One of the biggest stories to come out of the Covid-19 pandemic is the devastation of retail — especially of businesses that relied on brick-and-mortar sales, many of which have declared bankruptcy or shuttered altogether due (at least in part) to the pandemic. But even as discretionary spending has dried up for many Americans, certain segments of retail are apparently thriving. One is online resale — i.e. sites like Thredup, The Real Real and Vestiaire Collective.
On Tuesday, Thredup released the results of its 2020 Resale Report, conducted in partnership with third-party research and analytics firm GlobalData, to examine the trends and trajectory of the $28 billion resale apparel market. Each year, the report illustrates how consumer spending is shifting more and more towards the secondhand market. (It's worth noting that although data was collected in partnership with a third party, it's presented by and supports the validity of Thredup.) Its latest findings are no different. But, for the first time, the report reflects the impact of a global health crisis and ensuing economic downturn.
While the broader retail segment is projected to shrink by 23% this year, due in part to Covid-19, online secondhand is expected to grow by 27%, according to the 2020 Resale Report. Looking further out, it projects that over the next five years, online resale will grow 414%, while overall retail will shrink by 4%.
The most obvious answer to why shoppers are directing their web browsers and money towards pre-owned goods right now is value. Plus, with people stuck at home, browsing e-commerce sites is a way to pass the time.
Thredup found that May 2020 was a record-breaking month for new Thredup visits and that overall shoppers spent 2.2 million hours on the site — a 31% increase over pre-Covid numbers. At the same time, the company is facing unprecedented inventory levels thanks to what the report calls a "quarantine clean-out frenzy." As a result, it's taking it longer to process consignments (a couple months versus a couple of weeks).
GlobalData also surveyed around 2,000 consumers and found that most respondents are getting thriftier in a number of ways in response to Covid-19, ranging from mending clothes to cutting their clothing budgets. It also found that 44% plan to spend more on secondhand, while 66% said they plan to spend less on department stores. Additionally, 52% of respondents said they plan to spend less on luxury.
Of course, value is only one of the perceived benefits of shopping secondhand — the other being environmental impact. Over the past couple of years, there's been a gradual shift in marketing messaging on the part of secondhand retailers towards sustainability that has more or less paralleled growing consumer interest in being environmentally conscious. The survey found that while shoppers feel guilty buying fast-fashion, they feel proud when they buy secondhand. Plus, 43% of respondents said they plan to spend more on sustainable brands in the next five years, versus only 18% who said that last year. It also found that the younger shoppers are, the less of a stigma there is to shopping secondhand, with more Gen Z-ers shopping secondhand than any other generation.
Like many retail experts, Thredup president Anthony S. Marino believes that the pandemic has accelerated trends in consumer behavior that were already underway.
"Shelter-in-place catalyzed the shift to shopping online," he shares as one example, adding the prioritization of value as another. "Consumers who may have taken a bit longer to come around [to shopping secondhand], Covid may have pushed them into our court." He also feels that, in the same way the 2009 recession drove interest in off-price retailers (Nordstrom Rack, T.J. Maxx, etc.), the current economic crisis is driving interest in secondhand.
Pretty much any way you slice it, the future looks bright for re-commerce.
Aside from consumer interest, the sustainability aspect is driving increased interest from investors and venture capitalists (not that these sites have ever had a hard time raising money) who intend to grow their ESG assets — meaning businesses that fulfill certain criteria around environmental, social, and governance factors. "There's a lot of capital out there looking for business focused on [sustainability]," notes Marino.
Meanwhile, traditional retailers are increasingly seeing the value in participating in the resale economy, which has resulted in many of them (like Walmart) partnering with Thredup as well as other resale sites, like The Real Real and Fashionphile. Marino says that those partnerships haven't died down at all during the pandemic: "We still get emails every day [from retailers]," he says, noting how retailers see value in its e-commerce infrastructure and ability to rapidly process and list items digitally.
Something else to note — and that is also probably of interest to investors — is that there is still plenty of market share for online resale to capture. Per the report, 82% of America hasn't yet resold any clothing, but 67% of them are open to it. Secondhand is expected to double its market share in 10 years, claiming the second-largest share of market, after (new) off-price. And while rental and subscription models are also expected to grow rapidly, they will still make up much smaller portions of consumer spend.
You can view the full 2020 Resale Report here.