The Rise of Recommerce and What Retailers Need to Know
Recommerce, pre-loved, pre-owned, or secondhand: while these terms are not new, they have suddenly gained in importance in the economy. This is especially true since COVID-19, but with the beginning of global crises and inflation, the reports about brands actively entering the secondhand market have been increasing and continue to grow.
The reason for this is not only a strong rise in end-user demand, but also the political pressure for brands to implement sustainability strategies and to take more responsibility for resources and the environment. For consumers, the focus is not only on a new and more-conscious way of consuming fashion, but also the uniqueness which is inherent in secondhand items. They cherish the inimitable characteristic that, for example, a pair of jeans attains through wear and tear, or a jacket that can otherwise only be found in an archive.
In addition, new markets are opening up for consumers that were previously inaccessible due to high price barriers or uncertainty about the provenance of items. In this context, inflation and, consequently, an increased price sensitivity in shoppers also lead to an increase in demand. For the brands themselves, recommerce represents an enormous growth market that is increasing faster than the general retail channel. By participating in this new channel, they take the opportunity to expand into a new market, which is currently covered almost monopolistically by customer-to-customer (C2C) platforms.
While the first impression of the keyword secondhand and recommerce might be of the fashion retail sector, this is by far not the only interesting market. Used electronics have long been resold, but jewelry, watches, and oversized resale items such as furniture are now on the rise.
For the introduction of a recommerce model, the same rules apply as for other initiatives. First and foremost, the focus should be on the consumer. In this case, however, this applies not only to the buyer, but also to the seller. It is essential to provide a frictionless process for returning a used item back to the retailer. Compared to C2C platforms, retailers and brands have a special opportunity here. If done right, the seller doesn’t have to wait until the item is sold to know what the payout is. Plus, they don’t have to worry about shipping or whether the buyer will potentially scam them.
Since margins are particularly sensitive in the recommerce environment, the goal is to achieve optimal profitability on every purchase and sale. In addition to authentication and condition assessments, determining the purchase and sale price generates a great deal of manual effort. Each used item is unique and requires an individual price. Due to the fact that the secondhand market is very dynamic and prices can change every second, it is very difficult to calculate a competitive price. Therefore, the biggest losses can take place when determining the price.
That’s where technology comes in to optimize the process and maximize margins. Retailers or brands have all the information about their products at their fingertips. This means that characteristics such as the SKU can be used to quickly identify a used item. Part of the master data is the recommended retail price (RRP). It can be used as a base price to calculate an adequate purchase or sales price by deducting various markdowns. However, the key to a competitive price is hidden in the market. Through market intelligence, which calculates an average price of similar items through regular scans and evaluations, it is possible to unlock an indicator that makes the difference. By taking this crucial factor into account, brands can enter the recommerce market in a more profitable and sustainable way. The bottom line is added value for the environment, the end consumer, and the brand itself.
For more content on Circular Economy and Recommerce, make sure to also follow my colleague Benedikt Scheuermann.