The Emerging Resale Market: Recommerce and Resale Industry Stats
One retail category we’ve been watching closely over the last 12 to 18 months is resale. Resale includes secondhand stores, consignment shops, vintage boutiques, thrift shops, and resale websites for previously loved stuff.
Offline and online, recommerce (that’s what the data geeks are calling it) has outperformed the overall retail industry for the last six years. Not only that, but as the fashion world moves toward a more sustainable model and Millennials’ spending preferences force brands to be more accountable, thrifting is making the transition from being something a few outliers did to save money to being positioned as, wait for it… the next big fashion trend.
Yeah. There are some interesting things going on here. So, strap in.
The Verticals We’re Covering
In general, reports about the resale industry will exclude pawn shops because they make their money on loan interest paid) and stores that sell used vehicles, boats, trailers, and mobile homes. Some reports exclude online resalers from their data. But for THIS two-part series, I want to focus specifically on the online and offline fashion resale industry (including accessories).
Still, it’s worth noting that the resale of furniture and books are top performers as well. In fact, used furniture is one of the fastest-growing segments in the resale industry.
Let’s start with some big takeaways.
Recommerce as an industry is expected to double in size over the next 5 years.
Frugal, value-conscious Millennials are actively erasing the stigma formerly associated with resale.
Resale enables consumers to upgrade the quality of their wardrobe for the same amount of money they would pay for fast fashion and off-priced / closeout apparel.
The circular fashion movement and the uptick in resale are fueled, at least in part, by the desire for more sustainability and consumer mindfulness .
Market Size/ Growth
Let’s start with the big one - does this category make money? The answer is a resounding, “Uhhhh… Yeah.”
According to First Research, there are around 20,000 used merchandise stores generating $17.5 billion in annual sales in communities across the U.S.
Here’s where things get exciting - ThredUP reports the online and offline resale industry is worth $20 billion, and expected to double in size to $41 billion by 2022, fueled in large part by the younger shoppers who have taken up the habit of thrifting. Resale apparel represents 49 percent of that number.
And there are now more physical thrift shops than ever before. According to Ibis World, the geographical spread of thrift stores mirrors the spread of the population. So, for the 25.7 percent of the population living in the Southeast region of the U.S., they are living in a region that accounts for 27.8 percent of resale industry establishments
There are also more thrifters than ever before. Post-Great Recession, resale revenue increased more than 50 percent (from 2008 to 2016). Coincident with that increase, department store sales declined by about 25 percent.
Whether the economy is up or down, resale store sales are consistently increasing, and the growing popularity of online resale marketplaces such as ThredUP, Poshmark, The RealReal, and Depop is enabling resale to grow more than 20 times faster than retail. 20 times!
Source: ThredUP’s 2018 Fashion Resale Report 2018
Younger thrifters are redirecting their apparel spending from off-price stores like TJ Maxx and Burlington to thrift stores. ThredUP’s 2016 Fashion Resale Report said 87 percent of thrifters had redirected a portion of their spending from off-price retailers the ones I mentioned to online and offline resale shops.
According to America’s Research Group, 16 - 18 percent of Americans will shop at a thrift store during a given year. To put this in perspective, 12 - 15 percent will shop at consignment resale shops, 11.4 percent will shop in a factory outlet mall, 19.6 percent will hit the regular apparel stores, and 21.3 percent will shop at a major department store.
Don’t expect to see any signs of slowing down, either. In the five-year period from 2017 to 2022, retail apparel is expected to experience annual growth of two percent, growing from $360 billion to $400 billion. On the flip side, the resale apparel is expected to grow from $20 billion to $41 billion, at a rate of 15 percent annually.
According to ThredUP, one in three women shopped secondhand last year. ThredUP also points out that 70 percent of its first-time customers are also first-time resale shoppers, which means the resale sector is consistently producing new customers, online and offline.
In 2012, 11 percent of the items in a thrifter’s closet were secondhand. By 2017, nearly 25 percent of the items in a thrifter’s closet were secondhand. By 2022, that number could reach as high as 40 percent.
The Resale Game is Changing
Back in high school, I shopped resale stores in the Detroit area a couple times a month. My mom was a thrifter - books. That was her thing. She didn’t wear jewelry. She shopped at Sears for her old school mom wardrobe. She bought all our furniture new with warranties, fancy protection plans and a literal briefcase packed with polishes, sprays and other potions to keep everything looking and smelling new. The only thing she ever bought from thrift stores was books. And lots of them.
I, on the other hand, had a thing for men’s sportcoats and ties. Oh, and turquoise jewelry. I wouldn’t dare buy my shoes resale back then with my grandpa’s dark tales of athlete’s foot so fresh in my mind. But I had more men’s bell bottom jeans and sport coats than any urban girl could want (or not want… my friends thought I was peculiar). And vinyl records. I supplemented my record collection with used vinyl. Heck, in college during a trip to France to study architecture and art, I skipped Euro Disney to make a solo trek to the Louvre and make my return visit to a funky used record shop I spotted on a long walk on a cold, rainy day through the Marais District.
But that was then… when resale shops were limited to Salvation Army stores and dingy, church-run storefronts that were never that great about being open and operational during posted business hours.
Today, resale shops are looking more and more like the typical business - open daily during post business hours, extended holiday hours, sales and closeouts, plus special discounts for card holders, veterans and seniors…
My friend, the resale game is changing. So, let’s talk about how we got here
Catalyst #1: The Great Recession
On the heels of the Great Recession, low per capita disposable income sent discretionary spending to a grinding halt. Consumers who had become accustomed to shopping in department stores started looking for other ways to get the quality they wanted at a price that wouldn’t break the budget, and shopping resale fit the bill.
When the recession first hit ten years ago, the youngest Millennials were in junior high school, likely watching their parents scramble to find a plan b that would help them recover financially. Their parents may have been among the one in ten Americans who were suddenly unemployed. There were fewer jobs then.
If they were older Millennials, those in their late 20s when the Great Recession hit, they may have lived in or around a neighborhood in which one in four of their neighbors had homes that were suddenly worth less than what they owed on the house. Millennials learned a valuable lesson then, as did we all - it benefits us to be smart about our spending, and shopping for quality is usually the wiser choice.
Catalyst #2: Sustainability
Sustainability is big on the list of things Millennials are looking for from the products they buy and the brands they support, and sustainability has become a HUGE deal in the fashion world.
The circular economy - and specifically circular fashion - is a movement that is growing in popularity and practice. Based on the framework of the Ellen MacArthur Foundation, Dr. Anna Brismar defines circular fashion as:
Clothes, shoes or accessories that are designed, sourced, produced and provided with the intention to be used and circulate responsibly and effectively in society for as long as possible in their most valuable form, and hereafter return safely to the biosphere when no longer of human use.
Source: Copenhagen Fashion Summit on Instagram
The Make Fashion Circular Initiative, spearheaded by Burberry, Gap Inc, H&M, Nike, Stella McCartney and HSBC, is a call-to-arms of sorts for the fashion industry to design with sustainability in mind. The fashion industry ranks in the top five of the most polluting industries today. Inexpensive, trendy clothing makes it easy for people to throw out clothing items when they’re done wearing them. Often clothes are tossed long before they wear out.
According to ThredUP, 70 percent of the average woman’s wardrobe goes unworn, and the average clothing item gets five wears before it’s discarded. In the United States, we ditch the equivalent of 80 pounds of clothing every year per woman, man and child. Only about 20 percent of used clothing gets sold secondhand.
Source: Copenhagen Fashion Summit on Instagram
You may remember that earlier this year, Burberry got roasted on social media when it came out that the company burned more than $37 million in unsold clothing and cosmetics last year to keep from donating or discounting it.
Burning unsold merchandise isn’t uncommon for luxury brands that are working to protect the exclusivity of the brand, and keep high-end products out of the hands of off-price stores or knock-off producers.
Since the news came out in July of this year, Burberry has been working nonstop to make sure the public knows the company has since stopped the practice of burning merchandise and will, in partnership with Make Fashion Circular Initiative, work toward increasing efforts to reuse, recycle, donate and repair unsold merchandise.
A Short History Lesson on the Second Hand Industry
By the middle of the 20th Century, clothing was being mass-produced and sold in department stores. President Roosevelt standardized women’s clothing measurements to sort of help things along, and clothes - though mass produced - were made with inexpensive fabrics and put together with wide seams, making it possible for people to alter their own clothes at home if they fit a little too snugly or loosely.
Clothing manufacturers were producing clothes faster, pushing out new lines more frequently and driving down the price of clothing. The result - clothing became disposable. Whereas earlier generations would repurpose worn-out clothing for their kids or use it to make pillows or stuff furniture, mass-produced clothing items were cheap enough to be thrown away.
Perfect timing, too. America’s middle class was rapidly growing. No longer was it the haves and the have-nots, it was the more-than-enoughs, just-enoughs, and the not-enoughs. This created an opportunity for what author and historian Jennifer LeZotte calls an alternative economy.
Secondhand items were passed down between family members, community members and even from an employer to domestic employee. Churches started food pantries and “community closets” to provide for those in need, which is how the second hand industry originally earned a reputation for being for poor people.
Catalyst #3: Changing Demographics
Thrifting hasn’t gone mainstream. It’s been pushed into the spotlight. So, if thrifting isn’t just for lower income people anymore, who is it for? Let’s get into the nitty gritty of the demographics
Boomers were the first generation to truly take advantage of being middle class. So, buying or accepting hand-me-downs were often seen as a sign of financial hardship. For Boomers as a whole, about one in four shop resale.
Gen Xers were a rebellious lot, in part because many of them grew up middle class latchkey kids. They came of age at a time when jobs started going overseas. Enter Grunge, vintage fashions, Goth and a few other trends that dove head-first into hand-me-down culture.
Think Austin Powers, Beck, the popularity of college radio and everything that ever came out of Seattle during the 1990s. Today, Gen Xers and Boomers are neck and neck with their resale purchases. According to ThredUP, 25 percent of Gen Xers are resale shoppers.
Millennials watched the world come to an end, like three times. The first was during the market crash in 2000. The second was during the September 11th attacks in 2001. The third, was the second market crash in 2008. Community-minded Millennials have more access to opportunities than the previous two generations. The catch is they have fewer opportunities.
So, they place value on budgeting their resources. Millennials introduced the world to the sharing economy. Whereas Boomers and Gen Xers see owning a car or a home as a signal of successful adulting, Millennials aren’t as beholden to the idea that those two possessions in particular are symbols of success.
They pinch pennies on the less important things to spend with a little more freedom on what they value most. For many Millennials, experiences (which translate very well on social media) trump physical possessions. Sixty-five percent of resale shoppers say they spend their secondhand savings on experiences with their friends and families.
That said, it makes sense that Millennials are the most likely generation to shop resale, with 30 percent of Millennials in search of that sweet spot where quality intersects price.
Gen Zers had the good fortune of growing up with protective, disenfranchised Gen X parents, and watching what the economy did to Millennial siblings. They’re a practical bunch with a well-honed ability to see through bullsh*t. They aren’t so much disloyal to brands as they are unimpressed by brands. And they, too, value quality, wherever they can find it.
According to CNBC, 36 percent of 14 to 19 year-olds have used online resale platforms for clothes and furniture. It’s pretty much an even spread between resalers and specialty retailers.
Surprise! Millionaires are on the list. According to ThredUP, 13 percent of the most active resale shoppers (defined by ThredUP as those who spent $10K or more on used items in the last two years) are millionaires. That makes sense, right? Millionaires - especially self-made millionaires - find ways to reduce their consumption costs while increasing their revenue
Across demographics, shopping resale is growing. Thrifting gives shoppers the chance to stay on top of trends and more frequently update their wardrobes for a fraction of the cost it would normally take to do so.
The Major Players in Recommerce
Brick and Mortar
Plato’s Closet has been around forever, it seems. What you may not know is it is one of five resale franchises licensed by Winmark, the largest player in the thrift, resale and consignment market.
According to its website, Winmark generated $1 billion in revenue and recycled 140 million items in 2017 in 1200 stores across the country. In addition to Plato’s Closet, popular franchises also include Once Upon a Child, Play It Again Sports, Style Encore and Music Go Round.
In the nonprofit area, Goodwill and Salvation Army are the biggest retailers of used items in the United States. Both organizations have systems in place for sorting, testing and selling donated items in physical retail locations.
In Europe, Oxfam is a network of 20 independent charitable organizations with stores in Belgium, France, Great Britain, Ireland, Spain and Germany, as well as stores in Australia and New Zealand.
In the burgeoning online space, ThredUP, The RealReal, Poshmark, Rebagg, Depop, Tradesy, Grailed, and Vestiaire Collective are among the most well-trafficked resale websites. Oh, and I intentionally left out eBay and Amazon.
The Big Wrap-Up: Thrifting Isn’t Just for Lower Income People and Grandmas Anymore.
Recommerce is fast-becoming a major sector in retail apparel and set to double in size over the next three years. In fact, it’s one of the smartest, easiest and trendiest ways to upgrade your wardrobe without having to increase your income.
As the fashion industry moves more toward becoming circular, buying second hand and finding creative ways to lengthen the life cycle of every piece of clothing will become the norm, which means there will be more and more [not the mention greater and greater] opportunities for legacy brands to partner with resalers… and potentially fulfill the prediction that resale is the new fast fashion.
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