Manager, solution strategy, EMEA region

What is one of the hottest trends in retail and selling? Secondhand stuff.

Fast fashion is one of the most polluting industries on the planet. The Ellen MacArthur Foundation estimates that 10% of CO2 emissions and 20% of water wastage worldwide come from the fashion industry. Using a secondhand handbag can help reduce fashion’s carbons emissions by up to 90%, says Max Bittner, CEO of luxury marketplace Vestiaire Collective.

What does the secondhand business mean to consumers and the environment? Also, learn about the economics of retail and the luxury industry now and into the future.

The gold rush of re-commerce and what it means today

Beyond the sustainability angle, a massive draw with secondhand is price accessibility. Secondhand allows consumers to have unique pieces from loved brands that add an asset worth some value range to their collection.

Because of this movement, brands are more engaged in forging alliances with marketplaces to manage their resale. Some also manage these prices directly or with B2B providers such as Trove. Andy Ruben, Trove’s Founder and CEO, predicts that every brand will have resale as part of their distribution channels within the next 10 years. According to Global Insight, it’s a $32 billion market that will reach $64 billion.

There is a market need for this already. For example, Patagonia has a “buy used” button next to its first-hand buy button directly on its ecommerce site.

Brands are realizing in today’s climate that they must be more inclusive and embrace the customer who can pay first-hand, alongside the customer who shops via the secondhand market.

Marketplaces and pricing snowflakes

There is a strong demand for and supply of secondhand goods. Buyers today have a higher level of sophistication, shop at scale and, therefore, online marketplaces such as Vestiaire Collective, The RealReal, ThredUp, Poshmark, and Rebag, are playing with a significant share of the market.

Consumers want and buy secondhand and make their purchasing decisions based on competitive pricing. E-commerce shoppers are masters of hunting deals, and this treasure hunt effect is even more substantial with secondhand items, fittingly called “snowflakes.”

A checks-and-balances approach to pricing does not always apply. The market itself is filled with an asymmetry of information, giving the seller an advantage. Often, the seller does not manage a store or re-commerce program and, instead, searches for one specific item to match or give a similar price. The breadth of the market makes it hard to consider all relevant information in a decision-making process when it comes to price.

With secondhand, where every piece is unique, finding the appropriate price for the seller is tricky and takes time.

Educate the seller on the best pricing strategy

In a managed marketplace like Vestiaire Collective, the customers set the price for their item. The question is how to educate the seller best. This situation already presents a problem because of information asymmetry. The seller knows much more about her item.

One solution is to give maximum information to the customer. For example, a Gucci wallet has sold in the past two months 59 times. Searches for this item have now been falling for the past month. If the seller sets the price between a specific range, it is highly likely to sell within three weeks from the marketplace’s data analysis. If you set it at X-15%, there is a high chance it will sell within one week. The seller would also benefit from seeing how many Gucci wallets the site displays. Providing all the information in a one-stop experience to the seller can drive marketplace conversion and usage. It is in the interest of the seller, purchaser, and marketplace to provide as much traffic and conversion as possible.

Always a balancing act

Additionally, the pricing algorithm can be fed by outside information, including scrapping data from all relevant websites. As with any pricing, secondhand pricing is about sharing transparency with the seller and building credibility and trust. Rebag, a secondhand retailer based in the U.S. who buys handbags from top luxury brands (rather than the consignment model like The RealReal or the managed marketplace like Vestiaire Collective), has been growing with this model through their Clair App.

Tackling this challenge requires a forgiving and scalable algorithm. A homogeneous calculation engine must support both sides of the market, the seller and the purchaser. Since we are dealing with used goods, they are not easily comparable. Historical data, as well as market data, needs to be made comparable to produce meaningful information. Therefore, classification and standardization are critical.

Differentiate brand-driven reseller programs and marketplaces

In building a dynamic calculation engine, supporting and optimizing the marketplace interaction, it’s essential to differentiate between brand-driven reseller programs and actual marketplaces, connecting supply and demand.

Both problems can be optimized using advanced technology specializing in dynamic, optimized pricing. Advanced technology, such as MAAI (multi-agent artificial intelligence), can solve over-constrained problems by utilizing market simulation methodologies. This gives companies the advantage of simulating complex markets, demand changes, customer movement, and the willingness to pay and sell. The awareness of these effects and trends optimizes price guidance dynamically for sellers and purchasers to drive more traffic and increase the conversion and profit of marketplaces and reseller programs.

A few quick tips

There are multiple possibilities to make the refurbished or secondhand shopping experience better. Consider a few of the following technologies and strategies:

• Understand the market and pricing strategies or algorithms that will improve with better picture recognition software. Add-ons for marketplaces should include subscription access fees.
• Look into a sustainability calculator, which evaluates the CO2 footprint of a new product concerning the secondhand product.
• Find technologies that provide cross-shopping suggestions to make a shopping basket bigger and a shipment more CO2 efficient.
• Many retailers provide options to refurbish old products by taking them in and, in return, granting a discount to the products consumers want to purchase.

Pricefx offers price-management and configure-price-quote software.