Mar 4, 2022, Business

Recommerce on the rise – the future of purchasing?

John Oxley Business Consultant
Caroline, who is on maternity leave, was clearing out some old clothes to throw away. They hadn’t been worn except for special occasions. Her best friend suggested that she could make some money reselling these clothes, so she downloaded an online auction app, took some photos, and tried her luck.

Within a day, the linen jacket her husband had worn once to a party, advertised at 8 Euro, sold for 55. Caroline now has a new hobby, and also helps her friends sell off unwanted clothing and nicknacks.

Recommerce has been physically going on for many years, with the likes of garage sales, charity shops and small town markets, but with technology providing an online version, sales are going through the roof, and big name companies are starting to take notice of a business opportunity.

Annually, the world produces over 100 billion items for 7 billion people. Most of the goods are discarded before they are truly exhausted, and that is creating a huge environmental impact. It’s equivalent to one truckload of goods dumped every second. And the new thinking is to do something about it.

There are some problems though. Buying something that has been recommerced might be fraught with disaster. What is the provenance? Is it traceable, or will it be a cheap knockoff? This is a challenge that is being addressed by some of the major manufacturers, and we’ll see how they do this later.

So, the key point here is sustainability. Here are some explanations, ideas, and possible solutions to look at.

What is recommerce?

Secondhand, used, pre-owned, previously enjoyed, these are just a few of the descriptions people have used over time to sell unwanted products. Recommerce was a term coined in 2005 by the head of Forrester Research, an advisory company specializing in market research and IT. Basically, any used product that can be resold falls into the recommerce category.

eBay started their selling business in 1995, and as technology advanced, many companies jumped on the bandwagon and joined the recommerce juggernaut. I say juggernaut, as projected sales look like reaching $77 billion by 2024. And it seems to be creating a sweet spot for Gen Z’ers, who are drawn to recommerce for the positives in sustainability. 

The main products that are commercially recommerced are consumer electronics, such as tablets and smartphones, followed closely by fashion, both commercial and private sales. Depending on the region, each section will be more profitable to the seller. In the USA, consumer electronics are believed to be the best choice for profit margins, whereas fashion is the leader in the UK.

Why is recommerce gaining popularity?

Using figures from a recent eBay survey, it would appear that most, if not all, households have unused electronics and other products lying around, collecting dust, which would be desirable to another person. One man’s junk, etc. 

The ease and multitude of mobile apps is making it possible for anyone to sell anything, and with the pandemic problems of large group assembly, traditional garage sales and outdoor markets have taken a back seat.

But it’s not only individuals who are cashing in on recommerce. In a superb article by Aubrie Pagano, she shows that there are many companies that have jumped to the fore and grabbed a piece of the recommerce market. Of course, eBay, Craigslist and Etsy drove the market in the first place, with pretty basic offerings, but now even luxury goods are available from TheRealReal, Leprix and others. All products are restored and marked as such, and the prices are significantly lower than purchasing new, with the additional benefits of no initial design, production and shipping costs. For example, TheRealReal, which has over 20 million members, buys a luxury product from someone who wishes to sell it, then grades and authenticates it, and resells to another individual who knows that they are buying an authentic item. 

In China, an app called ‘idle fish’, backed by Alibaba, has overcome long standing worries (counterfeiting) and superstitions (wearing pre-owned clothing culturally disapproved) by hosting a channel with 3rd party experts checking high value products. The projection for this year is to be around RMB500 billion in gross merchandise volume. 

For established companies, recommerce increases brand awareness, and they may find that those who would not normally be able to afford a new product, will happily look for a recommerced one. The younger generation is, on the whole, less affluent than before, and they enjoy the fact that they can afford a top quality product at lower cost, while reducing waste.

The ultimate goal for everyone is to improve and maintain a circular economy, where products are made to be long lasting and of good quality. Consumers benefit from better products, and more importantly they also understand the sustainability positives.

How can traditional retail stores catch up?

I think most people prefer to actually see a product before buying, check the quality, size and specifications, and I am pretty sure that traditional retail will continue. There is the authentic, hands on link, and the customer is satisfied by it. But unless a retail company starts to think about the source, manufacture and longevity of a product, they might be hampered in future growth.

Levi, the clothing company, recently introduced a ‘buy back’ option for customers, called Levi’s Secondhand, giving them a gift card in exchange for their old Levi branded clothes, to be used against future purchases of their products. Levi then authenticates and resells the original, creating a two part store, one of fresh products and one of recycled. In this manner, they strengthen the brand, maintain customer loyalty, and gather crucial data for the future.

If traditional retailers can incorporate a method of digitally marking their products, it will change the effect of cheap knockoffs flooding the market. For instance, a QR code on a product, linked to a digital ID, will ensure that the item is authentic, a much needed requirement for purchasers.

Whatever happens, recommerce is established and growing rapidly, and the sustainability of it is extremely attractive. Anyone interested in a left handed acoustic guitar?