E-Commerce Retailers See Opportunity in Secondhand Market

Share this:

Call it secondhand shopping, circular fashion, or the “new to you” business. The resale market for brand name goods has never been hotter. 

Resale fashion has ballooned into a $30 billion industry, with experts forecasting 10% to 15% annual growth in the next decade. Specialized digital resale platforms and third-party marketplaces, like Poshmark, eBay, The RealReal, and thredUP, have been behind much of the industry’s growth, with a reported 25% to 30% market share. However, name-brand retailers like Lululemon and Net-a-Porter are getting into the action in 2022 as well, designing secondhand shopping experiences that rival their current e-commerce sites.

Why online retailers are embracing secondhand marketplaces

“Secondhand marketplaces pose an exciting opportunity, if not a mandate, for retailers to rethink sustainability and create items with longer lifespans. If a jacket can be sold not once but really multiple times by the same brand, that might shift some of the practices we see clothing retailers adopting around fast fashion and create better, more environmentally friendly businesses,” says Eli Finkelshteyn, CEO and co-founder of Constructor, a company focused on AI-first e-commerce search and product discovery. 

As more customers lean into buying and selling secondhand, online resale marketplaces are becoming an opportunity for companies to recapture the demand for their pre-loved products, Finkelshteyn says.

“It’s not a trend that’s going anywhere soon, so it’s a smart business move to go where the market is headed,” he says.

Americans will spend nearly $179 billion on secondhand goods this year, an increase of 96% from 2015. By 2030, that figure is expected to double to $354 billion. According to Mercari/GlobalData, three-quarters of consumers bought at least one secondhand item last year.

For well-known brands, like Lululemon, jumping into the resale business means gaining access to new customers, a hedge against inflation, and increased credibility with eco-conscious shoppers. Resale also provides retailers with new opportunities for unloading older inventory and effectively managing logistics.

“Retailers have limited room in their warehouses for products and typically try to get rid of products that are no longer in season by putting them on clearance. Because of that, if you want a jacket from your favorite apparel store for a trip in April, you may not be able to find one,” Finkelshteyn says. “But if you can buy a used version of that jacket from another person who will send it directly to you, it opens up some interesting possibilities.”

Resale challenges and AI’s role

Resale does come with challenges, though, forcing brands to compete against both their own inventory and other marketplaces where product owners can resell their items. Finkelshteyn says it’s difficult to A/B test merchandising optimizations to the same product over time. If there’s only one of each item, there is no B version to test.

AI and machine learning can help resolve some of the biggest challenges. For example, retailers are already using AI to drive personalization, even when there is limited inventory. If the AI is based on clickstream, it can also surface patterns between similar items. This becomes especially useful in secondhand marketplaces, where there can be very few of each item and very poor, user-written product descriptions. In these circumstances, Finkelshteyn says brands get a lot of benefit from learning and understanding behavioral patterns across similar products, and what makes each product appealing or unappealing to secondhand shoppers.

“A good product discovery strategy can help surface items that aren’t only relevant to what a buyer is looking for, but also attractive to the individual buyer’s tastes based on what each buyer is already clicking on—or not clicking on—and purchasing. This is especially helpful in resale marketplaces when people might not come looking for a specific item but are browsing categories of products in general looking for a great item at a deal,” Finkelshteyn says. “Regardless of whether it’s the first or second time around, retailers can improve their conversion rates and build brand loyalty by helping their customers find the products that are not just relevant to the users’ queries, but are something the user is likely to love.”

Stephanie Miles is a senior editor at Street Fight.

Stephanie Miles is a journalist who covers personal finance, technology, and real estate. As Street Fight’s senior editor, she is particularly interested in how local merchants and national brands are utilizing hyperlocal technology to reach consumers. She has written for FHM, the Daily News, Working World, Gawker, Cityfile, and Recessionwire.