From Charity Shops to High Fashion
Second-hand fashion, once relegated to charity shops, is now in style. Vestiaire Collective, a luxury resale site, featured in an episode of the latest season of “Emily in Paris”, a Netflix drama known for its designer costumes. eBay, an online marketplace, has partnered with “Love Island”, a cult British reality show, to kit contestants out in used clothes. At London Fashion Week last year, Vinted, a Lithuanian resale site, and Oxfam, a charity, showcased second-hand outfits.
A Growing Market
The global market for used clothes and accessories is now worth some $100bn, according to research from Lombard Odier, a bank, up from $30bn-40bn in 2020. McKinsey, a consultancy, reckons the American resale market grew 15 times faster than clothing retail more broadly in 2023, and that second-hand sales will account for 10% of the global apparel market this year. Some 30,000 items are now newly listed on Vestiaire every day. At a time when many fashion brands are struggling, resale sites are booming. How much bigger will they get?
Environmental and Economic Drivers
Some shoppers buy second-hand for environmental reasons. The fashion industry is responsible for about 10% of global carbon dioxide emissions, more than shipping and air travel combined. It uses a lot of water, too.
Yet as Maximilian Bittner, Vestiaire’s chief executive, notes, “By far the dominant driver is price.” Stretched consumers are increasingly turning to used goods to save money. Vestiaire has calculated that second-hand designer gear bought on its site is 33% cheaper on average than firsthand fast fashion from firms such as H&M, rising to 64% for coats and 72% for dresses, measured by cost per wear (calculated as the price of an item minus its resale value, divided by the number of times it’s worn).
Untapped Potential
There is plenty more growth to be had. Analysts at Wells Fargo, a bank, reckon there are $200bn-worth of luxury goods sitting in people’s wardrobes that are ripe for resale, of which only 3% make it onto the market each year.
Making Resale Easier for Sellers
To entice more people to part with their “pre-loved” outfits, resale platforms are looking to make the process cheaper and easier. Vinted scrapped listing fees for sellers back in 2016 (it charges a fee of around 5% to buyers instead). Last year Depop, a London-based social commerce firm, and eBay followed suit in Britain. For many would-be sellers, though, the hassle remains a bigger barrier. Mr Bittner recently spent about half an hour putting four of his items up for sale on Vestiaire. He says that is still too long. Several resale platforms are now investing in artificial intelligence tools to help sellers fill in product descriptions and advise on pricing.
Enhancing the Buyer Experience
Resale platforms are using technology to improve the experience for buyers, too. Shoppers want to know that branded goods are authentic, particularly when it comes to pricier designer fare. Hiring experts to manually check products is costly and slow. But there are a growing number of whizzy alternatives. Osmo, one startup, uses sensors to authenticate shoes by their odor. Ordre, another startup, helps brands create a “digital fingerprint” of their products by photographing parts of an item during the production process.
The Profitability Challenge
Growth is one thing. Profit is another. Investors have become impatient with loss-making resale platforms. Shares in The RealReal, an American luxury resale platform, have lost three-quarters of their value since the company was listed in 2019. Those of thredUp, another online resale firm, have dropped by almost 90% since its listing in 2021. Neither firm is in the black. Vestiaire, founded in 2009 and still privately held, promises that it will become profitable in the coming quarters.
Vinted: A Rare Success Story
Vinted, which also remains private, is a rare exception, having turned a profit in 2023. The firm has invested in its own logistics and payments arms and has its own servers and security software. Thomas Plantenga, the firm’s boss, says doing this “unsexy stuff” keeps costs down, though he acknowledges the strategy makes the business “more complex”.
The Threat of Competition
Perhaps the biggest threat to profits, though, is competition. Charity shops and online marketplaces are not the only places to buy used clothes. Brands including Lululemon and The North Face are getting into resale themselves. A growing number of shoppers are buying second-hand clothes through social media platforms like TikTok. As the industry grows, others may take an interest. Mr Plantenga of Vinted worries his firm could one day be crushed by a Silicon Valley tech giant. For now, though, there are plenty of wardrobes still to be cleaned out.
