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Out with the old and in with the… well, old

As COVID-19 continues to force people indoors, clothing brands are seizing upon the upcycling and recycling trend that is booming on the back of thrifty Gen Z and Millennial consumers.

Major fashion labels and outlets are launching “re-commerce” sites as a new source of revenue, as savvy younger shoppers opt to buy pre-worn items to save cash and the planet in one fell swoop. Joining the so-called circular economy, Urban Outfitters announced its forthcoming peer-to-peer marketplace last month, where consumers can buy and sell clothes of any label, due to open this Fall.

M&A or nah?

This rapidly emerging trend has already delivered some notable deals, including Etsy’s acquisition of London-based second-hand marketplace Depop in June 2021 for US$1.62 billion, and reseller ThredUp—whose IPO in March raised US$168 million—purchasing Bulgarian fashion resale business Remix Global in July.

However, not everyone is convinced there will be racks of deals. According to ThredUp, 60% of traditional retail executives plan to capitalize on re-commerce sales via partnerships with outsourced resale businesses, while just 8% say they would prefer to acquire a resale business.

Super-fragile-retail-logistics-needed-expeditiously

One potential reason for this aversion is the lack of logistics and processing infrastructure required to recycle clothes. This is a major obstacle for would-be acquirers, preventing them from integrating a business and rapidly scaling it up. This is where partnerships can help.

Attempting to solve the back-end logistics bottleneck are companies like California-based Trove, which has raised more than US$45 million in funding. It partnered with Patagonia in 2017 to launch its re-commerce site, Worn Wear, and it has now also partnered with Lululemon to provide resale technology and operations for the “athleisure” brand’s first re-commerce program. Levi’s has also partnered with Trove for its resale program, SecondHand.

Clearly, apparel brands will continue to pile into re-commerce. In the next five years, the resale market is projected to double to US$77 billion, according to ThredUp, and the pandemic hasn't hurt their business either. Last year, 33 million consumers bought secondhand apparel for the first time and 76% of them plan to increase their spending on secondhand goods.

Whether partnerships or M&A, re-commerce is an opportunity that's simply too big for brands to miss.