Shoppers buy from resale retailers more than ever. Here’s why

Used retail companies find success with customers who are focused on sustainability and goods that are difficult to find, while avoiding the pressures in the supply chain that are experienced by traditional retailers.

Big box retailers such as Walmart and Target have focused on keeping prices down, and have absorbed the rising costs of shipping, labor and materials for customers. Other retailers, such as Macy̵[ads1]7;s and Kohl’s, have raised prices to keep up with cost increases.

But the resale companies The RealReal and ThredUp are playing up their used supply chains, inventory levels and prices.

“Although many retailers have been forced to raise prices due to inflation or supply chain pressures, we do not have the same level of exposure,” said James Reinhart, CEO of ThredUp, at the company’s latest third-quarter earnings call.

ThredUp’s business is exclusively sourced domestically from users, according to Reinhart, and is not dependent on direct production for equipment.

– We have chosen to lower prices strategically to engage as many customers as possible at a time when consumers feel price pressure in many other parts of life, he added.

ThredUp’s prices were on average 15% lower in the third quarter compared to the same period last year. Reinhart said the company will continue to keep prices down through ThredUp’s domestic supply system.

The company reported record quarterly revenue of $ 63.3 million in the third quarter, up 35% year-over-year. It also had a record number of active buyers of 1.4 million and a record number of orders of 1.3 million, a growth of 14% and 28% from year to year, respectively.

Julie Wainwright, founder and CEO of RealReal, said after the third quarter results that the company’s inventories have exceeded pre-Covid levels, adding “we think we are well positioned from a supply perspective as we enter the holiday season.”

She also noted that RealReal is shielded from the inflationary effects other companies see.

RealReal reported total revenue of $ 119 million in the third quarter, an increase of 53% compared to last year. There were 757,000 orders in the third quarter, an increase of 38% from the previous year.

“Besides the issue of resale and all the empty store fronts, I feel very strongly that retail is just changing,” said Tim Ceci, founder and president of Tim Ceci Retail Consulting.

Nevertheless, investors are not completely sold on the prospects for these companies, even due to supply chain problems around the world for retailers. ThredUp’s share has been volatile since the first IPO this year, and after recent earnings resulted in a one-day bounce, the shares continued on a falling trajectory. RealReal received a boost from its recent revenues, but is still down to almost 25% this year.

But the broader consumer trends that support the second-hand market continue to serve as a secular tailwind for the niche.

In total, by 2023, the resale market is expected to reach $ 51 billion, according to a recent report from ThredUp.

The resale industry is growing 11 times faster than traditional retail, according to Carolyn Thomas, president and CEO of Aravenda, a broadcast software company. This trend is probably linked to two factors: supply chain logistics and the consumer’s shift to a sustainable mindset.

It also gets help from younger consumers like Edwin Elliott, a 25-year-old Miami resident who is looking for old-fashioned garments online to complete trendy outfits. They can be difficult to recreate “without real vintage pieces,” Elliott said. “And there are so many resale stores online, so it’s made it easier to buy vintage goods.”

“Before you have to go on frugality,” Elliott said, “you have to sort through piles of things and hope you find something worth buying.”

Thrifting, the obsolete term for resale, is about the buyer having a choice. And the internet has given it, says Ceci. “Gen Z runs secondhand and resells,” he said.

Etsy, the online company known for its handmade and vintage merchandise marketplace, bought the Depop resale app in July for $ 1.62 billion, and shows “significant potential for further scaling,” according to Etsy CEO Josh Silverman in a statement announcing the deal.

Etsys shares have outperformed the marker this year.

Depop, or the “Gen Z Resale Home” as Silverman described the marketplace, hosts 30 million users in 150 countries. Through its core message around environmental and ethical shopping, the resale brand is a major attraction for the younger consumer.

“It’s about having choices,” Ceci said. And for the younger shopper looking for retro styles and a sustainable way to shop, “it’s a viable way to trade with a retailer or brand,” he added.

The sustainability factor is an “added perk” for Elliott, but the main reason he buys resale is for the exclusivity and online convenience.

These resale sites not only provide a platform for sellers to sell old items. “New with tags” or “new in a box” items are increasingly being sold through resale platforms, according to Thomas.

Launched in 2016 as the “Stock Market of Sneakers”, StockX has developed into a resale hub for users to buy and sell new high-end tickets and hard-to-find items from clothing, handbags and electronics. In April, StockX completed a new round of financing that valued it at $ 3.8 billion, signaling the “broad recognition and excitement” for the company in the long term, StockX CEO Scott Cutler said in a statement.

Through resale sites like Depop, consumers can resell limited items that may have been sold out and are no longer available directly from the retailer – a common occurrence, according to Elliott, “so it’s hard not to buy from a resale site.”

“When you turn over and look at RealReal, a lot of the relationship with the customer is on luxury goods or high-end goods,” Ceci said.

More traditional retailers are finding ways to move into the resale area as the business grows.

Lululemon announced in April that they would launch their own resale program. The brand partnered with Trove, a company that helps businesses build resale stores, and began piloting the “Like New” program in California and Texas in May.

ThredUp has entered into several partnerships, including an agreement with Macy’s in August to offer used clothing in 40 stores. JC Penney is partnering with ThredUp to offer used women’s clothing and handbags in 30 stores.

Through its resale as a service platform, ThredUp works with multiple resellers to help them offer used products to customers, including Walmart, Everlane, Farfetch, Gap, Adidas and Crocs.

Even Ikea said they would get started with resale, with the Scandinavian ready-to-assemble furniture store announcing this month that it would offer a “buy back and resell” program in 33 of its US stores through December 5, after to have tested the service in a Philadelphia store.

“I am optimistic in the midst of much of the development that is going on,” Ceci said. “And certainly, the resale market is definitely here to stay.”