Second coming

Whilst the global fashion resale market is expected to grow at three times the rate of the overall clothing market, it is yet to become established, and many operators remain unprofitable. So does it have a future?

Growth of the market
The resale market is forecast to be worth $350bn by 2027, up from $177bn in 2022. This growth is being driven by young consumers, with Millennials and Gen Zs accounting for two-thirds of second hand spending.

Affordability of sustainable fashion is a challenge for young consumers who are conditioned by fast fashion prices. The appeal of the resale market is driven by its value proposition combining both responsible and affordable fashion. This enables sustainability-conscious consumers to purchase products with a cleaner conscience, often at a lower price point than purchasing the goods new.

Resale to date has largely been an offline operation, however growth of digital platforms has disrupted the market and will continue to grow. Brands are recognising the shift from the traditionally linear trading model of fashion, towards a more circular journey, engaging with the recovery at the end of a garment’s life. Following the growth of online peer-to-peer resale platforms including Ebay, Depop, The RealReal and thredUp, first-hand retailers are launching their own resale platforms in attempt to gain control over their pre-loved items being sold elsewhere, including Selfridges, H&M and Lululemon. These are largely in their infancy but will continue to grow and develop with technological evolutions, creating an increasingly competitive landscape.

Performance
Mass market online peer-to-peer platforms including Ebay, Depop and Vinted increased performance significantly during the pandemic. Depop’s revenue more than doubled from 2019 to $70m in 2020; Vinted increased revenue 51% from 2021 to 2022 and decreased losses by 62%, a result of entering three new markets, optimisation of operations and the launch of its own shipping business. Ebay has struggled since its peak in the pandemic and revenue decreased 9% YoY in 2022 and a loss of $1.2bn was reported, a 109% decrease YoY, largely a result of increased expenses and increased competition.

Luxury resale is growing faster than the primary luxury market, up 50% from 2018-2022 compared to 35% for the primary market and is expected to continue to grow at nearly twice the rate. The RealReal reported 29% YoY revenue increase in 2022 reaching $603m, however this topline growth is yet to reach the bottom line. Vestiaire Collective has raised significant investment, increasing its value to over $1.7bn, demonstrating the optimism of the market growth going forward. The company intends to leverage investment for technological development and expansion into the Asian market to drive growth.

Increasing profitability
Luxury resale platforms such as The RealReal and Vestiaire Collective are most likely to reach profitability, given the significant demand for resale luxury and their ability to achieve higher margins from high-value goods. Mass-market peer-to-peer platforms may struggle to reach profitability as competition in the market increases as first-hand retailers optimise their own resale channels and competition increases, and therefore need to expand their capabilities. The concept of `resale as a service' is likely to grow because of increased pressure on peer-to-peer platforms, which involves resale companies partnering with first-hand retailers to create bespoke resale services, removing the need for companies to build their own in-house resale channels. Trove and thredUp are examples of brands offering these services. 

Future of the market
Fashion retail will continue to shift towards a more circular model in the future, and many brands will begin to consider the longevity of garments at the beginning of the lifecycle to maximise their value. Online platforms will likely dominate the market and overtake physical stores as the primary resale channel, due to high overhead store costs, the extent of products available online allowing customers to browse and compare prices and products, and technological advancements allowing brands to streamline their operations and logistics to maximise efficiency.

There is opportunity for the market to become profitable in the future, however, this will largely come down to brands leveraging AI technology to optimise operations to cut costs and maximise profit, as well as prioritising customer service and satisfaction to retain customer loyalty. The future of the market will likely show more collaboration between first-hand retailers and online resale platforms, particularly an increase in resale service models to increase profitability.

Emily Brown