrate that resale is actually good for the planet, it would need to have an impact on output. And from a bird's eye view, it needs to divert the industry's carbon footprint. And so far, there are no signs of this. But I do think there are some promising bits going on. So for instance, Patagonia is really doubling down on its resale program as part of its efforts to curb not necessarily growth, but the impact of growth on the planet.

6:44There are a few smaller brands whose resale programs are now totally profitable, which is really interesting because resale is notoriously, online resale is notoriously difficult to operate profitably. So the fact that that's happening, I think that's a really promising sign. Something you said earlier really struck me when you were talking about you're on the subway and you see all these ads for these different resale platforms. It feels like we're in this odd place where this is a market that it's almost, I would say, a mature market at this point. It's, you know, online resale has been around for a decade, 15 years.

7:21I don't know. I don't know when The RealReal was founded, at least a decade ago. And at the same time, there are constantly new services starting up. I mean, I was just at Voices, our annual conference in the UK, and every room you went into, you feel like you met five different founders of different resale platforms that were just emerging or services for resale. Where are we in the lifecycle of this market? Yeah, that's also a very interesting question, Brian. I think 15 years ago when the RealReal came onto the scene for online fashion resale, there was really only one player around and that was eBay.

7:57And part of the Rio Reels hypothesis and its proposition to investors was that it could become the dominant service provider for luxury secondhand fashion. And that was sort of its hypothesis, even leading up to its IPO in 2021. But in the years since, what we've found is that there really isn't a market leader in fashion resale, or there hasn't been a market leader in fashion resale. And instead, we have dozens of these new platforms popping up every day. And they're all undermining each other, right? And it's become kind of a race to the bottom. I'm working on a story about commission fees and how commission fee structures have changed so much in the past two years because there's so much competition for customers.

8:54And that creates some tension, right, between the platforms and their customers. I mean, tell us what happened with Poshmark recently. Not so long ago, Poshmark announced that it would be placing some of the commission fees onto the shoppers to better incentivize sellers. And there's a lot of competition on the seller front because there's always demand for secondhand items. They're cheaper. But the supply end is where a lot of platforms struggle with. Basically, the original policy was that sellers are charged a 20 % fee on everything that they sell. But in order to incentivize more sellers, more supply onto the platform, Poshmark imposed a portion of that seller fee onto the buyer.

9:50So then prices of the goods sold on Poshmark went up. And immediately this had an effect on its sales. A little over two weeks after this new fee structure was imposed, Poshmark switched it back. And I think this just shows how willing they were to take this ginormous risk in order to incentivize people to sell on the platform because there are just so many other options out there. You know, am I going to make more money selling on Poshmark or am I going to make more money selling on eBay? And all of these platforms are trying to draw me in with how much money I can make on each sale. It seems like it's very difficult to squeeze more money out of this business, even if you're one of the biggest players in it.

10:39And the reason is because, like you said before, there's always someone new coming along. I mean, my favorite example of this is this marketplace Vinted, which came out of Lithuania. And it's been around a while, but it wasn't really on my radar, especially being in the US where they don't have as big a presence, but they're apparently huge in Europe. They're challenging Vestiaire Collective, which is the established resale player there. And then a month ago, they announced a 5 billion euro valuation. Again, for a company that someone who's been covering resale off and on for a while had really, we'd never written about it.

11:10Like they're not, you know, maybe that's a failing on our part, I guess, but you know, they kind of came out of nowhere and now they're the biggest player in Europe potentially. Yeah, absolutely. They're actually making a pretty big push in the US as well. And yeah, it's really interesting. I think the learning for operators of these platforms is that there's very little consumer loyalty in this space. Like when I consider selling something, I am going to consider every single one of these platforms, basically whichever one that I'm going to get the best, the quickest sale, the easiest sale, and then of course, what I can recoup.

11:49How much am I making on my sale? It's funny because two things you said earlier, there's no market leader right now. A lot of these platforms are racing to the bottom. What is incentivizing businesses to launch a new resale platform every day, every week, every month? What are they after? What are they hoping to gain? Where is the real opportunity? I think for the platform operators, There is white space in the market. If you have the investment capital to pour into marketing, to appeal to consumers who, by the way, it's a tough economic climate. I think people today are actually even more interested in resale than they were two, three years ago right out of the pandemic.

12:35I think for brands, the proposition is different. I think that resale has been the vehicle of a lot of greenwashing tactics, using resale as a means of curbing their carbon footprint, putting it into their climate reports, you know, even though that has not been measured, even though that, you know, these very small brands operating even smaller resale programs that haven't had really an effect on their production on their bottom lines. But we continue to see brands invest in this space. And I do think that there are players with really great intentions, earnestly developing resale programs to be profitable to maybe one day diminish their overall production.

13:27Is there a core resale customer right now? I hear you on that. It's grown so much and it's been embraced broadly. But is there a core demographic, a core customer? My first instinct is to say young consumers, Gen Z consumers. Brian was sort of talking about the shopping literacy that people have today where, you know, if you're shopping for a plain t-shirt, you'll go somewhere affordable and mainstream. Maybe you go to Uniqlo. But if you're shopping for an occasion, maybe you want to splurge on a Simone Rocha dress. But before you make that purchase, you're going to look on Poshmark and you're going to look on the real real to see what that dress is going to fetch when you sell it.

14:07And so in your head, you feel a sense of security going into that purchase, knowing that you'll be able to recruit the cost of it. I think that mentality, that savviness isn't just young consumers anymore. I mean, it's me. I don't know about you, Sheena, but I also think about resale all the time in terms of both buying and selling. Oh, for sure. but I also consider myself a young consumer. So there you go. Why are we laughing? Come on.

14:39We'll be back with more of The Debrief right after this.

14:47So now we're going to shift gears to another topic, which is reselling the unsellable. Joining us now is e-commerce correspondent Malik Morris to talk about how new software platforms are emerging to help fashion brands turn damaged return goods into new sales. But do new solutions truly address the problem or just shift it around? That's the idea, but I want to open this with the scale or the magnitude of online returns as an issue. How big is it, Malik, and how have brands managed it to this point? Hi, thank you so much for having me back. Yeah, it is a huge problem. I actually did a case study last year about online returns, and something I learned during in that process was that most things that consumers send back to brands that they bought online can't just be dusted off and put back on the shelf.

15:30That was news to me because I worked in physical retail and we took products back and immediately resold them. Sometimes in the same day, sometimes one customer came in and bought back a shoe and the other customer was like, oh, that's the size I need. Can I have that please? And when it comes to e-commerce, unsellable inventory could be as severe as having tons of stains on them or as small as a pulled thread or even a customer's like lingering scent could make it unsellable. And it's not just about returns either. Sometimes things can go wrong on the handling of products. You know, you accidentally break off a button on a shirt or something when you're unboxing, you know, a package or inputting the items on the shelves or, you know, an item on display in a window in a store gets sun damaged.

16:11And all those goods usually get what we call in retail damaged out and, you know, it may get donated or more likely end up in the landfill. But the brand, of course, takes a loss on that item. So that's what we mean when we talk about unsellable inventory. And it's quite a huge and large scale problem. And then you have these providers like Bazaar and Revive that have launched recently. What is their premise? So, you know, they're part of this group of return software firms that streamlines the reverse logistics process. In some ways, it is quite novel, but in some ways it's on the heels of firms that have existed for a long time, you know, like Optoro or Loop Returns that basically make it easy for consumers to drop returns off at like a Staples or other retailers.

16:56And they give brands the tools to offer quick refunds or easily process exchanges online. But they also help brands and retailers figure out what to do with unsellable products, either through donations, recycling, or reselling them. And those companies like Optoro and Loop Returns, they traffic in all product categories, but particularly in electronics is where, you know, that proposition of reselling unsellable products typically shines for them. But that last piece is really tricky for fashion brands because, you know, the smallest thing can make something unsellable. Like I said before, a snack thread and so on and so forth.

17:29But in my story, I do talk about these newer platforms, including Bazaar and Revive, that are specifically helping fashion brands take those unsellable goods and resell them at a discount. Revive, for one, they're a little bit more traditional. And being a software firm that helps brands refurbish their return goods and other things in their inventory to be resold on their own site or through resellers like Poshmark. But the model that's really novel here is Bazaar, which has a marketplace, a front facing marketplace like a RealReal or Poshmark, where brands can directly list their products that can't be resold or offload excess inventories.

18:08And these options feel tailored to fashion and have an understanding of the complexity of what makes an item not worthy of being resold as new or at full price and serves as some sort of a remedy to that ongoing conundrum. And Bazaar is working with some fast fashion sellers like Cider, which a lot of the traditional resale sites have explicitly said they don't want that essentially cluttering up their listings. And that's actually a specialty at Bazaar, right? Yeah, that is a part of their specialty is like being able to, so they traffic in helping brands that sell product for less than$200, where honestly, at that price point, brands are often like, screw it, you know, like just throw it and burn it.

18:53Like we're not going to make any money off of trying to refurbish this. And that obviously includes fast fashion, you know, platform, then fast fashion, you know, retailers like Cider and others. But there's also, you know, some that are in the middle, like Halara, you know, that's like had a viral moment with Taylor Swift earlier this year and opened pop-ups, so they wrote about, and they sell products and dresses for like$40. So like, you know, not rock bottom Shein prices, but again, it's still at a price point where if something gets resold and has been a vaccine on it, it just doesn't make sense for them to try to refurbish it and resell it.

19:24And now Bazaar is coming in with a proposition of saying, hey, we can offload that and put it on that site. And also it's good to clarify with Bazaar that they don't go through the trouble of necessarily fixing items. They just kind of list it as is. And the customer is kind of what you see, what you get was very similar to the proposition of like a real-real where it's like they have a range, a spectrum of conditions, you know, The price obviously reflects that. And so there is a level of transparency there, which is supposed to be a part of the proposition of sustainability and a part of the proposition of resale as well.

19:55By the way, I do see brands going directly to resale platforms to offload inventory. You know, this is something that's not addressed explicitly, but when you see 10 dresses of the same size of the same brands, tags attached on the real real, it's definitely either the brand or retailer offloading that inventory. And that is also a part of like a big part of what Revive helps to do. Like they have the refurbished part of their business, but they also, like Kat is saying, like connecting these brands to the Poshmarks of the world and offloading that inventory that they can't get rid of. Yeah, I think that's why Bazaar is so interesting, because they're taking this practice, which has gone on, I mean, probably gone on well before even online resale was a thing.

20:43You're just quietly disposing of returned merchandise wherever you can. And they're kind of bringing it out in the open and sort of like the RealReal did 15 years ago, trying to remove some of the stigma around buying something that was returned and maybe slightly off from what you'd see in the store. Yeah. And what's interesting too is that, you know, there's this idea that, you know, youth culture, like the stigma of buying something secondhand is gone for them. And if you look at Bazaar and their site, like the colors and the brightness and the brands that they carry are definitely youth oriented.

21:15And so even at a price point of less than$200, because consumers don't really care like, oh, I'll buy this dress that's now from Halara that's at a discount and maybe had a little bit of a stain on it. Like, it's totally fine. I'll take it to dry cleaners. And so they're really capitalizing on this shift in consumer behavior in recent years. I want to get back to the premise of brands maybe engaging with these platforms so that they can actually monetize their returns. I found this quote really interesting from Annie Hu, Bazaar's co-founder and chief executive in your story. Malik, she said, if brands do the math internally, they might find out that without Bazaar, it's actually cheaper to just let something accumulate in a warehouse and not do anything with it.

21:56But even so, they're still losing money. I find that confusing. Is it helping brands do something with returns that makes it less loss making? Is it really doing that? Yes, I can see why it's confusing, but the ultimate loss of the fact that this is a bunch of product that's not resellable. So you're losing money on items that you're not able to get to the consumer. And whatever the cost is of operating your own platform, the cost is of investing in a platform like Bazaar and the fee that they take or in Revive and their software service. at the end of the year, you're still going to recoup a lot of money that will be lost with items that are just going to be burned or have to be donated for what you can't make a new sale on.

22:38So I get what she's saying where it's like, if you don't invest in these kinds of platforms, then the solution is all that money just goes up in flames, literally. And also maybe introducing it to some new customers who may not come into your store through a platform like Bazaar versus waiting to have customers discover you by going online or going into a store, right? Yeah, no, for sure. I mean, and I can imagine Kat can attest to this too. Like when you think about platforms like Shrove or Archive, which helps brands like Levi's and Patagonia build their own resale programs, like either through refurbishing return goods or through buybacks where customers come in and say, I've had this for 10 years and I want to sell it back to you.

23:21and they get a store credit or they get cash or what have you. Obviously, the buyback program is different than usually existing customers, but it is a way for a new customer that maybe can't afford your product at full price to come in and buy. And then those consumers with these platforms have found usually graduate into buying new items down the line, especially as they get older and they come into their purchasing power more. So it really is a great customer acquisition tool as well. So just to wrap things up here, I thought we could each give an idea for where we think resale is headed, what the next big development was going to be.

23:58And since I just sprang this on you guys, I will start first and give you guys a bit of time to think. my opinion is that this market is going to continue to flatten out there's not going to be some resale giant that emerges i think the more likely development is we'll get some sort of product search that goes across platforms and people will stop even knowing what a lot of these platforms even are where they're buying something they'll just know they found the product they want and what it will cost and i think that's going to force a lot of these resale sites to differentiate themselves in other ways.

24:33They're going to have to have a tighter edit. They're going to need to be the essence of retail or the My Teresa of resale, or they're just going to need to get more audacious. I mean, we saw a taste of that with Vestiaire Collective doing this big partnership with Emily in Paris and just splashing themselves all over this hit TV show on Netflix. Like they're really having to ramp up how they brand themselves, I think, in reaction to what's coming here, which is that, as Kat said before, nobody really cares where you buy something. They just want to buy it. Sheena, what do you think? Where are we going?

25:01An interesting development to watch for me comes from a story I recently covered, which is how brands are thinking about who should own resale within their company. So like there's now this role of a, it's not a real title, but it's a title that brands have been using casually, which is the CEO of resale. I think that opportunity to have talent touch resale and learn cross-functional skills like marketing, supply chain, e-commerce can actually be interesting. What that turns into, I don't know. I think how brands leverage resale's cross-functional skill set can be interesting to watch in the future.

25:37I love both of your predictions. I'm going to cheat a little bit and cite someone else in a conversation that I had this morning with one of her fellows about resale and she has noticed, and I think this is so fascinating, she has noticed that there is backlash against some resellers either selling things that are priced too high. And I mean, this is a common refrain in New York. People always say, I don't shop resale in New York. I mean, I don't really shop thrift in New York because it is really expensive. So there's a bit of a pricing ceiling that we're seeing, but also there are sellers on peer-to-peer services like Depop who are essentially being very duplicitous and buying fast fashion, taking off the tag, and then calling it vintage.

26:37This is something that I've seen on Twitter as well. I don't know how widespread it is, but we're seeing these hiccups in resale where this ecosystem is being exploited a little bit. I mean, we haven't talked about counterfeits, but the resale industry is why counterfeiting is so, so rampant in the industry. But yeah, I think in the coming months, in the coming years, there's going to be guardrails against these misuses of resale. Yeah, that's interesting, Cap, because I feel like if those guardrails would be the brands kind of taking it on more themselves, that's kind of in the vein of what, you know, Sheena was talking about, like a CEO of resale at some of these companies.

27:22And also, you know, what Brian was talking about, like the problem of there not being enough differentiation or enough of a sustainable proposition for the platforms, you know, that are dedicated to resale. And a lot of my reporting is focused on how brands can run a more profitable business. And if resale can prove that it is an avenue for them to achieve this, you know, whether it's through working with the companies like Revive to help them resell, you know, return merchandise. And I can see it becoming a bigger priority for brands, which will make the shopping experience all the better for consumers who can just go directly to their favorite places, their favorite brands and shop items that are more affordable and also feel like they're doing good for the planet.

27:59And then I would say that leads to an increase in sales and then it can further validate and expand the resale economy beyond, you know, a litany of players who are dedicated to creating marketplaces solely for resale. Malik, Kat, thank you so much for joining us today. Thank you for having us. Thank you. Please be sure to check out Malik's article, Fashion's Big Opportunity in Reselling the Unsellable. These and other stories are available to BOF Professional subscribers, and you can find the link in the episode notes. You've been listening to The Debrief, produced by Olivia Davies, edited and mixed by Eric Bria.

28:36I'm Brian Baskin. And I'm Sheena Butler-Young. We'll be back next week with a new episode. Thanks so much for joining us, and be sure to follow us wherever you get your podcasts.