Used clothes, it turns out, are worth a lot of money. Poshmark, which had a hotly-anticipated IPO last week, ended its first day of trading with a valuation of $7.4 billion. It’s a sign that the secondhand market is booming and that investors see continued potential for growth.
But even as Poshmark’s fortunes rise and the secondhand market explodes, there are questions about what lies ahead for the resale market. Does it signal a more sustainable future for the fashion industry? It’s unclear, given that the secondhand market is nowhere close to making a dent in the vast amount of new clothes churned out every year.
Still, Manish Chandra, Poshmark’s founder and CEO, says more Americans than ever are shopping secondhand, and the pandemic has only accelerated that shift. “I expect that as people have discovered buying and selling secondhand, they’re going to stick with this behavior,” he says.
Chandra co-founded Poshmark a decade ago as a way for buyers and sellers to connect. The platform mimics social media by making it easy to follow other users and like their products. Poshmark doesn’t own any inventory, but helps protect users from fraud, taking a 20% cut from sales. There are now 30 million active users on the site who spend 27 minutes a day on it.
It’s just one of a growing number of online resale companies that have popped up over the last decade, including ThredUp, Depop, Rebag, and TheRealReal. The market is worth now a whopping $28 billion and is poised to hit $64 billion by 2024, a growth rate that’s 25 times faster than the rest of the retail industry.
Changing consumer behaviors
While resale marketplaces are thriving, the vast majority of Americans still prefer to buy new products. In 2019, according to a study commissioned by ThredUp, 40% of Gen Z were secondhand shoppers, while only 30% of millennials and 20% of Gen X and Boomers were. Chandra believes that resale platforms like his have a lot of work to do to win the rest of the population over.
This will come down to changing consumer behavior, which isn’t an easy task. Until recently, there was often a stigma associated with buying used products, but the wave of online resale platforms have helped rebrand it. These companies often market themselves as a way to get good deals on coveted products, but they also make the case that it’s more eco-friendly to buy used. This argument appears to be working: Thredup commissioned a study which found that many shoppers—particularly younger ones—feel proud to shop secondhand, while they feel guilty about buying fast fashion, which they see as less sustainable.
The pandemic has been a rare opportunity to nudge more consumers to consider shopping secondhand. Poshmark’s revenues grew by 28% in 2020, while fashion industry sales dropped by more than a third. Stuck at home, many people were intrigued by the possibility of clearing out their closets to make some cash; some shoppers, worried about the unstable economy, are attracted to the deals. “I expect the velocity of sales to go up once we’re able to go out again and need outfits for more occasions,” Chandra says.
Appealing to different needs
As more consumers hop on the resale bandwagon, Chandra believes that different platforms can cater to different kinds of shoppers. Sites already offer wildly different ways to shop. ThredUp, Depop, and Poshmark tend to offer lower priced items, while Rebag and TheRealReal focus on luxury products. “Each seller on [Poshmark] is effectively building their brand,” Chandra says. “The ambient chatter on the site is the kind of conversation you might have in a store, when you’re asking questions about a product.”
Sites like Rebag, meanwhile, want to making buying and selling so easy that users spend as little time on the site as possible. Rebag focuses on selling bags and accessories in mint condition from around 50 top designers. It’s developed a tool on its site called Clair that digitally assesses the value of a handbag, so sellers can decide within minutes whether to sell their item.
How sustainable is secondhand?
As GlobalData’s research shows, many people associate buying secondhand with sustainability, allowing them to shop with less guilt. And indeed, the Ellen MacArthur Foundation, a nonprofit devoted to building a circular economy, argues that resale is one step toward sustainability in fashion, because it keeps products in use and out of landfills for longer.
Still, there hasn’t been a lot of research about resale’s impact on the planet and whether it’s actually making a dent in fashion’s enormous environmental footprint. It’s certainly true that manufacturing new clothes involves extracting raw materials, which spews a lot of carbon into the atmosphere and accelerates climate change. Meanwhile no new resources are used when you buy a secondhand piece. So if you buy a used garment instead of a new one, that purchase is more environmentally friend on its face.
But here’s the thing: There’s no evidence that people are replacing their new purchases with secondhand ones. They’re just buying more of both. The apparel industry has been growing exponentially from 50 billion garments in 2000 to more than 100 billion in 2015. The pandemic pummeled the fashion sector, but it has still grown by about 3%.
It’s possible that if business leaders like Chandra do their job right, more people will opt for used rather than new products, and the fashion industry will be forced to reduce the volume of clothes it churns out. But for now, it’s just a distant hope, rather than a reality.