The resale market is turning out to be one of the hottest trends of the young new year. After Nordstrom and Macy’s recently launched high-end resale retail platforms, Gap has now joined them. And lest you think it’s a bit of desperation move for struggling retailers, guess again. Resale is becoming mainstream.
Gap has announced it has partnered with resale platform thredUP, which has taken the lead as a third-party “circular economy” company. Gap is the biggest partner thredUP has signed to date as it continues to expand its business model and store-within-store concept. Gap will roll out the service in Gap, Banana Republic, Athleta and Janie and Jack stores. It will take advantage of one of the business models thredUP provides, which is providing bags and labels in the partner stores for customers to mail in used clothes in exchange for credits to use at the store. The other two options are in store pop-ups and online collaborations.
As a platform, thredUP positions itself not only as a revenue opportunity for its partners but as a sustainable option for environmentally-conscious consumers. Last summer it raised $100 million in funding. According to CEO James Reinhart, the loyalty program has proved the most popular of the three options been the most successful for partners. Here’s how it works: after a consumer buys an item from a thredUP partner, they are mailed a “clean out kit” which they send to the company. Instead of receiving cash they get a credit with the retail partner. thredUP keeps the markup; the partner can increase its standing with eco-conscious consumers and drive stronger customer retention.
Macy’s, JCPenney and J.Crew’s Madewell brand are also in the program.
“Through extensive research ... we know consumers appreciate new brands, as well as an engaging experience to find the unexpected,” JCPenney Executive Vice president and Chief Merchant Michelle Wlazlo said in an August statement. “The customer demand for secondhand is strong, and our thredUP partnership allows shoppers to find select national brands for the first time ever inside our stores.”
Macy’s called out its resale efforts in its most recent earnings call under the “good news” heading. Since August, Macy’s has partnered with thredUP at 40 locations. It also works with the rental platform CaaStle on a subscription rental program at Bloomingdales. Macy’s says both programs are attracting new customers, who most importantly are younger than the average Macy’s shopper.
The overall resale market in the U.S. today is valued at roughly $20 billion, with the potential to reach $33 billion by 2022, according to a report by Cowen & Co. That’s only 6 percent of the total apparel industry, according to Wells Fargo analyst Ike Boruchow. By his estimates, it will grow to roughly 10 percent by 2022, stealing share from traditional apparel players. “The consumer’s willingness to transition to resale is in the very early innings,” Boruchow said.
The resale customer profile is just starting to show itself. A new study from social resale marketplace Poshmark shows that secondhand items make up an average of 14 percent of consumer closets. Gen Z owns the most resale items, while millennial closets mix traditional mall and emerging brands. The epicenter of resale is the South, where the company says 35 percent the company says of its sellers live. The majority of Poshmark sellers live outside of major cities: 40 percent live in small to medium-sized cities and 34 percent live in suburbs and rural areas. Nearly a quarter (22 percent) of Poshmark sellers are full-time.
“2019 was a pivotal year for social commerce due to the surging popularity of resale. The retail landscape shifted drastically, as consumers embraced new ways to shop and think about their closets,” said Poshmark Founder and CEO Manish Chandra. “Looking ahead to 2020, consumers are emerging with an inherent desire for connection, redefining what it means to buy and sell, making social shopping synonymous with retail itself.”
Another resale company is taking aim at the ultra-high end. The RealReal has taken its consignment model to the posh Magnificent Mile in Chicago. “Buying secondhand has been losing its stigma among consumers looking for better value, unique merchandise or a more sustainable way to shop. But The RealReal, which announced plans for the Chicago store while reporting 2019 earnings Tuesday (Feb. 25), “isn’t the typical neighborhood resale shop,” said the Chicago Tribune. “And its opening on North Michigan Avenue is just the latest evidence of how much the retail marketplace has changed.”