Resale Marketplaces Turn Against Boohoo, Pretty Little Thing, and Asos
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Key Takeaways
Brand-owned resale channels have economic advantages over marketplaces if they are set up to leverage existing brands’ assets–therefore we will continue to see more brands owning their resale programs.
There are reasons for brands to start resale in partnership with a marketplace, but over the long run, successful brands will own these programs and their customers.
Vestiaire Collective banned fast fashion from its platform–removing roughly 5% of listings, as reported in BoF. Customers will no longer be able to list items from ultra-fast fashion players such as Boohoo, Pretty Little Thing, and Asos. This is a smart move for Vestiaire as a way to tout its sustainability credentials as we have seen ThredUP do in the past. It’s also smart for longer-term profitability. As we saw with The Real Real (TRR) last week moving upmarket, there is simply more margin in higher priced items with more demand for additional wear as everyone looks to make resale profitable.
Sourcing Journal this week wrote an in-depth piece comparing brand-owned resale models to “resale stalwarts” such as Thredup, TRR. It can be a confusing landscape with ThredUP as a stand-alone marketplace supporting resale for brands and TRR which partners with brands and sells merchandise directly from brands on their platform.
Let’s start with the economics of the business models. Brand-owned resale models have an advantage as they are built on top of the existing brand infrastructure rather than needing to build the infrastructure ground up (eg, brand awareness, customer trust, store base, item catalog, and existing online storefronts to name a few.) Brands can also find value in other profit pools such as new customer acquisition thereby allowing them better resale economics. Hence brand-owned models have considerable advantages over pure marketplaces such as Thredup and TRR.
So why would a Thredup or TRR work directly with brands? These marketplaces are building their businesses and these direct brand relationships provide customer traffic and supply of high-quality items. But ultimately, the incentives and customer ownership will never align.
I have heard brands compare working with a marketplace to a wholesale relationship–which is not accurate and could be a dangerous way of seeing these relationships. In the wholesale model, the retailer depends on the brand to sell them products and hence has shared brand protection and monetary incentives. In the resale space, the supply is coming from customers and being sold to customers–hence no need for the brand.
From a brand standpoint, it’s not wrong to start with a marketplace. There is learning to be had and given the guardrails such as pricing, merchandising, item content is mostly set by the marketplace, it’s easier to get started. But over the long run, brands should stay close to their customers.
It’s for this reason we continue to see more brands jump into the branded resale space. This week Nobis launched Next powered by Recurate and Alaïa launched an in-store resale program powered by Resee Partners. The number of brands with brand-owned resale programs continues to grow. The next phase will be about how these programs are structured and grow into a significant business and which ones go by the wayside.
Finally this week, BoF published a study with eBay based on a survey of 1,000 luxury customers. The customers cited they are using eBay to arbitrage luxury goods. While I fully agree this is a segment of buyers the largest share will be those who want access to a brand they cannot afford today. If they can sell it for more that will be a bonus.
Until Next Week,
Have a Wonderful Thanksgiving!
Andy Ruben | Founder & Exec Chair of Trove
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