What Fashion Resale Can Learn from Cars and Consumer Electronics | BoF Professional, News & Analysis

What Fashion Resale Can Learn from Cars and Consumer Electronics | BoF Professional, News & Analysis

There is little doubt that fashion resale is heating up. ThredUp’s July acquisition of Remix and Etsy’s acquisition of Depop the month before underscore the growing momentum in the space and the increasing size and scale of the players aiming to seize the opportunity.

Since 2019, the market has seen at least 4 IPOs, 13 major new entrants (e.g. platform launches or companies directly entering resale), 14 major brand and retailer partnerships and 6 Resale-as-a-Service start-up launches, according to The Future of Fashion Resale, a report by BoF Insights, a new data and analysis unit at The Business of Fashion.

Yet for all of this recent activity, there is still significant potential upside for secondhand fashion, especially as BoF Insights estimates that only approximately 5-7 percent of resaleable fashion inventory is actually resold around the world today.

Fashion resale might still be in its infancy. But as brands and retailers warm to resale and overcome their concerns on brand dilution, counterfeits and cannibalisation, they would do well to consider how resale has reshaped the automotive and consumer electronics industries. In these two industries, annual sales of used items exceed sales of new items in mature markets. These secondhand sales can also be more profitable. In the US, for example, the average margin on used cars is 13 percent vs. 4 percent for new cars as per data from a Cornell University study on the economics of the automotive industry.

Fashion resale is earlier on the maturity s-curve than other industries such as consumer electronics and automotive. The Future of Fashion Resale, BoF Insights.

Managed trade-in programmes by original equipment manufacturers (OEMs) from BMW to Apple have also become entrenched in the automotive and consumer electronics secondary markets. Such programmes provide consumers with convenience, guarantees of authenticity and quality and an ability to lower the cost of a new purchase. Such programmes also help brands bolster inventory and capture more of the lifetime value of their goods. Most importantly, such programmes drive customer loyalty and retention, retaining customers within a brand’s ecosystem.

Of course, these programmes are operationally complex, and it is common for OEMs to outsource them, especially in consumer electronics. Consider Apple, a company that outsources its trade-in programmes to a third-party called Brightstar despite Apple’s demonstrated track record of managing complex operations and supply chains. By outsourcing, Apple focuses on its core competencies and distances itself from the complexity of the “single-SKU” business of resale as pre-owned items returned to the OEM each have unique characteristics that require individual processing.

In these industries, resale pressures new sales of mid-market items as luxury items become more available at more accessible prices, according to BoF Insights. But if resale is a potential challenge for mid-market companies, it can also serve as a gateway for luxury companies as it enables them to capture first-time customers. In automotive and consumer electronics, resale is also facilitated by widely available and data-driven sources that inform residual value, such as the Kelley Blue Book for vehicles.

Charles Gorra, chief executive of luxury resale platform Rebag, comments: “Electronics and automotive have two very liquid resale markets. These industries have figured out how to integrate resale within the customer lifetime journey, in particular by providing transparent pricing (e.g. Kelley Blue Book) and convenient trade-in programmes (e.g. Apple). We expect the luxury industry to reproduce some of those proven patterns over time.”

Of course, fashion is distinct from automotive or consumer electronics. It has a vastly greater SKU count, not just because of the variety of fashion items, but also because of variations in size, colour and material. There is a difference in the inherent functionality of cars and consumer electronics as opposed to fashion.

Nonetheless, parallels exist. BoF Insights details three takeaways for fashion resale:

  1. The validation of resale as a critical tool to keep consumers engaged within a brand’s ecosystem and to possibly upgrade them to higher-value items.

  2. The importance of outsourced “Resale-as-a-Service” models to enable brands and retailers to enter resale without being overwhelmed by its operational complexity (e.g. collecting, sorting, cleaning, pricing, connecting buyers and sellers, fulfilling, etc).

  3. The possibility for resale to pressure mid-market brands and retailers as resale opens up access to luxury items at accessible prices.

For more insights like this one, purchase your copy of the 123-page The Future of Fashion Resale report, in which BoF Insights offers its perspective on fashion resale: how it thinks about the upside of the industry, how it believes the landscape will evolve, and how it recommends industry participants build their own resale strategies.

The Future of Fashion Resale is the first in-depth analysis to be published by the BoF Insights Lab, a new data and analysis unit at The Business of Fashion providing business leaders with proprietary and data-driven research to navigate the fast-changing global fashion industry. For enquiries and support, please email insights@businessoffashion.com.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *