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Retailers are jumping on the resale bandwagon now that secondhand clothes are cool (and profitable)

Noam Galai/Getty Images

  • Used clothing sales are predicted to reach $77 billion by 2025, driven largely by resale sites.
  • Retailers have taken notice, and some are starting to offer their own trade-in or peer-to-peer resale sites.
  • If done right, it can be a win for consumers, brands, and the environment. 

It feels like everywhere you look, apparel retailers are diving into the secondhand clothing market. 

Outdoor retailer REI lets you trade in your old gear for a store gift card, Madewell is reselling “pre-loved” jeans, and Urban Outfitters created its own resale marketplace where shoppers can buy and sell clothing from its own brands and others. 

Taken together, these resale initiatives are a sign that apparel retailers are finally realizing the value — both in a business sense and an environmental sense — in embracing secondhand clothing. 

“The secondhand market was always looked at as competition to them, potentially cannibalizing their new sales,” Aditya Vedantam, assistant professor at the University at Buffalo School of Management, told Insider. “Most of these brands are now starting understand the value in selling refurbished or semi-refurbished apparel.”

The secondhand market is expected to boom over the next five years

The resale platform ThredUp predicted in a 2021 report that used clothing sales would reach $77 billion by 2025, up from $36 billion in 2021. Resale, rather than more traditional donation or thrift models, is driving that growth.

It’s a sign that the fast-fashion heyday of the 2010s is beginning to fade. Driven largely by social media, that trend dictated that a steady stream of new outfits was preferable to a few quality pieces. Disposable clothing, worn once or twice for the ‘gram and then discarded, became the norm. 

But shoppers of today are looking for something different. ThredUp’s survey of the “post-pandemic consumer” found that shoppers care more about sustainability and quality than they did in the past — 51% said they feel more opposed to “eco-waste” now than they did before the pandemic. Because of that, they’re turning to used apparel. 

A cohort of Gen Z shoppers are helping to lead that charge. While teens still prefer fashion brands like PacSun, Zara, and ultra-low-cost retailer Shein, they’re also allocating as much as 8% of their shopping to the secondhand market, according to Piper Sandler’s semi-annual survey of 10,000 teens. The most recent survey found that 51% of teens have purchased secondhand clothing, while 62% have sold it. 

A new way to make money

None of this is lost on retailers. 

Jumping into the resale market awards them cool points with young shoppers who value sustainability — in turn, those shoppers are willing to spend their money with brands that align with their values. For apparel companies, that means a new way to make money.

The brands that are diving into resale are typically opting for one of two resale models, according to Vedantam: trade-in or peer-to-peer marketplace. 

The trade-in model, used by REI, Madewell, Patagonia, and Eileen Fisher, allows customers to send back their unwanted items and receive discounts or gift cards in return. Those items are then repaired and resold by the company or recycled. 

The peer-to-peer model, favored by British retailer ASOS and H&M-owned minimalist fashion brand Cos, lets consumers handle the buying and selling on an online marketplace while the retailer takes a cut of the sale. And brands don’t even need to build that marketplace on their own: A new startup called Archive just landed $8 million in funding to build custom resale marketplaces for retailers, and brands like The North Face and Oscar de la Renta have already signed on.

Their are pros and cons to both options, Vedantam says. The trade-in model lets retailers have more control over their products and possibly charge higher prices. But it also requires the retailer to set up a whole network of infrastructure: a warehouse to store the items, the staff to process returns and make repairs, and so on. 

But the peer-to-peer model has its own challenges. While retailers can shift the burden of listing, repairing, and shipping the products onto the consumer, they don’t have any control over the quality of the items. 

Still, it seems that regardless of how brands go about selling used clothes, “depending on the product attributes, either model can be more profitable,” Vedantam said.

A win-win-win

landfill

LILLIAN SUWANRUMPHA/AFP via Getty Images

Of course, it’s hard to talk about secondhand apparel without weighing the environmental impact. 

The apparel industry is one of the world’s largest polluters, from when the first seed of cotton is planted to how much energy we use washing our clothes. And when we get rid of unwanted clothes, either by returning an item we just bought or throwing out old garments, there’s a high likelihood they’ll end up in landfills: 6 billion pounds of retail returns alone end up in landfills each year. 

“There is no regulation, unlike electronics and other items, to mandate the safe disposal of apparel,” Vedantam said. “Many times, apparel is just landfilled or incinerated.” 

So by getting your old clothes resold, you’re keeping those items out of landfills, at least for now; by purchasing used goods, you’re opting out of the environmentally costly clothing production process and probably getting a product for cheap.

Which means if both consumers and retailers play their cards right, used clothing could be a win for everyone, including the environment. 

“You can have a good experience with refurbished apparel. It gives you the same good feeling regarding the brand, it gives you high quality, and you don’t end up paying too much,” Vedantam said. “Retailers are recognizing that the used market is going to be really big in the next few years. This is something that is gonna stay.”

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