Business Case Study Information Opportunity

Embracing the Second-Hand Market: A Sustainable Approach to Consumer Goods

In the constant pursuit of acquiring new possessions, many people struggle with the dilemma of what to do with the items they no longer need or want. This challenge often stems from both emotional attachments and practical considerations. As a result, individuals frequently engage in “deferred disposal” practices, allowing unused items to accumulate in their homes or storage spaces. This accumulation of unused goods is not unique to any particular region; it’s a global phenomenon.

According to research by GlobalData in 2021, the average U.S. household holds onto potentially reusable goods worth approximately $4,517. Similar trends can be observed worldwide. This accumulation represents significant untapped value, and companies are now recognizing the opportunity to tap into this market by enhancing their resale capabilities.

Resale is not a new concept, but what has changed is its scale, largely driven by the rise of Gen Z consumers and an increased demand for sustainability. GlobalScan, a research and advisory firm, reports that 74% of global consumers are now actively engaged in resale shopping. The primary categories for resale include apparel, electronics, and home goods. Recognizing the potential, major brands such as Apple, Nike, and Walmart, among others, are actively entering this market.

The resale market for specific items, like sneakers, has grown significantly, with an estimated worth of over $5 billion. Rare pairs can even fetch thousands of dollars, leading some financial firms to consider sneakers as an “alternative asset class.” The global market for refurbished and used mobile phones was valued at $52 billion in 2021, and experts estimate the total resale market in the United States to reach around $175 billion by 2023.

In this article, we will explore the benefits of resale programs and whether your company should consider venturing into this space. We’ll also provide guidelines for success based on insights from industry executives actively involved in resale initiatives and partnerships with third-party platforms.

The Advantages of Resale

The most apparent reason for initiating resale programs is to boost sales and profits. Certain product categories, especially those in fashion, accessories, and technology at higher price points, are particularly suitable for resale. Apple, for instance, refurbishes and resells iPhones, making a significant contribution to the global refurbished smartphone market.

Brands can also leverage resale to promote sustainability and reinforce their environmental commitments. For example, Coach has established the “Coach (Re)Loved” program, which focuses on acquiring, restoring, and reselling their own bags while emphasizing sustainability.

Peter Land, Senior Vice President at Dick’s Sporting Goods, has noted that reselling “hard goods” like sports equipment has been more straightforward than “soft goods” like sports clothing. Soft goods require more intricate handling, have a wider range of styles and sizes, and exhibit greater differentiation.

One concern brands often have regarding resale is the fear of customers “trading down” from new to pre-owned goods, which may have lower profit margins. However, strategic pricing policies and website designs can mitigate this risk. Additionally, resale can attract new customers, particularly younger, less affluent ones, who may initially opt for pre-owned items but eventually become brand loyal and trade up.

Moreover, if brands don’t engage in resale themselves, third-party platforms are ready to fill the gap. Luxury resale platforms like the RealReal, Rebag, and Fashionphile have demonstrated profitability, offering authenticated luxury items. To retain control and profits, companies should consider participating in these markets.

Gen Z and Sustainability

Resale programs can be especially appealing to brands targeting Gen Z consumers. Gen Z constitutes a substantial portion of the population, making up 20% of the U.S. demographic. They are also pioneers in experimenting with and adopting new products, particularly in technology and fashion.

Gen Z’s role in driving the growth of the resale market cannot be understated. They have redefined the stigma around buying secondhand items and view sustainability as a paramount concern. Research indicates that 75% of Gen Z consumers consider sustainability when making purchases, and many are willing to pay more for eco-friendly options.

This generation has sparked trends like the “thrift haul,” where they purchase thrift shop finds and showcase them on social media platforms like Instagram and YouTube. Some even transition into becoming media influencers, while others resell their thrift hauls on peer-to-peer platforms such as Depop and Poshmark.

Brands like Patagonia and Apple have embraced resale to strengthen their sustainability credentials. By participating in resale, they keep products in circulation, reducing waste and conserving resources.

Guidelines for Successful Resale

For companies considering entering the resale market, there are several key principles to keep in mind:

  1. Creating Seamless Experiences: Simplify the process for customers to sell or trade in their items. Best Buy offers gift certificates for electronics and appliances with resale value and provides free recycling for electronics. Frictionless interactions can enhance a brand’s sustainability image.
  2. Collaborate with External Platforms: Not all companies have the resources to manage resale operations independently. Many resale platforms can seamlessly integrate with a brand’s business model, offering analytical data, inventory maintenance, and shipping support.
  3. Engage with the Gen Z Audience: Appeal to Gen Z consumers by aligning your resale program with their sustainability values. Make it clear that your brand shares their commitment to environmental responsibility.
  4. Incorporate Loyalty-Building Strategies: Leverage resale programs to increase customer lifetime value. Offer credits for items returned or resold, encouraging loyalty program participation. Some brands restrict resale to loyalty-program members, ensuring authenticity and building brand loyalty.
  5. Develop a Unified Product Range: Explore opportunities to merge new and used merchandise. Some brands are experimenting with selling both new and used items online and in physical stores. Integration of return processes with resale can be a lucrative venture.

In conclusion, addressing sustainability challenges is increasingly important for businesses, especially as consumer interest in eco-friendly practices continues to grow. Resale presents an effective way for companies to initiate a commitment to sustainability while tapping into a lucrative market. Brands that adapt to these changing consumer preferences and embrace resale will be better positioned for long-term success.



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