Will Brand-Owned Resale Platforms Disrupt the Reselling Industry?

The fashion industry was valued at over $2.5 trillion before the pandemic, making it one of the largest and most lucrative in the world – but there is a dark side to this booming market. According to statistics, 92 million tonnes of textile waste is created globally every year, and the equivalent of a rubbish truck full of clothes ends up in landfill sites every second.

The fashion industry today has yet to develop a mature closed-loop recycling model, with only one per cent of used products being recycled back into the fashion industry’s value chain (instead of being landfilled or incinerated), noted a report by McKinsey and Global Fashion Agenda. Some brands have taken into account the end-of-life plan at the beginning of production so that products can be reused, recycled or degraded at a later date by launching products or collection following cradle-to-cradle principles. Others have decided to extend the life cycle of their products by implementing trade-in programmes to take back used clothing and launching an official platform to resell these second-hand items to consumers.

Canadian activewear brand Lululemon announced its re-commerce project “Like New” in April this year, starting with a pilot trade-in programme in California and Texas in May, followed by the launch of an online resale platform in June. Lululemon is not the first brand tapping into the resale business – H&M Group’s COS, denim brand Levi’s and outdoor brand Patagonia are just a few examples of other brands that have already gone down this road.

Consumers these days are not only looking for budget-friendly options given the COVID-19 context, but are also thinking about how to spend more responsibly. Despite the global retail environment being hit hard over the past year, the resale industry has grown against all odds. Brand-owned resale platforms offer a new way for consumers and the market to approach things – but is this strategy just a way for brands to check boxes off their sustainability goals, or can it be a real disruptor and drive change in the resale industry?

Taking a New Step forward

Lululemon’s trade-in programme allows consumers to bring in “almost new” or “gently used” clothing (not including underwear) and bags from the brand to any participating store in California or Texas. Following a review of their items, consumers will receive a Lululemon’s e-gift card. Each item can be redeemed for a $5 to $25 gift card depending on the product category. The items are then processed by Trove, a San Francisco-based resale technology company that has partnered with Lululemon on this programme. Clothing sent to Trove’s warehouse are inspected and cleaned by its team of more than 300 employees before being boxed up and sold through Lululemon’s now-live pre-owned platform Like New, where consumers can purchase used items for around 50 per cent of their original list price.

“The move to re-commerce is a massive customer shift and third-party marketplaces like thredUP and The RealReal have credentialised it,” Andy Ruben, Chief Executive Officer of Trove, said. “When brands realised they've got to be staying with customers in this massive trend for resale, we make it easy, we provide the technology that allows brands to be able to buy back these items and make them scalable.” Trove also works with brands such as Arc'teryx, Patagonia and Eileen Fisher on their resale programmes.

This initiative can be seen as an extension of the sustainability agenda announced by the brand last autumn – Lululemon stated that it would make 100 per cent of its products with sustainable materials and end-of-use solutions by 2030, and also offer new options to extend the life cycle of its products by providing resell, repair or recycle options by 2025. Since the launch of its Like New initiative, the brand has also stated that it would reinvest 100 per cent of the profits or 2 per cent of the revenue (whichever is higher) on sustainability projects such circular product design and recycling programmes.

A Viable Model

While today’s third-party resale marketplaces continue to struggle with huge operating expenses that challenge profitability – both Poshmark and thredUP, two resale platforms that went public this year, have seen their share prices falling below the initial offering – the overall resale industry is set to grow at a rapid pace in the coming years.

Which is why Lululemon’s move to launch a resale business was met with much enthusiasm in the industry. Within two days of Lululemon’s announcement on 20 April, its share price jumped 7.1 per cent to $338.75. Roxanne Meyer, Managing Director at equity trading and research firm MKM Partners penned in a note: “[This company] is among the first to incorporate a re-commerce strategy into its business model, and will thus serve as a role model for other retailers who will likely watch closely.”

But that said, Lululemon has long been one of the most popular apparel brands in the $28 billion resale industry, and is already one of the top listed brands on resale marketplaces such as thredUP and Idle Fish (Alibaba’s second-hand trading platform). The brand’s resale demand has even prompted the birth of resale companies like Chicago-based We Buy Lulu, where consumers can trade-in their used Lululemon products and purchase pre-loved items via the organisation’s Poshmark store. Where there is demand, an official brand resale presence not only serves to fulfil sustainability goals, but also promises to be another potential revenue driver.

Capitalising on Scarcity

Product durability is a common denominator among brands that have successfully rolled out in-house re-commerce. On top of appealing to consumers with the lengthy life cycle of its items, brands are also tapping into the notion of scarcity in order to tag a premium to second-hand items, which has long been the case the pre-owned luxury sector with product categories like handbags, watches and jewellery.

Levi’s official resale platform, SecondHand, for instance, goes beyond being a platform for snagging worn denim at lower prices, and instead encourages consumers to discover the brand’s vintages. The brand’s trade-in programme offers consumers gift vouchers of varying values based on the age, condition and original price of donated clothing (the older the item, the more valuable it is). On SecondHand, items are categorised by their age as well, with a pre-millennium 501 selling for $128, far beyond the price of a brand-new 501 being sold on major sites.

Making Sustainability a Reality

Although brand-owned resale platforms are now on the rise, most of these resale platforms and trade-in programmes only operate in a limited number of markets as supply chain issues and the gaps in consumer behaviours across different markets make it difficult for them to be rolled out globally.

Patagonia has established a complete circular economy system called Wear Worn, offering repair services to product owners as well as an upcycled collection ReCrafted in addition to its resale platform and trade-in project. “For a project like this, the challenge actually lies not in the specificity among the offline or online operations, but in the complexity of the whole project,” says Roger Zeng, Head of Patagonia China, about the localisation of these circular economy projects. “At the moment, the challenge in marketing these initiatives in China are [related to] consumer behaviour and the awareness of sustainability, both at the level of the general public and the industry as a whole.” As such, Patagonia’s Wear Worn initiatives in China are mostly implemented in the form of pop-up events, instead of being an ongoing project like it is in the U.S. Although a permanent repair station has been set up at its flagship store in Beijing, there is still a lot of room for growth.

Consumers in different markets have not yet developed a common understanding of the circular economy, and the fashion industry has yet to develop uniform standards and criteria to benchmark the efficiency of companies’ sustainability practices, posing a further challenge for brands looking to develop their resale business. Certified B Corporations (B Corps) such as Eileen Fisher and Patagonia work to meet certain criteria in terms of product footprint, usage impact and end-of-life solutions during the annual B Impact Assessment. However, for the many companies that are not B Corps or have no intention of becoming B Corps, there are no governing bodies in place to monitor their product footprint or the redistribution of revenue of their recycling projects. This makes it harder for brands to benchmark their progress on the sustainability scale and push forth with more initiatives that make a difference.

While there is still much to be done in this field, the emergence of brand-owned resale platforms appears to be a step in the right direction. Besides being an alternative operational and even profitable business model, the involvement of key industry players in encouraging sustainable practices like this can also urge the standardisation of this business, which will not only increase consumer confidence in purchasing pre-owned goods, but also drive the industry at scale.