July 13, 2021
For any investor, this stat should stop you dead in your tracks: The Secondhand Market is projected to double in the next 5 years, reaching $77B.
Secondhand, or recommerce, will grow at 11x the rate of regular retail. If that doesn’t smell like opportunity, I don’t know what does. We at Alpaca wanted to investigate the white space in the recommerce market, which has matured over the last decade, but is seemingly poised for future incremental growth.
This is such a big topic to cover, but generally recommerce is defined as powering the re-use of goods. That can mean both reselling as well as renting of goods; that can mean everything from fashion to furniture; that can mean a merchant, brand or consumer as the seller; that can mean a business model that is P2P (peer to peer), a managed marketplace, or a layer of the tech enablement stack. When it comes to recommerce, I like to take the simplified view and split the market into two big buckets: marketplaces where goods are bought/sold, and the enablement layer of recommerce where companies are powering the reuse of goods via technology and logistics.
A quick history lesson here. Second hand P2P marketplaces have been around for decades, with players like eBay, Craigslist, and Etsy driving significant volume for resale transactions. To me, these are the 1.0 recommerce marketplaces. Over the last decade, new P2P entrants have emerged amid the move to a mobile-first consumer, with the likes of Poshmark, Threadup, and Depop leading the charge. Managed marketplaces have also grown, with entrants like The RealReal, StockX, Rent The Runway, and 1stdibs gaining significant traction and funding. I consider this the 2.0 wave of recommerce. We are now on 3.0 recommerce and there are a few key reasons that this will be a bigger wave than ever before.
Several economic, social and technological trends are driving the pervasiveness of recommerce.
If you are a brand in particular, there are several benefits to considering recommerce as a part — if not all — of your business:
What are the challenges?
There are several challenges to scaling recommerce for any brand to consider. These center around product and marketplace margin, authentication, bulky goods, and integrations + APIs.
As I have looked across the landscape over the last several months, there are several emergent areas where I believe there is white space, potential for disruption, and big dollars.
First, resale, versus rental recommerce, is most interesting to me. This is largely due to the sustainability mindset of both brands and younger consumers. According to Sustainable Brands, more than 160 fashion labels have committed to participate in its 2020 Circular Fashion Pledge (note: founded by Adam Siegel of Recurate) to enable take-back or resale, increase recycled content, or design for durability. 45% of millennials and Gen Z refuse to purchase from brands and retailers that are not sustainable. If a brand is not sustainable on first principles, it will be left in the dust.
Second, it’s time for brands to get in on the act. For the last decade at least, managed marketplaces have taken and resold products on behalf of brands and customers, and built large public entities. As consumer demand for second hand grows, it only stands to reason that brands should capture this experience within their own ecosystem, showing re-sellable products as an extension of their own websites. There are a couple ways this could happen, as outlined below in this graph and my comments:
In sum, I’m long on recommerce. If you are working on anything in this space, I am always looking to back amazing retail founders. Please DM me.
Lastly, we are hosting a virtual panel on this exact topic on July 28th where we will bring together founders in the space who are all thinking through recommerce.
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