The Circular Retail Economy

by | 09 November 2021

According to Boston Consulting Group, the global market for pre-owned apparel is growing at a rate of 15 percent per annum, generating a whopping $40 billion per year. As a result, established retail marketplaces have invested heavily in online resale technology platforms to expand their operational reach with consumers. In the last year, Poshmark’s recent acquisition of sneaker authentication platform Suede One to Etsy’s acquisition of Depop, and secondhand marketplace Vestiaire Collective raised $216 million in funding, has established resale as a top retail category.

With the supply chain in flux and the prospect of new inventory in the wind, more and more retailers are adapting their omnichannel strategies to incorporate circular economy concepts to maintain consumer interest and brand engagement. The secondhand retail market experienced a steady resurgence throughout the pandemic, inspired by consumers’ frugality and the aesthetic perpetuated by today’s youth and their prioritization of sustainable fashion, which influences 64% of Gen Z and Millennial purchases. And while we know this isn’t necessarily new information, perhaps the rising trend of luxury retailers embracing consignment and resale is newsworthy enough.

Accessories Make the Outfit

In the last few weeks, pre-owned luxury watches have dominated the digital resale marketplaces, and analysts predict that the remainder of the accessories sector will soon follow. For example, Net-a-Porter recently partnered with Reflaunt on a pilot program that encourages its loyal consumers to sell “well-preserved” previous purchases in exchange for credit or a direct deposit transfer, with accepted categories including designer jewelry ready-to-wear, bags and shoes.

The return on investment can be pretty lucrative for fashion enthusiasts and the retail marketplaces themselves. For example, coveted collectible handbags from Birkin, Gucci, Louis Vuitton and Hermes are more likely to resell at 75%-90% of their retail prices as reported by Rebag, an online platform for buying and selling luxury handbags.

Luxury Resale Makes a Global Impact

The US isn’t the only market reverting to the secondhand retail market due to supply chain struggles. China, which represents about 19% of the world’s population, is also driving revenue into secondhand luxury sectors. Before the pandemic, 56% of the yearly luxury purchases of Chinese consumers were abroad. Now, more than half of those purchases, or 86% of luxury purchases in both retail and resale, are happening locally. Now, more than half of those purchases, or 86% of luxury purchases in both retail and resale, are happening locally. Moreover, when you factor in the average age of the Chinese luxury consumer at 28 is a full ten years younger than that of the rest of the world, one can estimate the significant impact of this generation’s future buying power. The younger consumers of the post-00’s could make up nearly 40% of China’s luxury buyers by as early as 2035, according to Bain & Co., as the majority of the demographic enters the workforce.

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