Why it matters:
- Resale is one of the fastest growing segments of the retail economy. In the clothing sector, the resale market is expected to grow 16 times faster than non-resale over the next four years.
- More consumers are saying they are willing to buy secondhand, with interest in categories like furniture, appliances, and electronics growing.
- Online resale platforms have spurred the growth of hundreds of small businesses specializing in secondhand goods.
The growth of online resale platforms, and an interest in sustainable shopping, especially on the part of young consumers, created the first big wave of resale selling. Now, cost-of-living increases that are making Americans more budget-conscious, combined with easier ways for businesses large and small to sell used goods online, are driving the next wave.
Estimates of the size of the resale market vary, but researchers agree that the growth potential is enormous.
Coresight Research, a global research and advisory firm specializing in retail and technology, reported recently that it expects the U.S. fashion segment of the resale economy to grow 16% this year to $25.9 billion, and another 15% next year to nearly $30 billion.
Fashion resale has more than doubled since 2008, when sales were less than $10 billion, according to Coresight.
Online reseller thredUP, in its annual report on the resale economy released in May, said it expects the U.S. apparel resale market to grow 16 times faster than the overall apparel market.
ThredUP, which includes thrift stores and donations, along with resale in its estimates, expects the U.S. secondhand market to double by 2026, to $82 billion.
Online resale is the fastest-growing source of secondhand sales, and 70% of consumers say it is easier to shop secondhand now than it was five years ago, according to thredUP.
[Read: The Rise of the Resale Market]
Prices, merchandise scarcity now are prime motivators for buying used goods
In addition to technological advances and adoption of online resale platforms, the key factors that will drive the format’s growth are the price-value equation, sustainability, and scarcity, Chris Ventry, Retail and Consumer Lead at SSA & Company, a global management consulting firm, told CO—.
A year ago, “I would have said that the sustainability and environmentally friendly roots of re-commerce were rapidly becoming the primary conversion driver.” Now consumers are shopping resale for a more traditional reason – to save money, he said.
“While sustainability is still a consideration, as the main purchase drive, it has been superseded. We’re back to price being the primary motivator,” he said.
In addition, “scarcity and the global supply chain crunch have driven consumers to substitute pre-owned, refurbished, and pre-loved [merchandise] for new.”
Brands are creating ‘buy back’ and resale programs
Sustainability concerns have driven dozens of brands in recent years to create programs to resell or reclaim their used products.
Most recently, IKEA expanded its “Buy Back and Resell” program to all its U.S. stores after testing it last summer. Customers now can return certain items, including used cabinets, bookcases, tables, desks, and un-upholstered chairs, for IKEA store credit.
A growing number of other retailers, including outdoor brands REI and Patagonia, and clothing brands Lululemon and Eileen Fisher, have buy back programs for used goods.
Even more apparel brands have created their own resale sites for their merchandise, either in partnership with resellers like thredUP, or their own sites.
“Our estimate is that over 60% of brands and retailers partner with third-party resale marketplaces such as ThredUP to enter the fashion resale market, while over 20% choose to build their own marketplaces from scratch,” Coresight Research Analyst Sunny Zheng, the lead author on Coresight’s resale report, told CO—.
“The majority of brands and retailers,” Zheng said, “are still experimenting with the resale model to see its impact on a company’s overall profit margin, operational costs, and customer loyalty.”
“We believe that those that bring the resale business in-house will likely achieve better profit margins than brands and retailers that work with third-party marketplaces because of lower operational costs” and more effective brand messaging, Zheng said.
The growth of e-commerce has created an explosion in online returns, and the availability of that merchandise has created opportunities for entrepreneurs and small businesses to launch resale businesses, Sid Lunawat, CEO and Co-Founder of Hammoq, a tech platform for re-commerce businesses, told CO—.
Tools for small businesses to partake in the re-commerce gold rush
The growth of e-commerce has created an explosion in online returns, and the availability of that merchandise has created opportunities for entrepreneurs and small businesses to launch resale businesses, Sid Lunawat, CEO and Co-Founder of Hammoq, a tech platform for re-commerce businesses, told CO—.
Hammoq was founded in 2021 when Lunawat and Co-Founder Ty Blunt saw the need for tools that made it easier for the growing legions of resellers to list merchandise available for sale, and to source merchandise to sell.
They created a software-as-a-service platform that uses artificial intelligence and machine vision to automate product descriptions and listings. Hammoq also acts as a marketplace for resellers to source goods and buy in bulk, and as a place where online merchants can liquidate returned merchandise. It also offers resellers financing to buy inventory.
Lunawat describes what Hammoq does as providing the “picks and axes” for the resale gold rush.
Hammoq, in effect, is seeking to become the reseller-focused version of Shopify — the tech company that grew to over $4 billion in annual revenue by focusing on helping small businesses sell online.
“Shopify came in and said, ‘We’re going to create tools for SMBs to get online and enable them to grow,’” Lunawat said, adding that is what Hammoq wants to do for resellers.
[Read: Shopify Adds Features to Its Toolkit to Help Small Businesses Grow]
“Because of e-commerce growing, people buy a lot more stuff online, and they tend to return a lot more. With some clothing brands, you see as much as 40% returns,” Lunawat said.
Individual sellers working out of their homes are buying those returns in bulk and trying to sell them online, he said.
For those sellers, Hammoq provides a machine vision tool that generates an online listing when you take a photo of a product.
Hammoq recently closed on $24 million in financing, bringing its total financing to $27 million.
It currently has about 350 small- to medium-sized businesses using its platform. Last year it grew revenues by 400% and expects similar growth this year.
Saving money while shopping sustainably
While high prices and inflation now are the top reasons consumers give for choosing to buy used goods, a survey that furniture reseller FloorFound conducted this spring for Earth Day showed that many Americans care about saving the planet as well as saving money.
In FloorFound’s survey, 51% of shoppers cited sustainability as one of the benefits of buying used products.
The company was founded in 2021 to capitalize on what it saw as growing consumer sentiment in favor of sustainability and keeping returned furniture out of landfills.
It picks up, warehouses, and resells furniture returns for major e-commerce and brick-and-mortar furniture brands, and recently received $10.5 million in Series A funding.
In its first year in business, the Austin-based company grew its annual recurring revenue by eight times and tripled its client base.
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