Once a fringe business sneered at by fashionistas and Class A center landlords, the resale trade is evolving into a major retail category, both in stores and online. Coined “re-commerce,” secondhand retail appears to be a concept for its time, addressing such consumer concerns as inflation, a possible recession, supply chain delays, value and eco-friendliness.

Resale stands to capture 10% of all apparel and accessories sales globally within the next 10 years, Morningstar Holland equity analyst Jelena Sokolova projected in June. The secondhand clothing market, in fact, is growing 11 times faster than traditional retail and will be worth $84 billion by 2030, according to market researcher GlobalData.

The RealReal, an online retailer for upscale and luxury consignment with more than 28 million members, opened its first physical store in New York’s SoHo in 2017 and has expanded to about 20 locations, most of which allow patrons to sell back their gently used garb pending free in-store evaluations. The RealReal’s West Hollywood location in California features authenticated resale items including Gucci and Louis Vuitton handbags, Rolex and Cartier watches and women’s and men’s clothing from Prada and Chanel. “Resale is clearly a retail movement,” said Cushman & Wakefield Americas retail services managing director of business strategy Alana Loeffler. “It is amazing to see how it’s grown since the debut of eBay.” The RealReal and other new physical resale tenants “are creating such exciting and curated store journeys that are so easy to navigate that it’s hard to recognize you’re shopping in a secondhand store,” she said. 

As cost-of-living expenses escalate disproportionately to consumers’ incomes, “resale finds itself at the intersection of several important trends,” said Retail Prophet founder Doug Stephens, author of Resurrecting Retail: The Future of Business in a Post-Pandemic World. “What used to be the robust mid-tier of the retail apparel market has been decimated, and at the same time, it’s true that the average consumer today owns about two to three times more apparel than previous generations,” he said. “Resale also seems like a responsible purchase that keeps clothing out of landfills.” According to Jungle Scout’s third-quarter Consumer Trends Report, 25% of consumers plan to buy used/thrift store gifts to help shore up their buying budgets during the 2022 holidays. Typically, 16% to 18% of Americans shop at secondhand stores in a given year, according to data from resale professionals association NARTS.

Loeffler has seen steady, across-the-board resale-store growth from independents and charity-based thrift shops to luxury resellers and from pop-ups to stores-within-stores. There are more than 25,000 resale, consignment and not-for-profit resale shops in the U.S., according to a May 2022 IbisWorld report. Kate Camenzuli, CBRE vice president of occupier and crossborder retail in Toronto, has watched resale evolve into a legitimate retail tenant class. “We started seeing a large amount of resale in the luxury space about three years ago, and it’s taken off from there,” she said. “We’re taking a deeper dive in the environment and doing a lot of work with secondhand retailers.”    

Making resale even more compelling are cross-category offerings ranging from apparel to shoes to sporting goods to baby and kids’ gear. The latter two categories, by their nature, typically offer nearly new products at a steep discount, Camenzuli said. The Play it Again Sports chain, a resale pioneer, has grown to 400 U.S. stores since its 1980s founding. Rent the Runway, launched in 2009, was another of the first national chains to deal in secondhand fashion. Several brick-and-mortar resale chains are thriving, including Crossroads with 37 locations, Plato’s Closet with more than 400, the multimarket Kidizen chain, and regional operations like California’s Wasteland, which has stores in Santa Monica, Studio City, Los Angeles and San Francisco.

Some large online resale e-shops like ThredUp, which has added upscale items after its founding as “the largest online thrift store,” are collaborating with physical retailers. It partnered with Tommy Hilfiger stores in August to offer shopping credit for customers’ used clothes. Customers fill a shippable box or bag with any brand of female apparel or with men’s Hilfiger garments and ship them for no cost to ThredUp, which issues credit if items are deemed resale eligible. ThredUp earlier partnered with PacSun, Walmart, Macy’s, JCPenney and Abercrombie & Fitch in variations of what it calls its “resale-as-a-service” programs. In late 2021, ThredUp announced plans for a 600,000-square-foot warehouse near Dallas that can house as many as 10 million items.

“Resale is an industry megatrend,” said Adam Siegel, co-founder and CEO at Recurate, which powers online resale platforms for such brands as Michael Kors, Dolce Vita and Steve Madden. That includes responsibility for customers’ experiences listing products for resale. As a senior executive with the Retail Industry Leaders Association for eight years, he got to see emerging trends, “and it was clear that meteoric growth was going to happen in resale.” Buoyed by $14 million in new funding this year, the two-year-old firm expects to have about 100 brand partnerships by year’s end.  

Digital advertising costs are pushing some online resellers toward the brick-and-mortar channel to enhance brand awareness and generate new customers, said Loeffler. The RealReal has said that physical stores have been significantly more effective at customer acquisition than digital marketing has been.

Competition

Such luxury resellers pose little threat to firsthand luxury because “luxury brands will always have an affluent customer base that’s waiting for the latest collections to be released,” Loeffler said. Resale poses the biggest threat, instead, to mass-market brands, Stephens said: “For what it might cost for a new suit from Zara, you might be able to pick up a designer item at resale. That has made fast-fashion the most conspicuous victim of resale’s growth.” In response to the resale trend, H&M launched its Rewear platform in 2021 in Canada, allowing shoppers to buy and sell items of any brand using a price-recommendation algorithm. Sellers receive a choice between direct deposits and H&M gift cards redeemable online or in-store. The fast-fashion seller will base its decision to expand Rewear into U.S stores based on the Canadian program’s success, it said. Madewell, Harvey Nichols, Fabletics and other firsthand physical retailers also have expanded into resale.

Even some higher-end shopping centers are getting resale tenants these days, Loeffler said. “Resellers are building real programs, so landlords are becoming more comfortable with them,” she said. “They have personal indemnity, so they can go into plazas and malls now with few restrictions.”  

It’s not unusual to see resellers offering slightly older versions of new products that their co-tenants are offering, Camenzuli said. “But there are still sales restriction from same-center native brands, so I’m curious if we’ll see a workaround emerge,” she added.    

And resale still has more upside to go around. Price-conscious upscale consumers have become more comfortable buying expensive clothing firsthand because they know they can recoup some of their costs in a resale, Siegel said. Further, secondhand shoppers know they can find highly desired out-of-circulation items at luxury secondhand stores or can support causes at charity-linked thrift shops. Plus, brick-and-mortar resale stores allow customers to touch and feel the products, “which is still such a huge component for shoppers,” Camenzuli said. “There are so many positive aspects, and that’s why resale isn’t going away; I think we’re going to see more and more of them.”

How Much Can Brick-and-Mortar Resale Retail Grow?

“The rate which we see new resale stores dotting the horizon will depend almost entirely on how much quality merchandise is in the market,” Stephens said. During a recession, resale demand stands to increase, but the public may not be as quick to donate quality items to thrift stores or pay consignment fees. They instead may hang on to items or sell them privately, which might create a supply-and-demand curve opposite of most retail categories, he said. “But if the market can remain balanced for a sustained period of time, we’ll see a corresponding rise in the number of physical stores.”

Still, it’s not all clear for some resale segments. The economy is sidelining some ThredUp shoppers, co-founder and CEO James Reinhart said on a second-quarter earnings call. “We’re witnessing a clear bifurcation of ThredUp customers, with premium shoppers trading up and value shoppers trading down.” For the 12 months ending in the second quarter ThredUp’s average discount segment order declined 7% year over year while upscale orders increased 15%, Reinhart said. In August, The RealReal stated it was slowing its brick-and-mortar expansion to allow existing locations “to mature.”

Even so, the 2021 U.S. fashion resale market enjoyed a weighty 33% year-over-year increase over 2020 and should grow to $26 billion by year-end 2022, capturing a 4.7% share of the total U.S. fashion market, Coresight Research estimated. Post-COVID, “consumers are refreshing wardrobes as they return to more normalized ways of living,” noted Coresight, which anticipates an acceleration.

While only a few luxury store brands have dipped their toes in the resale waters by reselling some vintage pieces, more likely will. “I believe it’s only a matter of time before luxury adopts ‘pre-owned certified’ programs similar to luxury automobile manufacturers,” Stephens said. Prada, LVMH and Cartier already have formed the Aura Blockchain Consortium, a private, nonprofit group creating virtual representations of physical luxury goods it calls “digital twins” to certify authenticity.

It’s too early to project what net impact secondhand shops will have on retail real estate, Loeffler said. “But landlords are always looking for fresh product and concepts for consumer engagement.”

The majority of digitally native resale brands — including Poshmark, Vinted, Depop and Tradesy — have not opened physical stores. But it’s very hard for digitally native retailers to build critical mass without brick-and-mortar stores, “which are a vital means of generating brand awareness and impressions,” Stephens said. “Physical retail, when done properly, is an incredibly powerful and cost-effective media channel.” 

What is clear, said Loeffler, “is that we have a new wave of environment consciousness, and resale is a great way to both reduce waste and extend the life cycle of products while dealing with the idea of a looming recession.” 

As Camenzuli summed it up: “Resale is cool again.”