More retailers embracing recommerce

By Adam B. Davis, Managing Director, Wells Fargo Capital Finance—Retail Finance Division

Sell your used bluejeans back to the store? Rent your entire office wardrobe? Scan a QR code to authenticate a pre-owned designer handbag? 

Just a decade ago, most consumers would find these practices unthinkable. Yet today, they’re not just possible, they’re headed for mainstream adoption. Consumers concerned about sustainability and cost have transformed pre-owned goods from something with a stigma to absolute must-haves. 

For retailers, the trend—known as recommerce—represents a tremendous opportunity to connect with more buyers, improve their brand image, and grow sales thoughtfully and responsibly. 

Fashion industry paves the way for other retail categories 

Flagship brands like Poshmark, The RealReal, ThredUp, GOAT, StockX, Rebag, Fashionpile, and even Levi’s have quickly transformed how the fashion industry handles pre-owned goods. 

Analysts now expect recommerce to account for 14 percent of all sales of apparel, footwear, and accessories by 2024—up from just 7 percent in 2020. Last year alone, consumers spent approximately $36 billion on secondhand clothing as consumers and companies do their part to combat unnecessary waste.  The estimated total amount of garments produced annually has doubled since 2000 and exceeded 100 billion for the first time in 2014. The fashion industry alone creates an estimated 92 million tons of textile waste annually. 

Retailers and consumers both benefit from more sustainable models of consumption 

Recommerce plays a big part in sustainability. Reselling items extends their longevity, which in turn reduces waste. Younger consumers in particular place a premium on brands with smart manufacturing and positive environmental practices. Nearly two-thirds of Millennials and Gen Z (born approximately 1982-2012) prefer to buy from sustainable brands.

Retailers cite numerous advantages of supporting recommerce, such as: 

  • Building loyalty and repeat business with customers 
  • Attracting new consumers, especially those concerned with social responsibility 
  • Improving sustainability and meeting ESG (environmental, social, and government) goals 
  • Extending control of their valued brands beyond primary markets 
  • Improving margins, in some cases by selling the same item multiple times 

Consumers gain additional benefits, including: 

  • Minimizing consumption and reducing their environmental impact 
  • Staying true to their values and aligning with like-minded brands 
  • Affording higher quality products and designer goods, compared to new items 
  • Maximizing their investment through resale 

Choose the right recommerce model for your brand 

Success at recommerce starts by selecting the right business model. The way you choose to facilitate sales of your pre-owned products can make a sizable impact on your inventory, operations, cash flow, and working capital.

For example: 

  • Rental models can require significant investment in inventory and cleaning equipment. Customers expect the product assortment and sizing to be broad, in season, and readily available for pickup or delivery. 
  • Buyback programs and marketplaces where brands purchase pre-owned items from consumers can be capital intensive. That’s because unlike traditional suppliers who provide 30-60 day trade terms, consumers expect upfront payment. 

Technology is another important consideration, especially for luxury and designer brands that need to authenticate merchandise before resale. Managing the process by hand can be time-consuming and expensive. Fortunately, innovators are launching platforms that automate much of the recommerce process. Some clothing manufacturers are even adding unique item numbers and QR codes to accelerate tracking and weed out knock-offs. 

It’s not just fashion brands that are excited by the potential of recommerce; retailers across categories are capitalizing on the benefits. From secondhand sporting equipment and furniture to refurbished video games and consoles, consumers have a wide variety of choices. 

The type of goods being sold are a final factor in any recommerce decision. Are they designer items that consumers will treat as investments? Event-related outfits that make renting more desirable than ownership? Household items like baby gear that a user quickly outgrows? Once you know your niche, your target consumer’s values, and their buying habits, you can launch the right recommerce solution. 

Improve collaboration and make a lasting difference 

Working with the right financing team is critical. When a financial institution understands (and supports) your ESG goals, it can improve collaboration across the banking relationship. 

Your bank can also support you with best practices and real-world examples of how leading brands are making a difference for themselves, their customers, and the planet through sustainable recommerce practices.