Is Clothing Resale the Next Disrupter for the Apparel Sector?

Secondhand market shares features of off-price retail

Author: Andria Cheng

July 5, 2017

In the troubled apparel space, off-price retailers, led by TJ Maxx parent TJX Cos., have been picking up share. Another segment of the market could be poised to challenge for a larger piece of the market: secondhand clothing resellers.

The off-price and resale segments of the industry share some common traits: consumers' desires for name brand products at a discount, and the "entertainment factor of the treasure hunt for unique items," Deborah Weinswig, managing director at Fung Global Retail & Technology, said in a report.

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"Online secondhand resellers could pose a competitive threat to off-price retailers such as TJX," she wrote. Properties like ThredUp, which offer mainly mass market brands, and The RealReal, more geared toward luxury designer goods, "focus on higher-quality, gently-used, brand-name products and offer a more curated product assortment."

Meanwhile, resale properties have a distinct advantage in the digital space: Traditional off-price retailers still have zero to little online sales, she said.

Fully 50% of ThredUp shoppers said their secondhand purchases replaced ones they would have made at TJ Maxx or Marshalls, according to ThredUp's annual resale study published earlier this year. At least 75% of resale and off-price shoppers each list “the thrill of the bargain hunt” as their primary motivation, the report said.

Beyond low prices and the entertainment factor, some resale shoppers feel that buying used goods is a way of being more environmentally conscious. The "decluttering" movement may also be contributing to the growth of the market.

While many apparel and other retailers have shut stores or filed for bankruptcy protection—premium denim brand True Religion is the latest example—the Association of Resale Professionals said on its website its segment of the market saw net store count growth of about 7% a year in recent years. While small compared to major retail chains, Crossroads Trading Co., for instance, has expanded to more than 30 stores selling secondhand fashions in the US.

According to ThredUp’s annual study, the apparel resale market is expected to almost double to $33 billion in 2021 from $18 billion in 2016, with online resale players growing more than four times faster than the broader apparel resale market. The apparel category alone represents nearly half, or 49% of the resale market, far outpacing the other categories including electronics, media and books, each of which represents only 10% to 16% of the market, according to the report.

Echoing trends in other parts of the retail industry, millennials and other younger shoppers also will shape the future of resale, according to the ThredUp study. It found that 30% of those ages 18-24 said they have shopped secondhand in the past 12 months and 21% said they will do that in the future. In another example of this demographic’s shifting priorities, 65% of the millennial shoppers in the study said they spend their secondhand savings on experiences with friends and family—a spending pattern that has hurt traditional apparel and department store retailers.

Meanwhile, just as consumers across the board increasingly feel comfortable bragging about their cool find at off-price chains, ThredUP report said that high income shoppers, or those earning more than $125,000, are 35% more likely than low income shoppers to try secondhand purchases. In fact, among its most active shoppers, 67% of them have net worth of at least $100,000, including 46% of them with at least $250,000.

There’s also another sign that these startups like ThredUp are disrupting the market and could one-up off-price retail in a different way. Taking a page from online natives like Warby Parker and Bonobos, the company has opened its first brick-and-mortar store this year. 

Photo by Katya Austin on Unsplash