What is recommerce and how can it help save the planet?

There’s a growing interest in the practice known as recommerce. Essentially, this is where pre-owned products are resold — the goods are often quality-controlled or reconditioned, and the sale is frequently made possible or directly facilitated by the same company that manufactured and distributed the product in the first place.

You’ll hear many commentators talking about recommerce like it’s a 21st century innovation, but in reality, it’s nothing new. There have always been bric-a-brac markets, vintage and second-hand shops, and businesses built on reselling refurbished ‘new-to-you’ goods like televisions and vacuum cleaners. Launched in 1995, eBay brought recommerce into the digital era and this dotcom era survivor has done much to increase the acceptance and convenience of shopping for second-hand goods.

But just like an online version of a garage sale, eBay remains primarily a consumer-to-consumer e-commerce marketplace. What’s changing today, what truly is new, is that large brands are actively embracing the recommerce trend and getting involved in the quality (re)assurance and resale process, adding a level of trust and credibility that doesn’t necessarily exist when buying used goods through a third party.

Increasingly sophisticated e-commerce tech and logistics capabilities have enabled companies to make ‘reverse commerce’, as it’s sometimes termed, a part of their day-to-day operations, reselling or in some cases, renting out items that were formerly a one-time deal. Meanwhile, customer demand has made recommerce a profitable and virtuous business to be in.

Many consumers today, especially those of the younger generations, prefer sustainable products and strive to buy from ethical brands. Research from McKinsey suggested “67% [of consumers] consider the use of sustainable materials to be an important purchasing factor, and 63% consider a brand’s promotion of sustainability in the same way”.

A First Insight survey showed the young were particularly focused on sustainability, with 68% of millennials and 73% of Gen Zers surveyed saying they would pay more for sustainable products. (Figures markedly higher than the all-generations response of 56%.)

Beyond mere sustainability, which reduces environmental impact but doesn’t necessarily eliminate it, today’s new breed of consumer is acutely conscious of the need to “reduce, reuse, recycle” — recommerce fulfils all those criteria. Plus, as millennials and Gen Z become increasingly frugal, recommence allows them to save money.

According to research from Globaldata, the market for secondhand goods is projected to reach US$77 billion ($106 billion) by 2025, more than double 2021’s volume. Some 42% of all consumers and 53% of millennials and Gen Z say they’ll spend more on secondhand in the next five years. Per the same research, in 2020, 223 million consumers globally either had shopped or were open to shopping secondhand products.

It’s clear that resale is growing in popularity and can be good for both the planet and the bottom line. That helps explain why, rather than allowing external resellers to eat into profits and cannibalise their customer base, companies are getting involved in the buyback and resale of their own products. They’re realising that it’s the same consumer buying their goods new and used, so it’s advantageous to keep that loyal customer in the brand ecosystem, where CX and product consistency can be better monitored and assured.

Solving supply chain issues

To a certain extent, recommerce also alleviates the supply chain delays that have beset the global marketplace for the past two years. Customers who may have previously been reluctant to shop second-hand will gladly accept a used product if the alternative is going without.

We are experiencing ongoing supply chain interruptions caused by factors such as Brexit, industrial action and labor shortages, unpredictable weather resulting from climate change, and of course, the COVID-19 pandemic. Following a new outbreak, China has just locked down Shenzhen, the world’s fourth-busiest port and a huge global tech supplier, and restricted movement in Shanghai.

Now, with the war in Ukraine and sanctions on Russia, rising fuel costs, the threat of further conflict in Europe and uncertainty over trade with China should tensions over Taiwan reach boiling point, there is potential for supply chain disruptions to grow even worse.

Recommerce can help solve supply chain issues in a rather simple and elegant manner — obviously, you don’t need to be supplied with new goods if you’re reselling (or leasing out) used items. Surveys have shown that consumers are accustomed to buying used items and indeed, as inflation rises, they will likely be even more amenable to buying less expensive used goods. Conversely, within the luxury, vintage, rare and collectables end of the market, their customer bases have always been accustomed to paying top dollar for pre-loved items, so recommerce is actually business-as-usual, to a point.

With a US$29 billion ($40 billion) market cap, eBay is a second-hand behemoth, while rising third-party resale marketplaces like thredUP, The RealReal and Vestiaire Collective each currently enjoy valuations exceeding a billion dollars. Peer-to-peer resale platform Depop was acquired by online bazaar Etsy for US$1.6 billion ($2.22 billion) last year.

Not to be outdone by the start-ups, long-established apparel brands including Gucci, Lululemon, Patagonia, Levi’s, Eileen Fisher and H&M’s COS have all launched official pre-owned resale platforms. Others will surely soon follow. Online resale sales of fashion alone are projected to reach US$30.63 billion ($42.54 billion) by 2025, at which point they’ll represent 10% of all e-commerce apparel and accessories sales.

Brands that haven’t already explored the idea of recommerce should strongly consider what steps they’d need to take to enter this growing market. Perhaps the biggest recalibration exists in the switch from the typical practice of receiving goods from the factory or supplier and then distributing them to customers, to now also receiving goods back from the marketplace, one by one — then checking and readying them for resale.

Taking these new responsibilities on, businesses have a number of important questions to ponder. Among them: how will these products be shipped to you and at whose cost? How will the goods be certified for authenticity, quality and functionality, or repaired and refurbished if required? Is the expense of taking these steps worth it — can resale be conducted profitably? And pivotally, can the business engage in recommerce in a way that is legitimately eco-friendly, or will these activities simply add to its carbon footprint?

There’s a lot to be considered before entering the recommerce sector. By no means is this the right move for every business selling enduring physical goods. But for those with customers who have displayed a clear demand for a pre-loved example of their product, the opportunities could be huge.