Re-commerce has a future

The circular economy has grown massively over the past year. The increase in resale and rental options is causing uncertainty amongst retailers.

According to the ThredUp resale platform, the circular economy grew 21 times faster than the clothing market over the previous three years and is expected to top 51 billion US dollars in the next three years. “This year alone, more than 60 million women in the USA will purchase second-hand items. One in three people from Generation Z will buy second-hand goods”, said ThredUp chairman Anthony Marino during roundtable talks at the National Retail Federation Show.

The luxury segment is benefiting considerably from these trends. Experts believe that growth rates of up to 39 percent are possible in this area.

Luxury is a public good

The market is ready for the next generation of customers who cannot or do not want to buy a product at full price. Thanks to re-commerce, the product you’re longing for becomes affordable after all.

One example is reebag.com. The company buys used items from consumers to sell them on its platform. Rebag has also implemented its own authentication measures. In the past, luxury goods manufacturers have alleged that the internal authentication measures taken by third-party sellers did not meet the same standards as those undertaken by the brands themselves. Chanel sued the consignment platform The RealReal in 2018, claiming that it was selling fake handbags on its website.

Re-commerce is not driven solely by lower prices. The idea of securing access to something, rather than ownership, is also becoming more popular with customers. And a growing number of customers are considering the impact of their purchasing behaviour on the environment.

Circular economy for retail

Against this background, traditional retailers are increasingly tapping into the circular economy trend, either via partnerships or their own launches into the marketplace. For example, ThredUp joined forces with the J.C. Penney and Macy’s department stores in 2019, surprising the industry. The ThredUp service is now available in over 100 shops.

Specialist retailers also see potential in the circular economy. Urban Outfitters recently entered the rental market with Nuuly. The subscription-based service costs 88 US dollars per month and allows consumers to access six items that include “up-and-coming designers, cult labels, unique vintage finds”. The interesting thing is that the service has not led to a cannibalization of the company’s core business.

Other industries are jumping on the bandwagon

The trend now goes beyond clothing and accessories. The direct-to-consumer brand Feather built up its business by renting furniture to consumers. And this year Ikea is trialling furniture rental in 30 markets, after the service was initially piloted last year in Switzerland.