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Insights > How to build a successful resale program for fashion (and why most brands should aim to have one)

How to build a successful resale program for fashion (and why most brands should aim to have one)

17 | 05 | 2022
Fashion-circularity-reuse How to build a successful resale program for fashion (and why most brands should aim to have one)

Resale delivers a new level of efficiency to a sector where overproduction and overconsumption are the name of the game.

Circularity is top-of-mind for many fashion and sporting goods brands as they explore ways to reduce impacts and make good on climate, biodiversity, water and waste commitments. Opportunities for disruption and transformational change abound, but aligning the industry with planetary boundaries will be less about how we adapt our current system and more about how brands will challenge their current business models to shape a new future for fashion. This is the first in a series of articles (here and there) exploring the different approaches for system-level transformation in the industry.

With circularity a top-of-mind issue for the fashion and sporting goods industry, more and more brands are embracing resale and refurbishment programs as a first step towards slashing the industry’s myriad impacts, repairing its reputation and rebuilding consumer trust. Valued at $25-30 billion, resale marks a big shift in the way the industry operates, but with it comes plenty of potential for brands to boost value and build resilience while reducing environmental impacts.

A new look for fashion business models

Resale programs can be described as any system aimed at generating revenue by recirculating products already in the market. At its core, resale programs seek to decouple brand growth from traditional production by generating revenue in a way that doesn’t add to production growth — and, as a result, a brand’s environmental footprint. 

How, exactly? Resale promises to do more with less by extending the service life of clothing, thereby reducing the need to manufacture new ones. And that has a domino effect, bringing down natural resource and energy consumption, textile waste and more. Ultimately, it delivers a new level of efficiency to a sector where overproduction — and overconsumption — are the name of the game. 

In practice, resale works in much the same way as the traditional concept of shopping for new clothes, in which consumers purchase new garments at brand flagship stores, shopping centers, brand ecommerce sites or online retailers. The key difference being that the garments are pre-owned. In addition to collecting garments from former customers, C2B2C programs may include value-adding services like repair, cleaning, or quality verification. B2B Resale as a Service (RaaS) may also be in place.

Finding the right fit

Success in the resale market, much like the conventional market, is all about maintaining the perceived value of products — whether that value is framed around convenience, quality, durability, exclusivity, or trendiness. And that means there’s an opportunity for every brand to carve out their place in the circular economy.

Making resale work for your brand starts by looking inward and asking yourself why consumers value your brand. If the answer is low prices and the latest trends, solutions like rental, peer-to-peer resale or other systems that cater to more transient ownership behaviors can offer brands a way to maximize use without overproducing to meet demand. Systems with highly durable products and steps towards authentication and quality verification, on the other hand, may appeal more to brands valued for their exclusivity. Products that keep their value over time are seen as investments by consumers and continue to be desirable on the secondary market. 

For brands valued for performance — in particular, footwear, sporting goods, and outerwear brands — value-adding steps such as repair and refurbishment, and maintenance pathways can help keep good clothing and gear going with alterations, cleaning and more.

When done right, brands can see resale align — rather than hurt — with their growth models and can use it as an opportunity to create closer consumer engagements and potentially open new consumer touch points. These systems open up a completely new channel for consumer education and behavior change.

Defining success: it’s all about replacement rate

Resale and refurbishment programs offer a way for companies to show off their sustainability chops, but only if they’re paired with reduced production volumes. Without this all-important step, resale and refurbishment programs amount to little more than a marketing gimmick. Brands that want their programs to amount to more than a box-ticking exercise or mere fodder for their PR strategy need to focus on reducing production volumes over time and, ultimately, transition their business models to make resale a cornerstone of their sales strategies. 

It’s widely believed that resale automatically equals sustainability, but, in reality, it’s a bit more complex. It’s an idea based on a concept called replacement rate — the extent to which the purchase of a used or refurbished product can replace the market demand and production of a newly manufactured product. And here’s where things get tricky: low replacement rates have been shown to actually eliminate any environmental benefits of reusing garments, depending on the reverse logistics system, processing or repairs required to resell products. So, to maximize environmental benefits of resale programs, brands need high replacement rates. In practice, however, replacement rates can vary significantly; it’s not always a 1:1 or 100% replacement for consumers.

While this may sound like a consumer engagement issue, it is, in fact, one of brand responsibility. Higher replacement rates will only be possible if brands alter their production habits and provide greater access to secondhand products. The easier it is for consumers to purchase, maintain, and return used garments, the higher replacement rates will climb. For this reason, brands that have managed to build successful resale and refurbishment programs — from a sustainability and financial standpoint — are those that have integrated resale into the core of their business model and, importantly, focused on achieving high replacement rates.

How can brands achieve high replacement rates for their resale or refurbishment program? It all comes back to perceived value. If consumers value the products brands put on the secondary market, they’ll not only purchase them at greater frequencies, but they’ll also take better care of them. 

Resale has been around for decades under the guise of vintage or thrift, but to unlock its potential to hem the industry’s impacts, this can no longer be the sole image of the market. Vintage and thrift cater to one consumer persona — those who love hunting for hidden gems. There are a lot more out there, ready to be defined and developed. It’s up to each brand to find theirs.

Turning obstacles into opportunities

Ready to put resale to work for your brand? There are two major pathways to explore, each with their own advantages and drawbacks.

Brands can choose to work within a brand-enabled peer-to-peer system or create a comprehensive buy-back program complete with reverse logistics, inventory management and/or authentication and repairs. Barriers to entry for resale systems are wide-ranging and will differ depending on the design of the system. For buy-back programs and other similar setups, these may include complex reverse logistics systems, high labor intensity of QA or authentication, and high costs of third party providers, if outsourcing these steps. Peer-to-peer systems, on the other hand, have significantly lower barriers to entry as brands aren’t required to create and manage physical infrastructure. They do, however, come with lower oversight into product quality and maintenance compared to buy-back programs.

While there is a lot of nuance surrounding the actual sustainability benefits of resale programs based on replacement rate and brand value, the take-home message to the sector is clear: a move towards decoupling traditional production from brand growth can ensure that your circularity goals are achieved in a financially and environmentally sustainable fashion. This can open many doors to new revenue streams and strategic levers for environmental impact reduction. Executed effectively, resale programs will ultimately contribute to broader brand awareness, larger market share, and more loyal customers while ensuring a better, cleaner future aligned with planetary boundaries.

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Author(s)
Matthew Hawthorne Sustainability Consultant
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