Customers Continue to Seek Out Resale as Marketplaces Struggle for Profitability in their Models

Customers love resale, so the question for businesses is how to create a? financially viable resale program.

This week according to WWD, The RealReal (TRR) announced a layoff of 230 employees or 7% of its workforce. The company also announced the closure of flagship stores in SF and Chicago. TRR continues to grow sales at nearly 20% and while the cuts to CapEx are substantial they only moderately lessen the EBITDA loss from -12% to -10%.

In other news reported by Modern Retail, ThredUP has quietly launched a new resale storefront, 777 Thrift. The site boasts 50,000+ pieces all under $7 with random ‘full refunds’ for your purchase. ThredUP continues to be impressive in testing and learning in resale. Remember the ThredUP stand-alone stores that led to branded stores inside JCP and Macys which in turn led to RaaS for brands and now branded shops such as Madewell?? I see the 777 Thrift as a smart way to segment customers, compete with bargain hunters and fast fashion, and clear through hard-to-sell merchandise.??

But what does it say about the resale model? It is difficult to profitably scale the marketplace resale business. These models compete with traditional retail with already low margins. Yet the marketplace resale model starts with 20-80% lower price points and requires individual item processing (rather than listing a SKU and selling it multiple times).

However, the opportunity to serve customers changing behavior exists for brands with more brands jumping into resale every week.? This week as reported in Retail Dive, Moosejaw, owned by Walmart, launched ReTrail, their recommerce program.? The program is peer-to-peer and powered by Recurate. Rental and Resale are part of Moosejaw’s global navigation and provide strong credibility for the programs. The resale experience is limited in assortment but I expect it will grow over time.

Retail Dive also pointed out that Moosejaw does not take a commission on sales through the platform, but it will compensate sellers with store credit, which they can use to buy new merchandise on Moosejaw’s website or stores, rentals, or other used gear on ReTrail, per the announcement. The ability to use trade credit toward used gear is a plus but as discussed last week, it will be difficult for a brand or retailer to shift a business model without making money on selling pre-owned items.?

Gucci and Kering launched a circularity hub in a sustainable manufacturing push in Milan called the Circular Hub. The goal is to help Italy’s fashion producers transform the concept of a circular economy into a reality. The hub is funded with an investment of €15 million to cover the first three years. Sustainability has been important to Kering for the past decade and the creation of the hub is a great step forward for luxury–especially in the materials and manufacturing areas.

While the sustainability of materials is important, what is far more consequential for circular models is rampant growth in production. Gucci and 开云 have an outsized role to play in this larger view of circularity where well-crafted pieces are continuously brought back into use, thus displacing the need for growth in new production. There was less discussion of these models in the release but ideally, the creation of the hub will allow for more discussion on growth, production, and luxury brand exclusivity.

The So What

#1 Customers continue to seek out resale however marketplaces continue to struggle for profitability in their business models which presents opportunities for brands who can profitability build resale into their current business model.

#2 Allowing customers to utilize trade-in credit toward new or used items is a plus but ultimately business model change will require making money on the sale of pre-owned items.

Until Next Week,

Andy Ruben | Founder & Exec Chair of Trove

Resources:

ThredUp appears to have quietly launched an affordable apparel resale online store

ModernRetail

A new ThredUp-powered storefront has quietly hit the online resale landscape, offering thousands of used clothing items and accessories for no more than $7 an item. 777thrift advertises brands like Zara, Loft and Old Navy, and lets shoppers sort by price point as well as apparel category. It is powered by ThredUp’s resale-as-a-service offering. “Everything is up to 90% off estimated retail price with a thousand new arrivals added to the site daily,” the FAQ says.

The RealReal To Cut 7% of Headcount, Close Some Stores and Offices

The Information

The RealReal announced Thursday it would lay off around 7% of its workforce, or around 230 employees, and close several stores and consignment offices as it looks to cut costs amid growing pressure to achieve profitability. The luxury goods reseller will close stores in San Francisco, Chicago, Atlanta and Austin, as well as smaller consignment offices in Miami and Washington D.C.

Layoffs at The RealReal Point to Profit Imperative

WWD

The resale pioneer, along with its techie cohort, is trying to find its way to some bottom line traction. The latest round of cutbacks at The RealReal Inc. — which will bite hard into the resale pioneer’s workforce, stores and real estate — highlight just how hard fashion’s next retail generation is now pushing for profits. RealReal, ThredUp Inc., Rent the Runway Inc., Stitch Fix Inc. and even Farfetch are all buzzy names with big ideas and loyal consumer bases that have become laser-focused on the bottom line.?

Moosejaw introduces gear, apparel resale program

Retail Dive

Jumping on the resale trend, outdoor gear and clothing company Moosejaw is launching a recommerce program, ReTrail, according to an announcement emailed to Retail Dive. Recurate, a circular commerce technology company, will support the operation. Through ReTrail, customers can sell used items from their order history, upload product photos, describe the items and select recommended prices for the items. After Moosejaw authenticates and approves the merchandise to be sold on the platform, the company will provide prepaid shipping labels, according to the announcement. The company will not take a commission on sales through the platform, but it will compensate sellers with store credit, which they can use to buy new merchandise on Moosejaw’s website or stores, rentals or other used gear on ReTrail, per the announcement.

Gucci and Kering launch circularity hub in sustainable manufacturing push

Vogue Business

Gucci and parent company Kering are launching an innovation platform that aims to make the Italian fashion industry more circular. Called the Circular Hub, the companies say the goal is to help Italy’s fashion producers transform the concept of a circular economy into a reality, and to position Italy as a role model for what circular luxury could look like more broadly. From raw material sourcing to manufacturing processes to establishing new logistics and infrastructure to accommodate a circular economy, the vision for the hub, based in Tuscany, is a full “redefinition” of the value chain.

Moosejaw launches resell program

EcoTextile

Chloé is set to become the first major luxury fashion brand to road-test digital product IDs that contain detailed information about the authenticity and eco-credentials of individual items and allow for easy resale via Vestiaire Collective. In some corners of the fashion industry, digital IDs are seen as a game-changer for efforts to shift shoppers to more responsible forms of consumption and big brands to better business models. The idea is that simply by scanning a QR code consumers could get access to detailed information about the eco-credentials of their clothes and instructions for care and repair. In the same way, brands could link their customers to resale sites and, eventually, recycling solutions, smoothing out kinks that currently mean so many clothes end up in landfills.