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Why the Resale Boom Shows No Sign of Stopping

Three factors explain why investors and operators are bullish on secondhand fashion, according to research by BoF Insights.
Storage at the logistic hub of online marketplace Vestiaire Collective in Tourcoing, northern France. Getty Images.
Storage at the logistic hub of online marketplace Vestiaire Collective in Tourcoing, northern France. Getty Images.
By
  • Rahul Malik,
  • Diana Lee

The rapid and relentless pace of resale fundraisings and new partnerships in 2021 suggests a future in which secondhand becomes a core part of fashion’s operating model.

In the last thirty days alone, platforms like Vestiaire Collective and Grailed have announced fundraisings of $210 million and $60 million, respectively, while major brands and retailers have inked Resale-as-a-Service partnerships: Adidas with ThredUP and Yoox Net-a-Porter with Reflaunt.

Resale platforms have already raised billions of dollars to date. So why are investors still piling into the space? And why are more and more brands and retailers now choosing to enter the market?

The global secondhand fashion market is worth approximately $130 billion, with major markets like the US set to continue their double-digit growth at least through 2025, according to research by BoF Insights. Three fundamental factors that explain this momentum and why investors and operators continue to be bullish: multiple and reinforcing drivers of consumer demand, the market’s significant untapped growth potential and the growing realisation amongst incumbent fashion players that resale is here to stay.

1) There are multiple demand drivers for resale that continue to strengthen and reinforce one another.

BoF Insights’ research uncovered five demand drivers underpinning growth:

  • Platform sophistication as platforms offer more inventory with better features and streamlined user journeys that reduce frictions to participate.
  • Favourable demographics as younger generations are more likely to buy and sell secondhand — and not likely to “age out” of this practice given their unique perspective on valuing experiences more than goods and access more than ownership.
  • Reduced stigma as more people participating makes resale more mainstream and makes participating more likely to be something for “people like me.”
  • Limited editions / drops, as drop culture has moved beyond sneakers and streetwear and the scarcity of drops drives resale activity (often at a premium to the retail price).
  • Sustainability as secondhand shopping can inherently be more sustainable than new firsthand fashion consumption.

These drivers reinforce each other. As platforms improve their experience, for example, more buyers and sellers come online, further reducing any stigma and establishing resale as a more common way to buy and sell fashion.

Surveys from BoF Insights find that 75 percent of existing resale consumers in major markets like the US believe that they will maintain or increase their spend on resale going forward. The Covid-19 pandemic further accelerated resale — BoF Insights reports that existing participants are significantly more likely to purchase and/or sell secondhand fashion than before the pandemic, driven in part by more time spent online, growing awareness of fashion’s environmental impact and economic uncertainty.

Taken together, BoF Insights estimates that the secondhand fashion market in the US will continue to grow at a double-digit annual growth rate through to 2025:

Secondhand resale graph

2) Companies and investors recognise the magnitude of the upside.

Consumer surveys from BoF Insights in the US, UK, France and Germany reveal that only 50 percent to 60 percent of general consumers have purchased secondhand fashion before. More importantly, only 15 percent indicate they are not open to purchasing secondhand fashion at all. For an investor evaluating the total addressable size of an industry, these figures suggest that most fashion consumers are an addressable target for secondhand fashion.

BoF Insights also considers secondhand fashion’s “share of sales”: Of each dollar spent on fashion in a given year, how many were spent on secondhand versus firsthand? In the US, BoF Insights estimates that number was 10 percent in 2020 — considerably up from the 5 percent estimated for 2016 but far less than what is observed in other industries like automotive and consumer electronics where secondhand sales can be greater than firsthand sales. This suggests room for secondhand fashion to continue to grow:

Secondhand resale graph

Finally, with regard to inventory penetration, BoF Insights estimates that only 5 percent to 7 percent of total fashion inventory that is still in “resaleable” condition is actually being resold by consumers. This indicates that there could be $2.1 trillion in fashion inventory that is untapped in closets around the world — a reason for corporate and investor bullishness indeed.

3) Companies are starting to see resale as inevitable and fear being late to the party.

Many fashion executives now describe resale as a given. These executives compare the state of resale now to e-commerce 20 years ago or to physical outlet stores thirty years ago. Brands, especially luxury ones, were wary of e-commerce for years, unsure if they could replicate a premium experience online. Today, e-commerce is an imperative with almost every fashion company utilising an e-commerce channel (with only some notable exceptions such as Chanel), resulting in e-commerce driving nearly 25 percent of global luxury sales according to Bain & Company.

Similarly, the outlet channel used to suffer from negative consumer perceptions that stores were just stocked with excess or damaged items — a perception that also impacted brands’ willingness to participate. Today, operators like Value Retail and McArthurGlen Group have improved the outlet customer journey, in part by seeking to emulate a firsthand shopping experience. Many brands now actively manage outlets as an additional retail channel that can serve multiple purposes, including moving inventory, driving incremental sales and attracting new customers. Resale may follow a similar trajectory in brand and retailer playbooks, becoming just another channel to manage.

In interviews conducted by BoF Insights, some brands indicated a reluctance to engage with resale due to concerns like the cannibalisation of firsthand sales. However, other interviews suggest that this fear is eroding on the basis that secondhand sales of a brand’s items are happening with or without them. Resale platforms continue to raise funding, but the environments are not necessarily conducive to any particular brand’s storytelling. If platforms are going to make the brand’s inventory available, and consumers are going to see and potentially buy it, should the brand not at least seek to influence the experience?

Guide to Fashion Resale

Rahul Malik and Diana Lee lead BoF Insights, a new research and analysis think tank from BoF arming business leaders with proprietary and data-driven research to navigate the fast-changing global fashion industry. For more insights on the fast-growing secondhand fashion market, purchase your copy of the 123-page The Future of Fashion Resale report, in which BoF Insights offers its perspective on fashion resale: how it thinks about the upside of the industry, how it believes the landscape will evolve, and how it recommends industry participants build their own resale strategies.

Related Articles:

Should Luxury Build Resale Into Its Business Model?

Why Kering Invested in Vestiaire Collective

Why Big Retailers Are Finally Taking Resale Seriously

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