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REI is blazing the trail in brand resale, study finds
Trove's Brand Resale Index identifies best practices for brands that own their recommerce programs.
In the current era of commerce, brands are exercising more control over how their products are sold, and delivered.
As they run their own stores both online and offline, brands have ownership of the relationship with the customer, the shopping experience they provide and the process that delivers goods to their doors.
Increasingly, this ownership is also extending to resale.
While secondhand sales were long the province of marketplaces and consignment stores, brands are increasingly choosing to bring resale under their own roof. With infrastructure provided by software platforms, more brands are setting up their own recommerce programs that offer trade-ins, and selling pre-loved items through a channel that operates alongside ecommerce and brick-and-mortar.
Trove CEO Andy Ruben saw an opportunity to grow this area of resale after running sustainability, private label and ecommerce at Walmart.
The question he sought to bring from the whiteboard to the real-world was: “How would a different model work where brands could continue to grow, but their growth would not directly connect to new production?”
“So brands like Patagonia would make money the first time they made a Nano Puff, but then make money the second and third time they would sell that same jacket. And over time, more and more of the growth would come from the secondary sale as they have more products in the world,” Ruben said.
This resale model arrives as a generation of brands – Think: Patagonia, On, REI, Lululemon – are building strong affinity among customers, and creating highly sought-after products that make consumers want to seek them out. This increases the value of resale, as consumers can still participate in the experience with a brand and own an item, while doing so at a lower cost barrier to entry than buying new.
As this fast-growing segment of the $100 billion resale market continues to see more brands join in, Trove sees a set of best practices for brand resale emerging. Working with OSF Digital, the recommerce software company is codifying these and highlighting leaders in the space in a new report out on Tuesday.
The Brand Resale Index, which evaluated 40 brands across four verticals and was agnostic of tech platform, identified four key areas where brands can stand out:
- Brand positioning: In marketing, how are brands talking about both the global advantages of resale through sustainability and the tactical benefits such as saving money? Do they elevate resale within their marketing channels?
- Commerce: What is the resale shopping experience, and does it extend across online and offline? Are all of the elements of modern ecommerce, from web features to a variety of payment methods, available?
- Trade-In: How easy is the trade-in process, which provides the supply? Is listing online and offline frictionless, and are the rewards, such as gift cards, clear?
- Business model: How does resale contribute to sustainability? Is the organizational support in place to grow this into a profitable channel, or does it appear to be more of a marketing stunt?
To make resale sustainable for brands, growth and profitability will be necessary. Ruben said software is a key tool to undergird all of these elements.
“If you don't have that technology backbone, it's going to be very hard as a brand to make money and scale this program,” Ruben said.
When it comes to the leaders in resale, the report broke down top performers by category:
- Overall: REI
- Outdoor: Arc’teryx
- Fashion/Apparel: Amour Vert
- Footwear: On
- Luxury: Philip Lim
The leaders tend to stand out by tying each best practice listed above together. For instance, REI makes resale part of its membership program, so there is an inherent connection between the experience of buying a resale item and the experience of participating in the brand’s community.
“Brands have the ability to offer you things that no one else can,” Ruben said. “By trading items in, they can give you exclusivity and access to the core of the brand in a way that a third party marketplace or an Amazon never could.”
Looking ahead, the Index identified a key opportunity for luxury brands to expand their own recommerce channel. The category has a long history in resale, but the leading brands do not for the most part own their resale experiences. Rather, it is consignment shops and second hand boutiques that make up most of the upscale secondhand market.
“Luxury has all of the elements that make that category a winner in this space,” Ruben said. That includes items that are coveted by consumers, a deep narrative and heritage around those items, as well as a pricepoint where products hold their value.
Here are a few more key findings from the report:
- Branding resale: 63% of companies created specific resale branding to communicate the program’s role in carrying forward brand mission and values.
- Social opportunity: Only 35% of brands promote resale on social media. Many brands promote the launch of the program, but do not follow up with posts about specific items.
- Cross-channel: 13% of brands integrate new and used items within search results on their main ecommerce site, while only 25% allow customers to integrate purchases.
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This Week in Commerce: Nike earnings, Fed rate decision
Check out the agenda for March 20-24.
Welcome to a new week. Earnings offer a bellwether for the consumer economy this week, as key brands like Nike and General Mills will report results. Elsewhere, all eyes will be on the Federal Reserve as it announces its latest decision on interest rates.
Fed interest rate decision: The Federal Reserve Open Markets Committee announces its decision on whether and by how much to hike benchmark interest rates following its two-day meeting. The Fed has been hiking interest rates rapidly in an effort to bring down 40-year-high inflation, but slowed the pace at the February meeting with a 0.25% increase. (March 22, 2 p.m.)
Durable goods orders: The U.S. Commerce Department releases data on orders from manufacturers for goods that are designed to last more than three years. This is considered an indicator of business activity. In January, orders dropped at the steepest rate since April 2020. (March 24, 8:30 a.m.)
Monday, March 20: Boxed, Foot Locker
Tuesday, March 21: Nike, GameStop
Wednesday, March 22: Petco, Chewy
Thursday, March 23: General Mills, Express