Shoppers are buying more from retailers than ever. That’s why

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Second-hand retailers are targeting green and hard-to-find shoppers while avoiding the supply chain pressures experienced by traditional retailers.

Large retailers such as Walmart and Target have focused on lowering prices and absorbed rising shipping, labor and materials costs for shoppers. Other retailers such as Macy’s and Kohl’s have raised prices to keep up with rising costs.

But resale companies RealReal and ThredUp are pondering their used supply chains, inventory levels, and prices.

“While many retailers have been forced to raise prices due to inflation or supply chain pressures, we do not have the same level of risk,” said James Reinhart, CEO of ThredUp, in the company’s recent third quarter income statement.

According to Reinhart, ThredUp’s business is entirely backed domestically by its users, and does not depend on direct production for inventory.

“We decided to strategically lower prices to attract as many customers as possible at a time when consumers are experiencing price pressures in many other areas of their lives,” he added.

ThredUp prices in the third quarter were on average 15% lower compared to the same period last year. Reinhart said the company will continue to contain prices through its internal ThredUp supply chain.

The company reported record quarterly revenue of $ 63.3 million in the third quarter, up 35% from last year. It also had a record 1.4 million active customers and a record 1.3 million orders, up 14% and 28%, respectively, over the same period last year.

Julie Wainwright, founder and CEO of RealReal, said after its third quarter earnings report that the company’s inventories had surpassed pre-Covid levels, adding: “We believe we are well positioned on a supply side as we enter the holiday season.”

She also noted that RealReal is shielded from inflationary impacts that other companies are seeing.

RealReal reported total revenue of $ 119 million in the third quarter, up 53% from last year. In the third quarter, 757,000 orders were fulfilled, which is 38% more than last year.

“With the issue of resale and empty windows, I am very confident that retail is just changing,” said Tim Ceci, founder and president of Tim Ceci Retail Consulting.

However, investors are not entirely sure about the prospects for these companies, even amid supply chain challenges for retailers around the world. ThredUp stock has been volatile since its initial IPO this year, and after its recent gains led to a one-day rebound, the stock has continued to decline. RealReal’s earnings are boosted by recent earnings, but are down about 25% this year.

But broader consumer trends propping up the used-goods market continue to serve as a secular tailwind for this niche.

New habits pushing shoppers towards resellers

In total, the resale market is projected to reach $ 51 billion by 2023. recent report from ThredUp.

The resale industry is growing 11 times faster than traditional retail, according to Caroline Thomas, president and CEO of Aravenda, a consignment software company. This trend is likely due to two factors: supply chain logistics and consumers’ shift towards sustainable thinking.

It’s also helped by younger consumers like Edwin Elliott, a 25-year-old Miami resident who browses old-school items online to complement fashionable outfits. They can be difficult to recreate “without real vintage pieces,” Elliott says. “And there are so many resale shops on the internet, so buying vintage items just got easier.”

“Before you have to save,” Elliott said, “you have to go through heaps of things and hope you find something worth buying.”

Savings, an outdated term for resale, means the buyer has a choice. “And the Internet provided it,” Ceci says. “Generation Z uses second-hand and resells,” he said.

Etsy, an online business known for its handcrafted marketplace and vintage merchandise, acquired the Depop app for resale in July for $ 1.62 billion, demonstrating “significant potential for further scaling,” Etsy CEO Josh Silverman said in a statement deal.

Etsy stock has outperformed the market this year.

Depop, or “Gen Z resale” as Silverman described the market, serves 30 million users in 150 countries. Through its core idea of ​​sustainable and ethical shopping, the secondary brand is reaching out to young consumers.

“It’s about choice,” Cecy said. And for the young shopper looking for a retro look and an environmentally friendly way of shopping, “it’s a viable way to exchange with a retailer or brand,” he added.

A growing focus on new, unused items

The sustainability factor is an “add-on” for Elliott, but the main reason he makes purchases for resale is for the exclusivity and convenience of the Internet.

These resale sites don’t just provide a platform for sellers to sell old items. “New with tags” or “new in the box” products are increasingly being sold through resale platforms, Thomas says.

StockX, which launched in 2016 as the “Stock Exchange of Sneakers,” has evolved into a resale site where users can buy and sell new high-value and hard-to-find items in clothing, bags and electronics. In April, StockX completed StockX CEO Scott Cutler said the new round of funding is valued at $ 3.8 billion, signaling “widespread acceptance and excitement” for the company over the long term.

Through resale sites such as Depop, consumers can resell limited items that may have already been sold out and are no longer available directly from the retailer – a common occurrence, Elliott said, “so it’s hard not to buy from a resale site.”

“When you turn around and look at RealReal, a lot of that customer relationship has to do with luxury goods or more expensive items,” Ceci said.

Traditional retailers move to resell

Several traditional retailers are finding ways to move into the resale space as the business thrives.

In April, Lululemon announced the launch of its own resale program. The brand partnered with Trove, a business that helps companies open resale stores, and began piloting its ‘Like New’ program in California and Texas in May.

ThredUp entered into several partnerships, including an agreement with Macy’s in August to sell used clothing in 40 stores. JC Penney has partnered with ThredUp to offer pre-owned women’s clothing and bags in 30 stores.

Through its Resale-as-a-Service platform, ThredUp works with several retailers to help provide second-hand goods to shoppers, including Walmart, Everlane, Farfetch, Gap, Adidas and Crocs.

Even Ikea said it would resell Scandinavian ready-to-assemble furniture The store is announcing this month that it will offer a “buy-back and resale” program in 33 of its US stores through December 5, following a pilot rollout of the service in a store in Philadelphia.

“I am optimistic about the ongoing development,” Ceci said. “And of course the resale market is definitely not going anywhere.”

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