Buyers are buying more from resale retailers than ever before. here’s why

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Second-hand retail businesses are successful with buyers focused on sustainability and hard-to-find items, while avoiding the supply chain pressures felt by traditional retailers.

Big box retailers like Walmart and Target have focused on cutting prices and absorbing rising costs of shipping, labor and materials for shoppers. Other retailers, like Macy’s and Kohl’s, have raised their prices to keep up with rising costs.

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

“While many retailers have been forced to increase their prices due to inflation or supply chain pressure, we do not have the same level of exposure,” said James Reinhart, CEO from ThredUp, during the company’s recent third quarter earnings conference call.

According to Reinhart, ThredUp’s business comes entirely from its users nationwide and does not rely on direct manufacturing for inventory.

“We have chosen to strategically lower prices in order to engage as many customers as possible at a time when consumers are feeling price pressure in many other aspects of their lives,” he added.

ThredUp’s prices fell an average of 15% in the third quarter compared to the same period last year. Reinhart said the company will continue to keep prices low through ThredUp’s nationwide supply system.

The company reported record quarterly third-quarter revenue of $ 63.3 million, up 35% year-on-year. It also had a record number of active buyers at 1.4 million and a record number of orders at 1.3 million, growing 14% and 28% year-on-year, respectively.

Julie Wainwright, Founder and CEO of RealReal, said after her third quarter results that the company’s inventory 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 impacts that other companies are seeing.

RealReal reported total third quarter revenue of $ 119 million, a 53% increase from last year. There were 757,000 orders in the third quarter, up 38% year-on-year.

“Along with the problem of resale and all the empty storefronts, I have no doubts that retail is changing,” said Tim This, Founder and President of Tim This Retail Consulting.

Still, investors aren’t fully convinced by the prospects for these companies, even amid global supply chain issues for retailers. Shares of ThredUp have been volatile since its initial IPO this year, and after its recent earnings led to a one-day rebound, stocks have continued on a downward trajectory. RealReal has benefited from its recent profits, but is still down almost 25% this year.

But the broader consumer trends supporting the second-hand market continue to serve as an age-old tailwind for the niche.

New habits are pushing buyers towards resellers

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

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

He’s also aided by young consumers like Edwin Elliott, a 25-year-old Miami resident, who searches for old-fashioned pieces online to complement 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 easier to buy vintage items.”

“Before you had to save money,” said Elliott, “you had to sort through a bunch of stuff and hope to find something worth buying.”

Thrifting, the outdated term for resale, is about giving the buyer a choice. And the web has provided that, says This. “Generation Z is chasing the opportunity and the resale,” he said.

Etsy, the online company known for its market for handmade and vintage items, acquired the Depop resale app in July for $ 1.62 billion, showing “significant potential for further development. Etsy CEO Josh Silverman said in a statement announcing the deal.

Etsy stock has outperformed the marker this year.

Depop, or the “Resale House for Gen Z Consumers,” as Silverman described the market, is home to 30 million users in 150 countries. With its core message of green and ethical purchasing, the resale brand is a huge attraction for young consumers.

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

Growing focus on new and unused items

The sustainability factor is an “added bonus” for Elliott, but the main reason it resells stores is online exclusivity and convenience.

These resale sites don’t just provide a platform for sellers to sell old products. According to Thomas, “new with tags” or “new in the box” items are increasingly sold through resale platforms.

StockX, which was launched in 2016 as the ‘Sneaker Exchange’, the resale site has evolved into a hub for users to buy and sell new expensive and hard-to-find items such as clothing, handbags and electronic devices. In April, StockX finished a new round of funding that valued it at $ 3.8 billion, signaling “wide recognition and enthusiasm” for the company over the long term, StockX CEO Scott Cutler said in a statement.

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

“When you pivot and watch RealReal, a lot of that customer relationship is on luxury or high end,” said Cette.

Traditional retailers go for resale

Several traditional retailers are finding ways to gain a foothold in the resale business as this business is booming.

Lululemon announced in April that it would be launching its own resale program. The brand partnered with Trove, a company that helps businesses set up resale stores, and began piloting its ‘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 second-hand clothing in 40 stores. JC Penney is working with ThredUp to bring pre-owned women’s clothing and handbags to 30 stores.

Through its “resale as a service” platform, ThredUp works with several retailers to help them provide used products to customers, including Walmart, Everlane, Farfetch, Gap, Adidas and Crocs.

Even Ikea said it would go into resale, with Scandinavian cabinet ready to assemble store announcing this month that it would offer a “buy-back-and-sell” program at 33 of its US stores until Dec. 5, after testing the service at a Philadelphia store.

“I am optimistic in the midst of the many developments underway,” said Cette. “And certainly, the resale market is definitely here to stay.”

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