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Aug 01, 2023

Circularity Mindset: How Companies Can Win the Resale Market

As the interest in sustainability is growing in the mass market, resale and growth of the secondhand market are featured in news headlines every month. However, the variety of possible execution models, limited data availability, and fear of failure make many companies hesitant to take full advantage of the opportunity at stake.

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Sustainability
As the interest in sustainability is growing in the mass market, resale and growth of the secondhand market are featured in news headlines every month. However, the variety of possible execution models, limited data availability, and fear of failure make many companies hesitant to take full advantage of the opportunity at stake.

As more consumers become sustainability-oriented, the demand for resale business increases for brands and retailers. Let’s quickly talk about some facts. 

  • Market growth (US): Resale in the United States experienced record growth in 2021 at 58%, and in 2022 it grew 5x as much as the retail clothing sector.
  • Fast adoption (EU): 90 million EU shoppers engaged in reselling for the first time in 2023 (compared to only 16 million in 2020). 
  • Consumer sentiment: 41% of consumers use resale as a way to access hard-to-find pieces, while 40% consider it a more sustainable choice, and 36% want to save money.
  • Circular behaviors: 9 out of 10 surveyed shoppers participating in resale market, buy new and pre-owned, while 75% resell their items.

Fashion and luxury are the most talked about from the perspective of growth in the secondhand market. But the trends apply to other sectors, such as electronics and other consumer products, as well.

 

How to Go After the Opportunity

The resale business is not a new concept in the market. The first model of general marketplaces, such as eBay, has been around for years. The next generation of the model includes specialized marketplaces – dedicated to consumer or fashion products, as well as consignment marketplaces – that actively manage the resale process. For brands or retailers, these models give a quick access to a big audience, and provide easy ways to participate in the secondhand market with little operational burdens – but at the expense of not directly involved in the consumer touchpoint nor transaction. 

The big idea of value creation in resale is customer lifetime value expansion, which is virtually impossible without owning the relationship with the consumer. To help companies with lifetime value expansion, white-label recommerce service providers have emerged in recent years. These companies support brands and retailers in establishing their resale business under their brand, with a dedicated storefront – offering out-of-the-box solutions, outsourced operations, and a branded experience for shoppers. This is a huge step in consolidating the “new” and “pre-owned” business as it takes back the ownership of the value generated by products the companies initially sold (and could resell again!). 

However, such models come with limitations – an “outsourced” business typically involves breaking points in customer experiences with limited visibility into demand and supply, and much delayed or fewer ways to build on the newly established customer touchpoints. 

 

No One Recipe for Success

There are various ways to succeed in the resale business model. For example, specialists can support brands and retailers with services for product lifetime extension and operations that will limit environmental impact, in a way that is measurable and traceable. Also, sustainability plays a major role in the resale business and is a big drive in setting up a proper ecosystem for resale execution.

Success in the resale business starts with an alignment between business objectives and brand strategy. Organizations need to keep in mind that the customer experience as well as transaction data become a foundation for expanding customer lifetime value, which benefits the resale business. Companies can build trust with consumers via the “front-office” by delivering the best, most optimized customer experience. From the “back-office” perspective, they need to be equipped with the capabilities to handle complex recommerce operations along with the right data and insights to connect supply and demand signals. 

 

Room for Innovation

Once the basic setup of a resale business is in place, the question about maximizing its revenue, profit and customer lifetime value emerges. The answer to it would look different as each company has their own story and brand equity, combined with the circular mindset.   

For some, it would be about building new experiences that consumers can try using pre-owned products – lowering the barrier to trying a new sport, variation, or style. For others, it would be a way of capturing more customers who need certain products for a short amount of time, and an easy way to bring back a product after it serves its purpose. On the luxury end, it would be more related to collecting and reselling archive pieces or merging the digital and physical ownership using NFTs, and other forms of digital ownership. Regardless of the business categories and use cases for the resale market, companies need technology tools that support innovation and growth that generate value from existing products. 

Joanna Parizat, General Manager & Founder

SAP Recommerce

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