Resale is, as it is now practiced, a terrible business. Companies that aspire to be the middleman between buyers and sellers of used clothing have two choices, neither attractive: one method involves the platform handling the transactions itself, which means renting a warehouse in several cities to stock clothes, plus hire a small army of Chanel-Jordanian ologists and academics to authenticate goods, plus photographers to create listings and more.
The second option – leaving it all up to the client – comes with its own set of issues. It’s more work for sellers, a big reason why about 40% of US consumers surveyed by BoF Insights have never tried reselling. With fewer guards, sites can be flooded with fast fashion and other questionable merchandise. And this model does little to reassure buyers that they won’t get scammed (a reason why most peer-to-peer marketplaces still use authenticators for more expensive goods). Commissions are also lower, creating an incentive to overspend on customer acquisition.
These flaws are becoming more apparent as resale platforms report results (ThredUp is next, Monday). When the economic outlook began to deteriorate, some speculated that used sellers would benefit from an influx of consumers who could no longer afford to buy new. Instead, resellers appear to be suffering from the same online shopping slump that is hitting sales of DTC brands.
Costs are also increasing. RealReal said earlier this month that it was struggling to find enough sellers to expand its more lucrative consignment business. Poshmark, which was profitable in the past, is no longer profitable, in part due to higher marketing costs as it seeks new customers and tries to convert sellers into buyers. The big US push from Paris-based Vestiaire Collective will only add further pressure.
Resale platforms say they will eventually be profitable, although the exact date tends to be in the distant future, if they give one. The way forward comes down to scale and efficiency: these businesses need all those warehouses, authenticators, and vendors processing as many bags and dresses as quickly as possible to justify the cost. For years, category propellants have held out hope that artificial intelligence and automation could change the economy: computers that recognize fake Dior bags better than humans, and warehouses where robots do most of the work.
Progress has been slower than expected, and it’s telling that Tradesy, which built its authentication system around analyzing data collected from sellers, was acquired by Vestiaire Collective earlier this year and will be shut down in 2023. Yet less glamorous technology helps on the margins. A bright spot for The RealReal last quarter was more sellers shipping items themselves through an improved self-service option.
What to watch this week
August 15 Armani Code Parfum, a new concentrated fragrance, goes on sale as part of the brand’s ambitious expansion efforts
On the results of participations
TJ Maxx, Macy’s Results
U.S. retail sales
Estee Lauder Cos., Kohl’s Ross, Tapestry Results
UK retail sales
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