The Rise of the Resale Marketplace — and 7 Challenges Rising With It

The rise of resale comes with many challenges for eCommerce brands and marketplaces. In this post, we’ll cover why resale is becoming so big now, seven obstacles it creates, and strategies for overcoming them. 

A blue pair of sneakers for sale, new and resale

Originally published in the eCommerce Times.

As second-hand fashion gains more traction among consumers, digital resale platforms have emerged in full force. Platforms like Depop, Farfetch, Poshmark, and The RealReal are not only posting record performances, but they are also forming tight-knit, loyal bonds with shoppers. 

For example, San Francisco-based The RealReal posted a record first-quarter GMV of $327 million this year. While an extraordinary 80% of The RealReal’s business in Q1 came from repeat shoppers, its base of first-time customers also rose by 34%.  

With resale appealing to a growing share of consumers, more brands are jumping on the bandwagon. 

Patagonia’s Worn Wear service, which launched four years ago, had a “record year” in sales in 2020. The company said its resale program has even gained prominence on the company’s official eCommerce website. 

Levi’s denim pieces have been popular in the second-hand circuit for years, and in 2020, the brand launched its own buy-back and resale program. lululemon created its program — “lululemon Like New” in May. Even Nike, which has been a major holdout in the resale game, launched Nike Refurbished in April. 

However, the rise of resale comes with many challenges for eCommerce brands and marketplaces. In this post, we’ll cover why resale is becoming so big now, seven obstacles it creates, and strategies for overcoming them.

A seller takes a photo of a blue shirt to sell on a resale marketplace

Hitting Two Proverbial Birds With One Stone

There are two main benefits for brands, retailers, and marketplaces that get into the resale game. 

Increasing sustainability

Shifting consumer sales toward second-hand clothing, and, by effect, reducing the production of fast fashion could help offset some of the water pollution, greenhouse gas emissions, and waste that’s associated with manufacturing garments. 

According to a 2017 study cited by The Scientific American, quadrupling the average lifespan of a cotton T-shirt, a pair of jeans, and a polyester dress resulted in a 75% savings in freshwater used for dyeing and other processes for those items. Research by the Waste and Resources Action Program in England found that extending the average life of clothes by only three months of active use per item could produce a 5%-10% reduction in each item’s carbon, water, and waste footprints. 

By encouraging fashion “upcycling,” focusing marketing activities on it, and treating it as a core part of the business, these small reductions can add up to make a big difference. 

Fulfilling customer demand

Consumers in general are becoming more conscious of their individual impact on the environment, as well as that of the fashion industry as a whole. Today, the majority of shoppers want the brands they do business with to make concrete steps toward sustainability. 

According to a 2020 IBM report:

  • Nearly six out of 10 consumers are willing to change their shopping habits to reduce their environmental impact
  • Eight in 10 say sustainability is important to them
  • 70% of those who say sustainability is very/extremely important to them would pay up to 35% more for brands that are sustainable and environmentally responsible. 

In addition to appealing to sustainability-driven shoppers, getting into resale helps brands and marketplaces become more attractive to shoppers who simply think it’s cool.

According to a recent report by Depop and Bain & Company, Gen Z’s interest in fashion resale reflects how they define what’s “new,” and view self-expression. While 75% of Depop shoppers want to reduce their clothing consumption, another 50% shop secondhand to “find one-of-a-kind pieces,” while 45% use it to “tap into trends.”

7 Resale Challenges and How to Overcome Them

Here are the most common challenges retail marketplaces and brands deal with in regards to the rise of resale, as well as solutions for overcoming them.

1. Avoiding shopper disappointment 

One of the most obvious challenges to deal with when reselling used items is that you can’t completely control the volume of each item or style in your inventory. Beyond approving and rejecting items for resale, you can’t dictate how many of each you can add to your eCommerce site. That, combined with rapid turnover of new items, means shoppers may be easily disappointed when the item they want is out of stock. 

Perhaps you already sold the one vintage Chanel messenger bag a shopper wanted, or you don’t carry the New Balance 530s in their size. The challenge for brands and marketplaces doing resale is creating a journey that quickly and successfully matches shoppers with other products they’ll love (in the right size), so they’ll be motivated to buy something else and not bounce.

The solution:

There are a few ways to keep the product discovery journey flowing and prevent your shopper from leaving the page in a bout of disappointment. One solution is to offer hyper-relevant product recommendations. Let’s take the example with the New Balance sneakers above. Maybe you don’t have a size 9.5 in the 530 model, but you could show her all of the similar models you do have her size in. 

Another way is to provide tailored inspirational content based on their past searches. By displaying a carousel of product images or an inspiration board that includes the product categories or brands they previously searched for, you can steer the shopper’s attention to other items they might love. 

2. Standardizing product tags and descriptions 

Resale marketplaces such as Depop and Poshmark, in which shoppers upload items for sale themselves, run a very non-traditional inventory model. One of the greatest challenges associated with this model is standardizing product descriptions and tags, which is necessary for creating a consistent discovery experience as well as in-depth data analysis.

For example, 10 different sellers could upload photos of the same green Michael Kors dress. But without a way to ensure each post includes the points below, it will be difficult to provide relevant recommendations, run promotions, or merchandise effectively:

  • A minimum number of relevant tags
  • A standardized set of descriptors
  • Synonyms that include common search keywords
  • Detailed product descriptions

The solution:

You can’t rely on individual users to adhere to tagging and description guidelines. This means resale marketplaces need a system that can analyze product photos and create robust and accurate products tags and descriptions automatically. 

Solutions such as visual AI-based deep tagging analyze items based on a wide range of visual attributes and automatically produce every possible relevant tag using standardized keywords. This solution can also create product descriptions to ensure consistency across the board. 

3. Recreating “the hunt”

For second-hand shoppers, one of the quintessential — and most satisfying — parts of the thrifting experience is digging through piles and racks of clothing to find those few special pieces. This real-life treasure hunt has helped some second-hand stores, such as certain Goodwill locations, garner a reputation for offering the best experience. 

Now, with more shopping moving online, fashion resalers are tasked with delivering an equally satisfying hunt online. They need to find a way to create an inspiring online experience that replicates the joy and sensory experience of that search.

The solution:

In the eCommerce world, that “hunt” looks a little bit different. Although many thrift shoppers have the patience to physically sort through endless racks of clothes, they will probably have less patience for scrolling through rows and rows of irrelevant items on your website. That’s why ensuring key eCommerce functions — such as on-site search and web navigation — work flawlessly.

With all of your product tags and descriptions in order, a sophisticated on-site search infrastructure ensures every query your shoppers input will bring them to the most relevant products. Offering visual search in addition to text search provides more opportunities to seamlessly connect shoppers to the items that inspire them.   

Web navigation is just as important. Think of it as a shopper moving around a physical thrift shop. Everything from the images and text on your homepage, where your menu buttons are located, which categories are featured, and the filters you can apply to your search and product listing pages influence how successful “the hunt” will be.

4. Authenticating items

Certain segments of resale — such as sneakers — are incredibly lucrative. 

Some of the most popular sneaker drops sell on resale platforms like Goat, Fight Club, Stadium Goods, and eBay, for 100%-400% more than retail price. The global sneaker resale market is estimated to reach $30 billion by 2030, according to market research firm Cowen. 

At such a high price point, having a system and protocol in place to authenticate items is integral — not only for setting prices, but also to avoid enraging customers and destroying your reputation. 

The solution:

Currently, every resale platform has its own policies for authenticating items. While having items verified by experts might be ideal, not all brands or resale platforms have the capacity to do this at scale. In such cases, the best approach is combining AI-based solutions that are trained to identify fakes with a team of “counterfeit hunters” to ensure product integrity. 

For example, Poshmark has a community reporting feature and a “content integrity” team that is tasked with finding and removing alleged fake products. It also has a machine learning and rule-based detection system that proactively identifies and removes suspicious product listings, a spokesperson told WWD. This system also prevents restricted users from creating new accounts under fake names. If a seller is found to be selling counterfeit, damaged, or misrepresented items, Poshmark revokes their account privileges and issues a refund to buyers. 

eBay Authenticate is even more “strict.” For high-ticket products, a seller has to first check if the item is eligible for resale by entering the brand, item type, and condition into the Authenticate tool. If the item is eligible, the seller needs to send it to eBay for in-person authentication using a prepaid shipping label. Then, independent experts authenticate, price, and publish the listing for sale. When an item is sold, sellers get paid and eBay takes a 20% transaction fee. 

5. Setting the right price 

In many cases, determining prices goes hand in hand with authentication. But aside from in-demand sneakers, luxury items, and rare vintage pieces, used items are generally considered depreciated in value, which means their resale price should be lower than their original retail price. But how do you decide how much lower? For many brands tapping into resale and launching buy-back programs, this may feel like a subjective decision.

The solution:

We recommend coming up with a standardized set of criteria and a corresponding point-scoring system for assessing and pricing items. Here are just some of the points you’ll want to include:

  • First inspect the products for obvious signs of damage, degree of wear, and imperfections. Flawed items will be priced lower.
  • Register the item’s model or style, and use historical data to understand how in-demand the product was when it hit the market. Popular items will be priced higher. 
  • Analyze current market and trend data to understand how in-demand the item is now. High demand = higher price.
  • Count how many of said item you have in your resale program. Rare items may be priced higher (if they are also in-demand) than abundant items.

After scoring an item on all of your criteria, you can determine by what percentage to mark it up or down in your resale program. 

6. Accurately depicting the condition of items

This is especially pertinent for platforms where users upload images of their own items for sale. In order to accurately depict the condition of used items, users need to take high-quality photos from multiple angles, including those that disclose imperfections or damage. 

The solution:

While you can’t expect every one of your sellers to invest in a professional-grade camera, you can publish guidelines that help them take high-quality photos with their smartphones. For example, you can require sellers to take a minimum of, say, six photos, with instructions on which angles to capture. 

Other guidelines could outline whether the items need to be shot against a white background, if they need to be shown on a model, if the original packaging needs to be shot, etc. 

As an eCommerce site, you can add features like superzoom to allow shoppers to inspect items up close. And, you can implement an automated system or designate a team that reviews and approves new listing images before they are visible to shoppers. 

7. Striking the balance between vintage and new 

Some shoppers turn to second-hand for the chance to buy hard-to-find vintage pieces, while others are simply looking for a better deal on contemporary items. For brands that resell used merchandise, they must determine how to balance old items with newer ones.

The solution:

Just like in any other investment scenario, brands and retail platforms should turn to data to inform their decisions. In the end, striking the right balance is all about accurately predicting customer demand. 

  • Where do secondhand shoppers’ searches fall? What percentage is seeking current styles, and what percentage is hunting for vintage finds?
  • How in-demand were/are the pieces that consumers want to sell back to you?
  • What are the current trends saying? Is a certain vintage style coming back? Is a new trend still gaining momentum?

By considering these types of questions and analyzing relevant data, you will gain a better idea of which styles and pieces to resell, and which to reject.

The Resale Surge Hasn’t Peaked Yet

The resale trend is still rising. Consumer demand continues to grow, and new platforms are sprouting up left and right. Investors, who have been watching the market’s success, are lining up to get in on the action. 

Although resale may not be a fit for every brand or retailer, it’s worth considering how it might become relevant in the future, and preparing to overcome predictable obstacles. 

Build better jewelry discovery experiences.