Thifting, secondhand shopping, vintage hauls – there are a million names out there for the practice of buying pre-owned items. Once the domain of the price-conscious consumer, the exploding popularity of resale can be attributed to the growth of online thrift marketplaces – popularly known as ‘recommerce’.
But as retailers zone in on the growing secondary value of their merchandise, there’s a steady shift underway from resale being driven by enterprising consumers to being managed by brands themselves. How? Through the rise of RaaS (resale as a service).
RaaS platforms are changing the game by making it easier for brands to take control of their own resale experience. This means not only more revenue but also more consistency in the shopping experience and brand storytelling.
In this post we’re going to dive into the world of RaaS – and why retailers should be paying close attention to this increasingly mainstream service offering.
RaaS (Resale as a Service) is a business model where companies partner with external recommerce solutions to create a bespoke resale service for their customers. RaaS providers take care of the logistics of developing and maintaining a resale channel, so brands can focus on brand storytelling and marketing.
As recommence and the resale of pre-owned items continues to grow in popularity, the RaaS model is a win-win for both retailers and their customers. Companies benefit by outsourcing the creation of their resale channel to experts, instead of struggling to build their own in-house and risking a poor customer experience. Customers gain access to a convenient, easy way to buy and sell pre-owned items, which helps to strengthen customer loyalty.
The secondhand marketplace has transformed dramatically with the rise of e-commerce. Online platforms have lowered the barriers to access and made it possible for consumers to find pre-owned goods more easily, creating a thriving market that has attracted enterprising brands and business owners alike.
Resale will account for 14% of sales activity in the apparel, footwear, and accessories market by 2024, up 7% from 2020. Furthermore, ThredUp and GlobalData’s 2022 Resale Report found that the global secondhand apparel market is forecast to grow 127% by 2026 – which is over three times faster than the global apparel market overall.
But as the secondhand market grows, brands are faced with a quandary: Do they leave resale up to an unlicensed market, or do they step in to manage it for themselves (and get their slice of the pie?)
In spite of the uncertain economic outlook, the luxury goods market is continuing to go from strength to strength. According to Bain & Company, the market was worth €1.15 trillion in 2021 and grew a further 19%–21% in 2022 after a significant slump during the COVID-19 pandemic.
But just because consumers have to tighten their belts, it doesn’t mean that champagne tastes disappear overnight. Inflation has meant that discretionary spending has taken a hit, with consumer confidence still struggling to recover during 2023. This also dovetails with significant price hikes over the past few years by luxury brands like Chanel and Louis Vuitton, who are citing supply chain issues and rising material costs. Together, these trends are causing consumers to turn to resale sites.
High-end fashion brands have traditionally been hesitant to embrace resale, due to fears about cannibalizing their primary sales market. Yet attitudes are slowly changing: Luxury reseller sites have highlighted the vast scarcity value of vintage and limited edition collections on the secondhand market, items that would otherwise be worth far less without the right platform to promote them. This has led to brands including Gucci and Stella McCartney opting to partner with select resale sites where they get a cut of the sale proceeds
It’s no secret that the fashion industry is a massive contributor to climate change and pollution. The “Nature Reviews Earth and Environment” study in 2020 found that 20% of industrial water pollution, 30% of microplastic ocean pollution, and 3% to 10% of greenhouse gas emissions can be contributed to fashion and textile manufacturing.
Even though many brands are working hard to change this narrative by recycling textiles and using more eco-friendly materials, the fact remains that the fast fashion model and the expectation for regular product drops are inherently unsustainable.
This is proving ethically difficult for young consumers, with 64% of Gen Z and Millennials saying they are influenced by sustainability when making purchases. They are looking for ways to stay fashion-forward without worsening the problem – and resale holds the answer. According to a BCG study, Gen Z consumers are the most likely to buy (31%) and sell (44%) secondhand items, a behavior that is driving a meaningful portion of resale activity.
Having products bounce back into the warehouse – or not leave the warehouse at all – has long posed a major challenge for trend-based brands. When consumers are primed to expect a drop in new inventory on a regular basis, excess or returned merchandise often has very limited resale opportunities. This results in escalating storage costs, and in the worst-case scenario, having to discount or liquate stock in order to free up space.
These strategies for dealing with excess inventory are costly not just financially, but also to a brand’s reputation and position in the marketplace. Getting into a spiral of regular clearance sales threatens your standing as a premium retailer, as constantly discounted goods can be interpreted as being lower in quality.
Adding a resale channel to their business allows a brand to change the value proposition of excess, returned, or pre-owned items that could be viewed as unpopular or poor quality. Adding these products to a separate catalog from the rest of your e-commerce store creates more space for brand storytelling and building trust with consumers.
Traditionally, resale and recommence have been practiced not by brands, but by individuals looking to clear out their closets or make some quick money. As a result, the first generation of the resale market was dominated by peer-to-peer e-commerce sites, which saw individual consumers listing items such as fashion, footwear, or accessories for sale through their own accounts.
Over time, popular resale and consignment websites such as Thredup, Poshmark, and Depop have become home to successful resale businesses run by enterprising consumers. Brands in the fashion industry and beyond have become aware of how much ‘secondary value’ some of their products have on the resale market – and not surprisingly, they want a piece of the action.
By not having control over the resale of their products, brands also have little control over how their brand is presented. Depending on how platforms are set up, pricing, catalog design, and brand storytelling can vary widely. This lack of consistency, as well as potentially poor user experiences, can undermine brand trust – especially as resale sites are frequently new customers’ entry points into interacting with high-end brands.
Another notable advantage of resale in the age of e-commerce is that it provides an effective way for premium brands to combat the selling of counterfeit items on platforms like Amazon and eBay. As the desire for luxury goods has increased, so has the production of counterfeit products in categories like fashion and cosmetics. Nike is one brand that recently ended its partnership with Amazon, primarily over concerns that the e-commerce giant wasn’t doing enough to combat fake Nike product listings.
Since getting fake products taken down turns into a game of whack-a-mole, steering fans of your brand towards a legitimate resale channel where products can be vetted and given certificates of authentication offers consumers a safe alternative.
ThredUp offers an interesting example of how a peer-to-peer resale marketplace can successfully expand into resale as a service. ThredUp’s RaaS solution makes it possible for launch a brand-new resale channel within 30 days, managing e-commerce integration, inventory sourcing, quality checks, storage, and customer care.
H&M is the latest major brand to partner with ThredUp to launch its ‘pre-loved’ storefront, joining retailers including Kate Spade, J.Crew, Banana Republic, and American Eagle. As one of the best-known resale websites, these partnerships give brands new to the recommence scene a sense of legitimacy in the eyes of resale-savvy customers.
ThredUp’s main selling point is that it offers a standardized solution, with the drawback that resale storefronts cannot be customized to each brand. For this reason, ThredUp’s RaaS offering tends to be the domain of high-street retail brands, rather than the luxury market.
Trove is now a veteran in the resale marketplace, having been founded in 2012. Originally starting as a peer-to-peer marketplace, Trove chose to pivot fully to resale as a service in 2017 due to brands’ growing interest in taking control of the resale journey. Their competitive edge is offering a fully omnichannel resale experience, with retailers able to set up both in-store and digital trade-ins of merchandise for maximum convenience. Trove is also leading the way in terms of using AI for quality control and helping authenticate items, saving valuable time and labor. Outerwear retailer Canada Goose is the most recent brand to partner with Trove, joining retailers including Levi’s, Allbords, and REI.
Founded in 2020, Ryder e-commerce partner Recurate is a recent arrival on the RaaS scene. Their resale solution manages the entire end-to-end recommence workflow, from integrating with the back-end of an e-commerce platform to formulating a tailored resale program that complements a brand’s growth strategy. Recurate also spans multiple resale models, from traditional peer-to-peer selling to helping brands repurpose excess or imperfect merchandise for their resale channel.
Archive is working hard to corner to the luxury end of the resale market, with the RaaS provider setting itself apart by offering e-commerce resale experiences that are fully customized to a brand’s precise needs. Oscar de la Renta chose to partner with Archive after being displeased by the brand experience offered on external resale websites, feeling they did not embody the premium feel they wanted. Their Archive-run sale website, Encore by Oscar de la Renta, curates both current and vintage looks by the brand, in addition to exclusive runway footage. Customers have a choice between earning cash or store credit on merchandise or donating the proceeds to one of their charitable partners.
It’s clear that the influence of the resale market has only just begun as consumers increasingly pivot towards pre-owned merchandise. As more retailers opt to take control of the resale experience themselves, resale as service providers are set to play a growing role in the secondhand market. But as recommence transitions from being controlled by individuals to being run by brands, there is a risk of marketplace players cannibalizing primary sales if they don’t craft a strong value proposition that is distinct from the regular e-commerce experience.