Fashion’s Big Opportunity in Reselling the Unsellable

Fashion needs to find a new way to deal with its online returns problem.

At 26 percent, apparel, footwear and accessories face a higher return rate than any other category, according to the return management platform Loop Returns. That number is only likely to increase — in 2023, 18 percent of all online orders in the US were returned, up from 17 percent in 2022, according to the National Retail Federation.

Services to help alleviate this burden, which can weigh on profits and leave brands with a surplus of unsellable goods, have long existed, from local marketplaces that buy returned items from retailers and resell them at a discount to returns software platforms like Optoro and Loop Returns that help brands determine if they should recycle, donate or resell returned items.

A new generation of companies, however, are refining that pitch specifically for fashion. Bazar, which launched last year, operates a marketplace where brands list items that aren’t in the condition to be restocked and sold at full price. It notably works with fast fashion sellers like Cider — a sector that heavily contributes to landfill waste. There’s also Revive, a software firm that launched in January, which helps brands like Michael Kors and Djerf Avenue refurbish returned items to resell on their own sites or through resellers like Poshmark and eBay.

While retailers have started imposing return fees to soften this trend’s impact on their bottom line, platforms like Bazar and Revive offer brands the opportunity to improve profit margins on unsold inventory and create a viable new lever for them to grow their customer bases. Plus, they specialise in reselling fashion products, while other platforms work across categories and have less of an expertise in reselling apparel and other fashion products specifically. These companies are still small — Bazar, for example, is generating over $1 million, while Revive estimates revenue will hit north of $3 million this year — but they’re growing quickly. Bazar plans to triple revenue year over year in 2024; Revive expects the volume of goods it refurbishes by the end of the year to jump 25x from January.

Despite the early momentum, it’s unclear how big a business that helps fashion labels resell returned goods can become. Companies may find that this service alone isn’t a compelling enough offering: Many established software providers that help brands do resale on their own, including Trove and Archive, also offer returns refurbishing as one feature in an overall suite of services.

Still, those realities haven’t dimmed these start-ups’ goals. Revive expects to generate $100 million in revenue by 2029, said Allison Lee, the company’s chief executive.

“Ultimately the perfect solution doesn’t exist,” said Scot Case, vice president of corporate social responsibility and sustainability at the National Retail Federation. “Better solutions will focus on making it incredibly cost effective and convenient for both the retailers and the consumers.”

Solving the Inventory Problem

High return volumes are an undeniable reality of today’s retail landscape. While brands are doing what they can to decrease returns, they’re also more open to figuring out how to make the most of the problem.

Reselling returned apparel is a major opportunity to turn a loss-maker (that could end up in a landfill) into a money-maker. But it presents challenges. Returns usually come back with minor wear and tear — ranging from a slightly snagged thread to armpit stains or even the lingering scents of the people who may have worn the garments. What’s more, warehouse workers are usually trained to pick, pack and ship out orders, not survey dresses and pants for visible signs of wear and determine how they can be resold.

That’s where a Bazar or Revive comes in, though their approaches differ. In addition to being a marketplace, Bazar lets brands send customer returns directly to its network of warehouse partners where data is pulled about those items’ condition and then listed onto Bazar’s site. The company, which takes a cut of sales, typically works with labels that sell apparel and accessories for less than $200, a price point that many brands would rather incur a loss on than go through the trouble of trying to resell, said Annie Hu, Bazar’s co-founder and chief executive.

Revive, meanwhile, works with brands across price points to repair returned items within three weeks to their original condition to be resold at full price on a brand’s site or through resellers like Poshmark and eBay. The company collects a commission from what’s sold on resale sites and charges a service fee for the refurbishing process.

Though there’s sustainability benefits, the primary advertised incentive for brands is to improve their bottom lines. Lee said Revive’s brand partners on average have seen their return on investment — which the company measures by the value of items restored, as well as GMV and profits generated from those goods — grow as much as ten times more than what they spend on its service.

“If [brands] do the maths internally, they might find out that without Bazar, it’s actually cheaper to just accumulate everything in a warehouse and not do anything with it,” Hu said. “But even so, they’re still losing money.”

Burnishing a New Growth Machine

Reselling returned products can also be a source for finding new customers as it remains difficult for brands to appeal to shoppers online.

The stigma of buying pre-worn or imperfect garments is no longer a hang-up for consumers, especially Millennial and Gen-Z shoppers. Brands eager to tap into the growing online resale economy — which data firm GlobalData estimates will grow 21 percent annually on average for the next five years — can use reselling returned items to attract price sensitive customers who could become full-priced buyers down the line.

“There’s real money to be made in resale and brands are understanding that more and more,” said Ryan Rowe, co-founder and chief technology officer at software firm Archive, which also offers resale services to brands like The North Face and Oscar de la Renta, including the ability to repair returned product to be sold at a discount on their sites. He added that some of Archive’s brand partners want revenue from resale to account for as much as 20 percent of their overall sales.

To see the gains they crave, brands first have to make managing returns a bigger priority. Beachy, Californian apparel brand Faherty, which uses Archive and tech company Tersus to resell returned items on its site, for example, recently worked with Tersus to increase staffing at the company’s warehouse and accelerate the brand’s relisting process. The goal is to grow the share of overall sales from resold items to 5 percent in the next five years from 1 percent today, said Alex Faherty, the brand’s co-founder and chief executive.

The newer platforms aren’t yet a major growth driver for all of their brand partners. Halara, for example, sells on Bazar to meet internal sustainability goals instead of meaningfully increasing sales. Still, the startups are launching services to make it easier for labels to maximise their sales growth potential from reselling returned wares. Revive, for instance, plans to introduce a drop-shipping model in 2025, where brands can direct individual customer returns to its warehouse partners instead of sending them in bulk once a month, speeding up the process of getting items relisted on their sites, Lee said. Brands should see increased resale revenue as a result, while Revive can move closer to its goal of generating nine figures in revenue in the next five years.

For some industry observers, there’s a seemingly endless well of potential for brands, and the platforms that serve them, to grow within the booming resale economy — and turning an inventory issue into a money maker is an auspicious starting point.

“This is still the beginning of the story,” NRF’s Case said. “This is a growing piece of the retail economy. There are a lot of people that are going to do a lot of good and make some good money.”