- Secondhand retail is growing rapidly as consumers and manufacturers strive to reduce waste, support a circular economy and ESG goals, and reduce costs in the wake of the pandemic.
- Marketplaces and brands should collaborate on new systems to authenticate goods, which would fight counterfeiting, encourage sustainability habits among consumers and unlock increased resale growth.
- The technology exists, but it needs to be scaled to boost growth in the sector, as well as the circular economy.
The global clothing and textile industry was responsible for nearly 100 million tons of waste in 2015 - a figure that could jump by at least 50% by 2030, according to Global Fashion Agenda. As consumers increasingly demand sustainable production and manufacturing from the brands they love, the textile industry is faced with a significant challenge. Resale platforms grew 25 times faster than the broader retail sector in 2019. This growth expected to continue as consumers flock to these sites that give new life to products that would otherwise be discarded.
Building trust in these platforms, however, remains an industry-wide problem that no actor can solve on its own. Consumers are wary that the products they buy on resale markets won’t be authentic. Brands can help, but don’t currently have a viable business and technology model to collaborate in these secondary markets. Many have also traditionally viewed the secondhand market as a threat to brand prestige and sales in the primary market.
Collaborations that connect brands with these marketplaces will be essential to building more consumer trust in secondhand resale platforms. Innovative technology, combined with such creative new partnership models, could boost market circularity and produce both economic and sustainability value for all.
What is the World Economic Forum doing about the circular economy?
The World Economic Forum has created a series of initiatives to promote circularity.
1. Scale360° Playbook was designed to build lasting ecosystems for the circular economy and help solutions scale.
Its unique hub-based approach - launched this September - is designed to prioritize circular innovation while fostering communities that allow innovators from around the world to share ideas and solutions. Emerging innovators from around the world can connect and work together ideas and solutions through the UpLink, the Forum's open innovation platform.
Discover how the Scale360° Playbook can drive circular innovation in your community.
2. A new Circular Cars Initiative (CCI) embodies an ambition for a more circular automotive industry. It represents a coalition of more than 60 automakers, suppliers, research institutions, NGOs and international organizations committed to realizing this near-term ambition.
CCI has recently released a new series of circularity “roadmaps”, developed in collaboration with the World Economic Forum, the World Business Council for Sustainable Development (WBCSD), McKinsey & Co. and Accenture Strategy. These reports explain the specifics of this new circular transition.
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3. The World Economic Forum’s Accelerating Digital Traceability for Sustainable Production initiative brings together manufacturers, suppliers, consumers and regulators to jointly establish solutions and provide a supporting ecosystem to increase supply chain visibility and accelerate sustainability and circularity across manufacturing and production sectors.
Connect to Learn More →
The secondhand retail boom
Several trends have driven the recent growth of the online secondhand retail market: increased demand from consumers and the industry to scale sustainable fashion; a growing proportion of shoppers comfortable with pre-owned products and buying online; and consumer interest in saving money while managing the financial impact of a global pandemic.
Historically, brands have been reluctant to be associated with secondary marketplaces for a variety of reasons. They feared brand dilution, didn’t get to share in resale economics, and had little influence over how the brand was presented. Today, they are starting to realise that their merchandise will appear on resale markets whether they like it or not. Meanwhile, these marketplaces are realizing that customer demands for authentic goods are fundamental to driving trust, and therefore the growth of their platforms.
Establishing trust has traditionally been an expensive endeavor, however. Marketplaces often use costly in-person brand experts to inspect items by hand and make determinations on authenticity on a “reasonable-efforts” basis. Others rely on the reviews and credibility of their sellers.
Also, the results of such methods have been negligible. Nearly 90% of consumers worry about authenticity in resale marketplaces, according to a survey of US-based Ralph Lauren customers conducted by the World Economic Forum, Ralph Lauren and Bain & Company between February and March 2021.Difficulties in authentication not only affect value, but also leave marketplaces open to potential liability and reputational risks from counterfeit items.
This issue cannot be solved by any one marketplace or brand alone. Rather, the solution lies in developing an effective multiple brand and marketplace collaboration model that uses flexible technology, is cost effective and can be scaled and replicated quickly. In other words, a digital authentication platform.
Products can be manufactured with digital identities to track individual items along the value chain. If these systems could be extended all the way to resale marketplaces through a digital authentication platform, it could help solve the authenticity dilemma for brands, marketplaces and consumers. It could also unlock new value streams from brand-marketplace partnerships.
The benefits of collaboration
This solution would create multiple benefits for both brands and marketplaces, ranging from sustainability (more circular value chains), to operational (lower authentication costs), to commercial (creating new business models).
By partnering with resale marketplaces to create a digital authentication platform, brands could increase control of their image in the secondary market. They could access insights to inform their customer relationships and product development plans, and tap into new revenue streams in collaboration with marketplaces. By participating in the resale phase, brands would have an opportunity to continue engaging with consumers through multiple stages in the retail journey, driving innovative and valuable business opportunities.
From the resale marketplace perspective, it would increase trust in the secondary market and grow demand for resale overall – after all, consumers are seeking out branded goods because they value the brand. This new digital model could also enable marketplaces to obtain access to original, digital brand assets such as item information and rich brand-curated experiences that would facilitate easier product listing, database management, and better consumer engagement.
Marketplaces could also save on operational costs through automation, while improving accuracy compared to traditional authentication methods. They may also see increased prices for authentic goods and enjoy reduced liability if any counterfeit goods did slip through the net.
The wider sustainability impact
Consumer demand for more sustainable, circular value chains mean that the growth in resale marketplaces is likely only beginning. In addition to the potential business opportunities that this kind of industry collaboration would unlock, improving and growing the circular economy will provide sustainability benefits by extending the life of goods. Digital authentication could enable trusted exchange of goods with fewer transportation legs to a central warehouse for inspection. Finally, identifying and eliminating counterfeits will have added societal and workforce protection benefits by reducing demand for goods originating from unregulated sources.
It is time for brands, solution providers and marketplaces to think beyond current business models. By defining a new future where digital traceability technologies connect beyond supply chain management and even direct customer interactions, it could be possible to unlock enormous untapped opportunities for sustainability, circularity, competitiveness and consumer trust.