The Rise of Resale in the Retail Sector

The retail sector has generally been engaged with buying and selling of new goods. This has been the case across the world, both in the developed nations as well as in developing nations.

However, in recent times, big box retailers have started dealing in second hand goods (often referred to as pre-loved goods). This trend has gained momentum across various product categories such as apparel, electronics, footwear etc.

The market for resale goods in the organized retail sector is already growing at breakneck speed. This speed is likely to increase in the future and the market may double in size within the next five years!

In this article, we will have a look at the rise of the resale segment in the retail sector. We will also have a look at the drivers behind this increased growth.

The Growth of Resale in Retail Sector

The rapid growth of the resale segment in the retail industry is being discussed in many big universities such as Wharton and Harvard. This is because research has shown that the resale segment provides a ray of hope for the growth starved retail industry.

Retailing giants such as Apple, Amazon, Lululemon etc have already started adopting the resale model. It is now common for big box departmental stores to have a separate section for pre-owned goods across the United States. There are specialist third party companies which have sprung up in order to help these big box retailers manage the supply chain related to the resale segment.

Drivers for Growth in the Resale Segment

Buying second hand or used goods was considered to be a taboo in the not-so-distant past. People would prefer buying new products which they could afford instead of buying expensive goods in the resale market. However, this belief has rapidly changed due to the change in the value system of the younger generation. The younger generation has a disproportionate influence on the retail sector.

Some of the factors which are driving this increased growth in the resale segment have been mentioned below:

1. Sustainability: Firstly, there has been a huge shift in the value systems of the young consumer. While the earlier generations of young consumers were more interested in fast fashion, the current generation seems to be concerned about sustainability. There is a huge customer base which wants to buy products only if they are eco-friendly.

   The threat of climate change as well as the realization of the fact that the earth’s resources are finite has led many youngsters to make a conscious effort to only buy products which are sustainable. Since the resale segment in the retail industry involves reselling and reusing the same products, it can be considered to be eco-friendly. It is for this reason that the resale segment resonates with the young Gen-Z customer who tend to drive sales within the retail industry.

2. Economic Benefits: The Gen-Z customer is also facing a lot of economic duress in most parts of the world. Inflation is at record highs in most developed countries. As a result, the cost of living in most major countries across the world has skyrocketed.

   At the same time, salaries continue to remain stagnant in most parts of the world. This means that the Gen-Z customer who is a new entrant in the job market is fashion conscious. However, they do not have the financial means to purchase all the products they want. As a result, some of these customers gravitate towards the resale segment.

3. Virtue Signalling: The biggest change related to the resale segment has happened in the mindset of the Gen-Z retail customer. Earlier, there was a lot of stigma associated with purchasing second hand products. The purchase of a second-hand product was considered to be socially undesirable and would lessen the social status of a person. However, over the past few years, this mindset has changed.

   Consumers buying resale products tend to flaunt their purchases on social media. They try to project values such as thrift and sustainability to buying resale products. These values are considered by many as being virtues which actually makes the products more desirable for some customers.

4. Increasing Customer Base: Certain retailers had shown skepticism while introducing the resale segment in their retail stores. This is because they though that they would end up providing lower priced options to their own customers. The end result would be that their own sales would end up being cannibalized and their profitability would be reduced

5. Trade Ins and Reward Programs: There are many big box retailers which have started offering trade ins and rewards wherein customers can give back their old product and obtain a substantial discount on a new one. These reward programs are helping companies set up a reverse supply chain to procure products which can then be refurbished and sold to a different set of customers.

The entire retail industry has acknowledged the rise of the resale segment in the retail industry. Since this segment is growing rapidly in an industry which is otherwise characterized by low growth, it is being pursued by an increasing number of retailers. However, some of these forays are not successful because of the issues being faced.