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The Shift to Thrift: A Resale Small Business


By Harrison Greenspan

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Turns out that an awe-inspiring number of Americans stuck in quarantine (or any other pandemic-related lockdown for that matter), finally cleaned out their closets. Because of the COVID-19 crisis, the ruthless economic downturn has led many Americans to start developing new habits that were already on an upward trajectory before the pandemic even began. Whether this is regarding frugal spending habits by way of thrifting opposed to buying the newest in-season fashion trends, or regarding environmental concerns by practicing sustainability by what they wear based on how it’s made, Americans are seemingly looking to embrace the resale industry.

“For some time, there was a question, ‘Is it a flash? Or is it a fad?’ But every year it becomes clear this will be part of the next normal,” says thredUp CEO James Reinhart. According to the Business of Fashion, a leading digital authority on the global fashion industry, “Before the pandemic hit, the resale market was on track to double. Now this growth may very well accelerate. Resale sites are coming out big winners as the pandemic plunges the economy. Analysts predict consumers will turn to sites like thredUP and Rebag to clean out their closets for extra cash. [They’re] stuck at home and worried about their finances, [so] they’re hunting for bargains online.” The Wall Street Journal reports, "Bargain hunting, environmental concerns and the sharing economy have erased the stigma of used goods at the same time technology has made thrift shopping more accessible, reliable and cool. Even Kim Kardashian West wears vintage designer duds." Albeit all this being said, let’s actually take a look at the numbers.

Resale Stats Show Exponential Growth in the Short and Long-Haul

With consumers seeking bargains from home, the online secondhand market is set to grow 69% between 2019 and 2021, while the broader retail sector is projected to shrink 15%. Additionally, resale is expected to overtake the traditional thrift and donation segment by 2024, as there is an estimated 39% compound annual growth rate for resale, while there is an estimated 6% compound annual growth rate regarding traditional thrift and donations. And when compared to fast fashion (which is basically inexpensive clothing produced rapidly by mass-market retailers in response to the latest trends), the total secondhand market is projected to grow almost twice the size of fast fashion by 2029.

The numbers, though, don’t stop here, as an estimated 50% of people are cleaning out their closets more than they were pre-COVID. As such, companies who are in the resale business have seen their websites receive more online traffic than ever before. For example, 2.2 million hours were spent by shoppers browsing thredUP in May (a 31% increase post-COVID), which coincidentally was also a record-breaking month for new thredUP visits.

When looking at the big picture, resale is expected to grow 5 times over the next 5 years. That’s a 414% increase and an estimated 64-billion-dollar market, up from the current 28-billion-dollar market of resale. We already saw resale grow 25 times faster than retail overall in 2019. Further, by 2029, resale will account for 17% of the average person’s closet space—second only to off-price retailers like TJ Maxx, with 19% closet share. McKinsey & Company reaffirmed the expected growth, especially due to the pandemic by reporting that “[t]he next normal has started to emerge, with consumers indicating they will adopt long-term behavioral changes that will last beyond COVID.” This notion is actively supported by consumers’ plans in times of economic uncertainty, as more Americans will shift to thrift. 4 in 5 people say they will have or are open to shopping secondhand when money gets tight. 79% of consumers plan to cut their apparel budget in the next 12 months. Moreover, 2 in 3 people who have never sold their clothes are now open to it, with the #1 reason being to make money. And with the uncertainty of COVID-19 still up in the air, consumers are set to prioritize value and online shopping over the next 12 months, as secondhand, Amazon Fashion, and off-price are the only sectors expected to gain customers within that time period.

Resale is Reshaping How We See the Climate Crisis

The author of The Conscious Closet, Elizabeth L. Cline, offers insight on the situation at hand by imploring that “[a]s the momentum to solve the climate crisis builds, consumers are waking up to the realities of fashion’s impact on the environment. Shopping secondhand is one of the most effective ways for us to collectively lower our fashion footprint and to make the most of the resources used to create these garments.” She is undoubtedly correct, as the numbers only support the notion that fashion is one of the most polluting industries in the world. For example, according to the Green Story Inc. Environmental Study, it takes 75 pounds of CO2e (carbon dioxide equivalent) to produce the average pair of jeans and 700 gallons of water to make one new T-shirt. Further, it has been estimated that 1 in 2 people are throwing their unwanted clothes straight in the trash. The result? 64% of the 32 billion garments produced each year end up in a landfill.

Conversely, the Environmental Study also showed that resale is possibly the most environmentally friendly way to get rid of unwanted clothing. As an example, they said that if everyone bought one piece of used clothing instead of one piece of new clothing this year, it would save 5.7 billion pounds of CO2e (or 66 million trees planted), 25 billion gallons of water (or 1.25 billion showers, although those long ones you take while bored in quarantine are probably not factored in), as well as 449 million pounds of waste (or 18,700 garbage trucks full of waste). The study even reported that simply giving a dress a second life reduces its CO2e impact by 79%.

Thankfully, when it comes to environmentally friendly practices of sustainability, consumers are also buying into the resale craze, especially the younger generations. As reported by a GlobalData Consumer Survey, 9 out of 10 Gen Z consumers (people 24 or younger) are open to buying used clothing. Additionally, 40% of those same Gen Z consumers bought secondhand in 2019 (opposed to 25% in 2016), and 30% of Millennials (ages 25 to 37) bought secondhand in 2019 (opposed to 21% in 2016). Moreover, in one year, the number of consumers who plan to spend more on sustainable brands has doubled. Nearly half of consumers say they plan to buy more sustainable fashion in the next five years. In a survey conducted during the COVID pandemic, 70% of consumers said that addressing climate change is more important than ever.

Launching a Resale Small Business

Now that I’ve shown you an abundance of studies and reports portraying the growing success of the resale industry, the answer to whether you should launch a resale small business should be a resounding “YES!” However, there are a multitude of factors to consider and questions to answer when first launching. I’m here to help you out.

Should your resale small business be online and/or have a physical address?

While having a physical address is appealing to customers who love to shop in person, due to the current pandemic, those aspirations might be put on hold for the foreseeable future. It will also be costly to open up a brick and mortar storefront, especially if more shelter-in-place orders and rules limiting in-person shopping at businesses are issued. Moreover, business licenses, liability insurance, and space rent are among the initial startup costs for a physical business, while there are relatively no costs (besides advertisements) associated with an online business. Utilizing software that automates tasks, such as maintaining customer databases, tracking sales and inventory, and creating sales promotions will make your life even easier when you decide to launch your resale small business online (for some of the best consignment software out there, click HERE for a list of some of the best). A past article of mine called Marketing the Future includes a ton of data and reporting that shows how consumers are more interested in buying online as opposed to visiting brick and mortars. Essentially, having an online business is vital to current and future success.

Who are your target customers?

There are simply more secondhand shoppers than ever before. As aforementioned, the younger generations of consumers are at the forefront of looking to buy secondhand. Additionally, an estimated 70% of women have or are open to shopping secondhand, all while women have also bought 62 million secondhand products in 2019 (up from 56 million in 2018). Accordingly, it will be in your best interest to stock styles and fashion trends that might appeal to women ages 18 to 37 (which include Millennials and Generation Z). Although you are not necessarily choosing what to stock, if clothing is donated to you, your website should still be marketed to that age range of women. Speaking of acquiring clothing…

How will you acquire clothing or any items you’d like to resell?

There are numerous ways you can go about acquiring clothing or any other resale products, but it is probably best to take advantage of them all. As a start, look for good deals on high quality items through online auction sites such as eBay (click HERE for a list of top clothing auction websites), or even websites such as Craigslist. Visiting yard sales in your area might also accumulate many steals of a deal. Another way to acquire clothing or items to be resold is to pick up any clothes that people want to donate. At the end of the day, be sure to thoroughly sanitize and deodorize any newly acquired items (which is a process you can explain to your potential customers on your website). Click HERE and HERE for tips on how to properly sanitize and deodorize clothing.

Are licenses or permits needed to launch a resale small business & resell?

Yes, but it depends, as each state with a sales tax issues its own resale licenses through a state sales tax agency. The license goes by a variety of names in different states, such as “Use and Sales Tax License,” “Seller's Permit,” “Certificate of Resale” and “Certificate of Authority.” Also, there is typically no fee to obtain such a license.

Are there other expenses involved in operating this type of small business?

Yes, but the kind of expenses vary depending on whether or not you have a physical storefront, which may include rent. Additionally, you may want a separate business phone line to respond to inquiries. A company van or truck might also be helpful when picking up donations. Other costs associated with operating an online small business could include website maintenance, managing a warehouse (especially once you have a large enough consistent intake of clothing/items to stock), as well as any materials, such as shipping boxes and costs when preparing and shipping orders.

Regardless of whether you launch your resale small business solely online or by way of a traditional brick and mortar, it is remarkably clear that the market for resale is on the rise and would be a fantastic opportunity during these trying times.

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