Reselling, as practiced today, is a terrible business. Companies that want to act as an intermediary between buyers and sellers of used clothing have two choices, neither of which are attractive: one method involves the platform handling transactions itself, which means renting warehouse space in several cities to store clothes, plus hiring a small army of Chanel ologists and Jordan scholars to authenticate items, as well as photographers to create listings and more.
Option two – leave everything to the customer – presents its own problems. It’s more work for sellers, a big reason why about 40 percent of U.S. consumers surveyed by BoF Insights have never tried reselling. With fewer gatekeepers, websites can become inundated with fast fashion and other questionable goods. And this model does little to reassure buyers that they won’t be defrauded (one reason why most peer-to-peer marketplaces still use authentication for more expensive items). Commissions are also lower, creating an incentive to overspend on customer acquisition.
These flaws are becoming increasingly apparent as resale platforms report results (ThredUp is due next Monday). When the economic outlook first began to turn south, some theorized that used sellers would take advantage of an influx of consumers who could no longer afford to buy new. Instead, retailers appear to be suffering from the same decline in online shopping that is hitting sales at DTC brands.
Costs are also increasing. RealReal said earlier this month that it is struggling to find enough sellers to expand its more lucrative consignment business. Poshmark, which has been profitable in the past, no longer is, partly due to higher marketing costs as it hunts for new customers and tries to convert sellers into buyers. Paris-based Vestiaire Collective’s big American push will only add further pressure.
Resale platforms say they will eventually be profitable, although the exact date tends to be in the distant future, if they provide one at all. The way forward comes down to scale and efficiency: these companies need all these warehouses, authenticators and salespeople processing as many bags and dresses as quickly as possible to justify the costs. For years, the category’s boosters have held out hope that artificial intelligence and automation could change the economy: computers better at spotting fake Dior bags than humans, and warehouses where robots do most of the work.
Progress has been slower than hoped, and it’s clear that Tradesy, which built its authentication system around analyzing data it collected on sellers, was acquired by Vestiaire Collective earlier this year and will shut down in 2023. Still, less glamorous technology helps . on the margins. A bright spot for The RealReal last quarter was that more sellers are submitting items themselves thanks to an improved self-service option.
What you should see this week
August 15 Armani Code Parfum, a new concentrated fragrance, goes on sale as part of the brand’s ambitious expansion efforts
On inventory results
TJ Maxx, Macy’s results
retail sales in the United States
Estee Lauder Cos., Kohl’s Ross, Tapestry results
UK retail sales
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