As Jelena Zec, director of venture investing at Citi Ventures, told PYMNTS’ Karen Webster, some of the top luxury brands are primed to enter the space more fully, offering rental and resale options directly to consumers in a bid to wrest some share of wallet as buying secondhand goods becomes more commonplace.
“There’s a big opportunity for brands to win in this commerce space,” said Zec.
And they can win by deploying a few strategies, she said. They can partner with managed marketplaces, and/or they can leverage a “ReCommerce-as-a-Service” approach, where they offer secondhand sales or rentals directly.
“There’s no right way or wrong way here,” said Zec, who added that “it’s up to the brand to decide how much control they want to exert.”
ReCommerce has been around for as long as people have lived in communities. Face-to-face meetups have always been a mainstay of neighborhood activities, even as garage and yard sales dot neighborhoods. But, Zec added, ReCommerce, conducted across digital channels, will remain sticky in the post-pandemic age, extending the appeal (and reach) of secondhand commerce beyond the localized approach, across currencies and time zones.
Demographics Favor ReCommerce
To get an idea of the greenfield opportunity that lies ahead, Zec said ReCommerce sales could double in just the next four years to $289 billion.
The seeds of that growth have been sown over several years. Amid the pandemic, millions of individuals stuck in lockdown (herself included) went through their closets to conduct a significant amount of spring cleaning. And in a bid to make some extra money, they put what wasn’t needed or didn’t fit on sites such as Poshmark.
“Selling on these secondhand sites became a bit of a hobby,” Zec said.
And so, the stigma of buying goods secondhand (it was never a problem for high-end art, cars or watches) is dissipating.
Younger consumers are increasingly becoming key drivers of commerce. They care deeply about sustainability and are entrepreneurial in their habits, certainly when it comes to using what they have on hand to make some extra money.
Younger consumers today, said Zec, may wear a dress once or twice to an occasion, and then see some opportunity for monetization. The rise of social media also gives some tailwind to ReCommerce, as TikTok and other platforms are places where the creator economy goes to interact, yes, but also transact.
Zec’s belief in the enduring demographic and technological trends supporting ReCommerce has been long-standing. She noted that before her time with Citi and while working at Unilever Ventures, “we spent a lot of time on anything that had to do with social selling … and how trends impact brands.”
New Top-Line Growth
Against that backdrop, she said, it’s not a surprise to see some of the highest-end brands pivot a bit to meet younger demographics’ consumption preferences. LVMH, in one example, has a rental feature, indicating that brands want to take some control back from the peer-to-peer marketplaces — and they realize they are missing out on some revenue-generating opportunities.
The brands have built the technology and the infrastructure to scale into reselling, and to offer what she said is a “proper selling experience” that includes product returns and exchanges.
“There’s a competitive advantage here,” she said.
Given the size of the market and the demographics, Zec maintained that there’s still room for a variety of ReCommerce models to emerge and evolve, and marketplaces such as The RealReal and NetApp (with sophisticated merchandising) bring buyers and sellers together directly.
Artificial intelligence (AI) can help speed would-be buyers’ searching and scrolling, easing the time it takes to find what they want, she said. ReCommerce, after all, is about supply as much as it is about demand (even in marketplaces that function as “online thrift stores”), and about verifying that supply so that buyers feel comfortable with authenticity (and in some cases, the cleanliness/hygiene) of what they’re buying.
Eventually, Zec predicted, the technology and the digital experience for ReCommerce will evolve so that authentication and even refurbishment will be seamless parts of the equation, so that the experience of buying secondhand goods will be indistinguishable from buying brand-new items.
More immediately, entering or increasing efforts in ReCommerce may require some rethinking on the part of the luxury brands, said Zec. But then again, “for brands like Chanel, Hermès and Dior, when you think about their vintage pieces that are being sold at a premium … why not capture that? Think of it as ‘second life’ revenue.”