Consumers Want Resale—But the Business Model Needs Refining

Spring 2022

I’ve become an occasional buyer and seller of secondhand goods online, and I find myself craving more. To date, my journey has had as many magic moments as frustrating experiences. Selling furniture on Craigslist in New York took hours (to my surprise), while selling furniture on Facebook Marketplace in the Bay Area took weeks (to my demise). The nightstands I bought resale took weeks to find. I sold a belt that sat on a marketplace for several months, listed close to the MSRP, and only sold after being put on sale without my knowledge. I got lucky with selling my cars. I used both for nearly a year, sold them close to what I paid for them, and received the money in 48 hours–I just wish I would have known how valuable they were before I went deep on finding storage options.

Key stakeholders are similarly captivated: Resale has been all over the news lately. Just this week, ThredUp released a report highlighting the energy and traction in the space. In the past year, brands and retailers of all sizes have launched or expanded their re-commerce capabilities–Target, Apple, Joybird, Lululemon, REI, Nike, Dick’s, IKEA, and Farfetch, to name a few. At Forerunner, we’re challenging ourselves to think about what a next-gen, durable business model for resale might look like.

While apparel gets most of the airtime, there’s so much more to the broader resale opportunity. Over the past decade, online resale has become a mainstream economy. In a recent Forerunner survey, 61% of consumers reported purchasing resale online in the past 12 months–a level of buying that was consistent across age, gender, race/ethnicity, income, and geography. The online resale purchases were also spread out across categories, including electronics (30% purchased online), cars/transportation (29%), apparel/accessories (25%), sports/activity equipment (22%), furniture (20%), and collectibles/memorabilia (16%).

The first cycle of online resale–horizontal P2P platforms like eBay, Craigslist–has matured into today’s vibrant second-cycle ecosystem of largely-managed and mostly-vertical marketplaces. Many of these are now public companies, including The RealReal, Poshmark, ThredUp, Carvana, Vroom, 1stdibs, GOAT, and StockX. Whereas the aim of first-cycle platforms was to connect buyers and sellers online for the first time, the aim of second-cycle marketplaces was to build trust and better consumer experiences to pull more buyers into the market. As buyers began purchasing across categories, new consumer behaviors emerged and solidified.

Resale Reimagined–But Not Refined

Consumers have become savvier and more compelled by resale as a way to access one-of-a-kind items, purchase higher-quality goods at lower price points, or stay environmentally-conscious. In our survey, we discovered:

  • 91% of respondents plan to purchase the same or more resale than they have in the past 12 months.
  • 68% of consumers reported thinking about the resale value of goods when purchasing new items.
  • Consumers are most likely to build trust in online resale from seller reviews (37%) and buyer protection guarantees (37%) rather than the high-quality photos (29%) and authentication (25%) that managed marketplaces popularized.

Buying behaviors also paved a path for buyers to become sellers, as well as for the emergence of “power sellers.” Sixty-two percent of consumers that have purchased resale online in the past 12 months also report selling resale online. Of the sellers that engage in the behavior monthly, 60% plan to sell more in the year ahead, 71% think of reselling as a side hustle, and–important to note–93% would be interested in selling more if they had better tools to do so.

The pull in the market from consumers is clear: They want to buy (and sell) more resale. However, despite meaningful investment into managed and vertical platforms over the past decade–The RealReal, Carvana, Back Market, 1stDibs, etc.–59% of consumers report preferring to buy on P2P platforms and 67% report preferring to sell on P2P platforms. Unsurprisingly, with this preference in mind, Forerunner’s survey showed that legacy P2P platforms continue to own consumer mindshare: Amazon, eBay, Facebook, Walmart, and Craigslist remain the most popular platforms for buying and selling.

Managed and vertical marketplaces may not be the answer to the pain points of P2P platforms. Many have invested in costly service offerings that do not match the majority of current consumer preferences. They have proven to be operationally-intensive, with high COGs needed to deliver a high-touch service and high marketing spend needed to drive demand. Poshmark, ThredUp, The RealReal, and Vroom, for example, are all projected to have over $400M in revenue while losing tens of millions of dollars of EBITDA in 2023.

A 'Third Cycle' of Resale?

At Forerunner, we believe the resale trend is promising and there will be continued advancement in the category that could propel a third-cycle of resale. We have yet to see a convincing business model that supports sustainable growth while meeting consumer expectations, but we remain open-minded about how the category will evolve.

Can resale be a standalone business–or is it a better add-on business, similar to how Facebook, Amazon, and Walmart leveraged a broad consumer reach to launch a complementary resale offering? What will lower the barrier-to-entry for the next cohort of sellers? Can a category-specific P2P platform reach a venture-backable scale? How can you empower consumers to better understand the value of their goods? What software can sellers use to automate the manual tasks that managed marketplaces have centralized? Can sellers be elevated to build direct relationships with consumers, lessening the need to drive demand through paid marketing? These questions are top of mind at Forerunner.

Companies like Archive and Recurate are powering P2P resale on a brand’s website – 45% of survey respondents expressed interest in this. Companies like AirRobe, Gently, and Beni help consumers navigate the market and understand the resale value of their goods; 43% of respondents expressed interest in offerings like this. Upgraded and Tradeblock, which are pioneering rental and trade models, are abstracting the conversation away from price and back to the old world bartering days; 44% of our respondents expressed interest in trading goods.

We’re continuing to learn and seek fresh approaches across the resale ecosystem, and given consumer behavior and interest in the category, no doubt more new business models will emerge that we are eager to explore.