September 19, 2019 by Sujay Seetharaman

The buzz around circular economy and in particular, circular fashion, has been gaining prominence for about a decade now, thanks to changing consumer demographics, attitudes, and environmental conditions. Concepts such as Retail Resale and Rental have shot to fanfare and are maturing from being isolated niche businesses to a must-have channel for omni-channel retailers

In this blog post, we’ll take a look at the resale market. (Watch this space for deep dives into rental and subscription boxes in later blog posts)

A report by online thrift retail store ThredUP estimates that the resale market was worth approximately $24 billion in 2018, and is expected to cross $40 billion in the next 4 years. Of all major industries that constitute the resale market, Fashion (Clothes, Shoes, Accessories) leads with a share of ~50% or $10 billion.resale market profileAccording to retail analytics firm GlobalData, the Fashion resale industry has been growing 21x faster than the retail apparel market over the past three years. So, what’s behind this insanely exponential growth?

What’s driving the growth of the retail resale market?

The explosive growth in retail resale can primarily be credited to changing consumer demographics – Millennials and Gen-Z consumers, aged between 18 and 39 – that make up much of the retail buyer cohort today.

They’re more credit-averse and environmentally conscious than other generations, which drives them to opt for a sustainable lifestyle. What is perhaps another advantage (or chief motivator) in resorting to second-hand retail clothes is that resale enables consumers to constantly clean out their closets and substitute it with clothes that are trending in real-time.  

Resale today is fostering an inventory that is growing faster than fast fashion!
Resale-market-vs-fashionResearch says that Millennials and Gen-Z consumers adopt resale items 2.5 times faster than the average consumer. According to ThredUP, 40% of Gen-Z consumers spent on resale in 2018. 51% of resale shoppers reportedly plan to spend even more on thrift in the next five years.

With textile production set to account for 25% of all global carbon emissions in the next 20 years, any trend toward a circular economy could be beneficial. As far as resale goes, buying one used item reportedly reduces its carbon footprint by 80% and extends its life by another 2 years.

The average number of items in a consumer’s closet is actually declining, thanks in part to the organization guru Marie Kondo, who encourages people to tidy up and discard anything that doesn’t spark ‘joy’. There were reports of an 80% spike in Clean Out Kits (the bags of clothing people send in for resale) when Kondo’s show aired on Netflix.

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Leading retail resale players & Funding trends

Following an initial wave of online fashion resale startups like Vaunte, Threadflip, ShopHers, stronger players have emerged onto the retail scene and have attracted more investment. Below, we list out today’s major retail resale players, with their funding, GMV, category and investor information.

Retail Resale market players and funding information

ThredUP has raised an additional round of $175M at the time of writing. It will use this funding to launch its Retail-as-a-Service (RAAS) platform which will provide services for retailers to buy and sell second-hand clothes.

Mainstream retailers embrace Resale

Retailers such as Macy’s and J.C.Penney have announced their entry into Resale. 

Macy’s announced in August that it had been trialing resale services in 40 of its stores across the US through a ThredUP partnership. Macy’s CEO Jeff Gennette said during the company’s Q2 earnings conference call “This partnership gives us the opportunity to reach a new customer and keep them coming back to shop an ever-changing selection of styles and brands that we don’t typically carry.” JCPenney, following Macy’s footsteps, said that 30 of its stores will start offering a seasonal array of resale handbags and women’s fashion from ThredUP, with the assortment uniquely branded in a 500 to a 1,000-square-foot presentation. Also, to keep things fresh, the department store chain said it will be switching up the curated assortment of ThredUP items on a weekly basis. 

It remains to be seen how successful these department store chains turn out in their retail resale efforts since they aren’t the typical shopping spots for Millennials or Gen-Z consumers.

As of 2018, the second-hand market accounts for an estimated $28 billion, against Fast fashion which is estimated to be worth $35 billion. Various statistics show that the story could be different in another 5 to 10 years, when second-hand is expected to triple in GMV, outpacing Fast fashion by tens of millions!

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Sujay Seetharaman

Market Analyst @ PipeCandy

Currently donning the Researcher's hat. Talks to himself.