The fashion industry is becoming increasingly aware of its negative environmental impact. A staggering 87 per cent of materials1 used in clothing production ultimately end up in landfills or incinerators, with less than one per cent being recycled into new products. This waste is a byproduct of the industry’s conventional linear model, which produces clothes with the expectation that they will be worn briefly and then discarded. Moreover, increasing consumer demand exacerbates the problem by forcing companies to ramp up production.

While there have been efforts to transition towards more circular and sustainable business models, progress has been sluggish. The rate of consumption and production in today’s world far surpasses the capacity for circular solutions. Given the urgency of climate change and the mounting waste problem, it is crucial to focus on immediate strategies to reduce the fashion industry’s environmental footprint.

And as sustainable practices take centre stage, traditional business models are being re-evaluated. One of them is Resale-as-a-Service (RaaS), a burgeoning model that not only offers a solution to waste but also promises new revenue streams for brands. As the secondhand market gains traction, driven by a mix of sustainability concerns and consumer desire for affordable luxury, brands are contemplating whether to take control of the resale process themselves.

Understanding RaaS

Resale-as-a-Service, or RaaS, is a business model where companies partner with third-party re-commerce providers to create bespoke reselling services for their customers. These RaaS platforms handle the technicalities of establishing and operating a resale channel, allowing brands to focus on marketing and storytelling.

Both retailers and consumers benefit from the RaaS model as the resale of used items gains traction. By outsourcing resale channel development to experts, businesses can avoid compromising customer experience, while consumers enjoy a simplified way to buy and sell pre-owned goods, fostering greater customer loyalty.

The Surge in Recommerce

The rise of e-commerce has significantly influenced the secondhand market, lowering entry barriers and making it simpler for consumers to find pre-owned items. By 2024, it is projected that 14 per cent of sales2 in the clothing, footwear, and accessories market will come from resale, an increase of seven per cent from 2020. This has created a thriving ecosystem that has attracted both innovative brands and entrepreneurs.

As the secondhand market continues to grow, brands are confronted with a dilemma: Should they manage the resale process themselves and claim a share of this burgeoning market, or should they relinquish control to an unregulated secondary market?

Why Brands Should Prioritise Resale Now

Brands have compelling reasons to prioritise resale, outlined as follows:

1.  Consumers Crave Affordable Luxury

Despite economic uncertainties, the appetite for luxury goods has not waned. According to Bain & Company, the market was valued at €1.15 trillion in 2021 and grew by an additional 19-21 per cent in 2022. With inflation rising and consumer confidence projected to dip until 2023, discretionary spending is under pressure. This is further complicated by luxury brands like Chanel and Louis Vuitton raising prices, citing supply chain issues and higher material costs. Consequently, consumers are flocking to resale platforms.

While high-end brands have historically been hesitant to endorse resale, fearing it might erode their primary market, this view is evolving. Luxury resale sites have demonstrated the intrinsic value of vintage and limited-edition items, which would otherwise depreciate without a proper platform. Brands like Gucci and Stella McCartney are now partnering with resale platforms and sharing in the revenue.

2.  The Growing Importance of Sustainability

The fashion industry is a notable contributor to environmental degradation. According to a 2020 study published in Nature Reviews Earth and Environment, clothing and textile production accounts for 20 per cent of industrial water pollution, 30 per cent of microplastic ocean pollution, and between 3 per cent and 10 per cent of greenhouse gas emissions.3

The fast-fashion model, with its emphasis on frequent product releases, is inherently unsustainable. Younger consumers find this ethically troubling; 64 per cent of Gen Z4 and Millennials say sustainability affects their purchasing decisions. Resale offers a solution to this ethical dilemma. A BCG survey5 revealed that Gen Z shoppers are the most active in the resale market, making up 31 per cent of buyers and 44 per cent of sellers.

3.  Maximising Value from Excess Inventory

For fashion brands that focus on trends, the return of items to warehouses has always been a major issue. Excess or returned goods often have limited resale avenues, especially when consumers expect continually refreshed inventories. This leads to increased storage costs and the potential need to liquidate or heavily discount items.

Such approaches are not only financially burdensome but also detrimental to a brand’s market standing. Regular clearance sales can damage a brand’s image as a luxury merchant, leading customers to question the quality of the products. By incorporating a resale channel, companies can reposition the value of these items. Creating a separate catalogue for such merchandise allows brands to maintain their narrative and attract discerning customers.

Elevating Replacement Rates

For brands, participating in resale programmes is often seen as a testament to their commitment to sustainability. However, these initiatives risk becoming mere marketing tactics if not paired with a reduction in production levels. To transition from superficial gestures to truly impactful strategies, brands must focus on minimising production and make resale a core aspect of their business model.

The Nuances of Resale and Replacement Rate

Resale is often equated with sustainability, but the relationship is more nuanced. The concept hinges on the ‘replacement rate’, which measures how effectively purchasing a used or refurbished item can offset the demand for a newly produced item. However, low replacement rates can negate the environmental benefits of resale. This occurs when the reverse logistics, processing, or repairs required for resale items consume more resources than the environmental benefits gained from reusing the clothing. Brands, therefore, must aim for high replacement rates to truly benefit the environment. While replacement rates can vary significantly, they never achieve a perfect 1:1 ratio. This means that while the resale market may offer some benefits, it is not a complete solution for problems like overproduction or environmental waste.

A Matter of Brand Accountability

Though this issue may seem rooted in consumer behaviour, it is fundamentally about brand accountability. Higher replacement rates can only be achieved if brands modify their production practices and make used products easily accessible. The easier it is for consumers to purchase, maintain, and return used clothing, the higher the replacement rates will be. Brands that have successfully integrated resale and refurbishment into their business models are those that have focused on achieving high replacement rates, both for environmental and financial gain.

The Role of Perceived Value

The key to high replacement rates lies in the perceived value of the product. Customers who place a high value on resold items will not only purchase them more often but are also more likely to take good care of them.

Moving Beyond the Vintage and Thrift Paradigm

Reselling has long existed under the guise of vintage or thrift shopping, catering primarily to those who relish the hunt for hidden gems. To fully unlock the potential of resale in mitigating the industry’s environmental impact, this market image needs to evolve. The customer base for resale is far more extensive than that for vintage and thrift, waiting to be tapped into. Brands must figure out their own unique approaches to serve this wider market.

By understanding these factors, brands can move beyond simply ticking boxes for sustainability and instead make resale a cornerstone of a genuinely sustainable strategy.

Why Brands are Embracing Raas

1.   A Lucrative Revenue Stream

Traditionally, the resale market was largely driven by individuals looking to declutter their closets or make quick money. The first wave of the resale market was dominated by peer-to-peer e-commerce platforms where individuals listed items like clothing, shoes, or accessories for sale. Today, successful resale operations exist on established platforms such as ThredUp, Poshmark, and Depop, managed by entrepreneurial consumers. Recognising the substantial ‘secondary value’ that some of their products command, brands are keen to capitalise on this growing market.

2.  Safeguarding Brand Equity

In the traditional resale market, brands have no control over how their products are presented. Factors such as pricing, catalogue design, and the overarching brand narrative can vary widely depending on the platform. Given that many new customers first encounter luxury products on resale sites, inconsistent or negative user experiences can erode brand trust. By adopting a Resale-as-a-Service model, brands can maintain control over these elements and provide a consistent customer experience.

3.  Tackling the Counterfeit Market

Another compelling reason for brands to venture into resale is the fight against counterfeit goods. With the rise of e-commerce, the fashion industry has seen a surge in the creation and sale of knockoff products. By directing consumers to an official resale channel where products can be verified and certified as authentic, brands offer a secure alternative. This becomes crucial in an environment where taking down fraudulent products resembles a never-ending game of whack-a-mole.

Ending Note

The influence of the resale market is evidently on the rise as consumers increasingly opt for pre-owned goods. As more retailers decide to take control of the resale experience, Resale-as-a-Service providers are likely to become more prevalent in the secondhand market. However, there is a valid concern that brands may undercut their primary sales as resale transitions from being individual-driven to brand-managed. To mitigate this, brands must offer a strong value proposition that sets the resale experience apart from traditional e-commerce. Failure to do so could undermine the benefits of entering the resale market in the first place.