Sustainable Retail: Driving the flywheel of sustainability

Welcome to the sustainability column that takes a look at what retailing is doing to address the issues in its industry. Much of the ongoing focus will be on fashion but not exclusively.

This month’s column takes look at the resale market and where the focus needs to be for brand owners to boost the levels of engagement in an area that will be crucial to their long-term sustainability strategies.

We are very pleased to bring this series of columns to you with the much appreciated support of our sponsor Prolog Fulfilment.

When fashion retailers talk about the resale market it is invariably within the context of a sustainability strategy but it is worthwhile to consider that the real drivers of resale are not necessarily about the environment.

For consumers it is more about getting a better deal from buying second-hand rather than new. They can buy into a brand that might be out of reach at full price. And for retailers it is about being able to make money from existing products as opposed to just from new items. These both ultimately contribute to a reduction in the production of goods, which clearly feeds into the sustainability agenda.

Andy Ruben, founder of Trove – a resale platform for brands including Patagonia and Levi’s, says: “Resale is a trade-up market for consumers. Everybody is trading up from somewhere. The driver of resale is about people getting more for their money. The difference between new and used is gone. There is a broad shift taking place in the market.”

But the reality is it is slow. It is understood that Trove’s clients currently generate a modest 1-5% of their revenues from resale. However, this should not deter retailers from pursuing a resale strategy, according to Ruben, because he suggests the current scenario is very much about brands building the revenant infrastructure for the future. They will then hopefully be deriving at least 10% of their turnovers from the resale of their own goods.

If these sales are a direct replacement for the sales of new items then it will clearly have a meaningful positive impact on the environment and take the brands into the domain of being more sustainable. This would represent a marked move in the fashion industry away from the current widespread view that the only way to grow their businesses is by boosting sales through the production of more items.

To help shift this mindset brand owners arguably need to gain as much control of the secondary market of their products as possible. They need to ensure their items are not being resold on third-party marketplaces. This way they gain the margin on the resale and this begins to power their sustainability flywheels.

For this to happen the brands need to bump-up the levels of consumer awareness and better promote their own second-hand marketplaces. Customers need to be given sufficient incentive to sell their products to a brand owner via their website as well as the encouragement to purchase from the brand’s marketplace rather than on a third-party site such as eBay or the peer-to-peer platforms including Poshmark and Depop.

There is also a great opportunity to sell returned goods on the marketplace, which would help offset the costs involved in this problematic part of many retailers’ businesses. For this to all work there needs to be a seamless logistics infrastructure underpinning the complex inventory management involved in resale.

Changing the mindset.

What would also undoubtedly oil the wheels of this circular economy activity would be to introduce used goods alongside new items on a brand’s website. Currently there is a universal separation of new and used and this would need to be dismantled. This scenario should not be a conflict as long as the relative margins are carefully calibrated to ensure there is no loss of income from the sale of used items versus the new equivalent.

The sale of used goods also provides the opportunity to introduce new customers to a brand who would not have historically been able to buy into it. This highlights the trading-up dynamic that Ruben suggests is the primary driver for consumer adoption of resale.

What then follows on, of course, is the greater environmental standing of the brand, which will undoubtedly place it in a strong position in the future for when the resale market really becomes a firm feature of the fashion industry.

Glynn Davis, editor, Retail Insider

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