Part 5: Resale As A Service, aka the Companies Helping Brands Get In The Game
With more brands interested in getting into resale than ever before, there is subsequent demand for these brands to be supported in their entry into the industry. Resale is significantly different to selling newly-made standardized products, so brands prefer to outsource what they can to businesses that have expertise to manage and organize the secondhand sales. These secondhand support businesses are known as Resale-as-a-Service or RaaS companies.
The Business Model
RaaS businesses provide brands with the infrastructure to integrate secondhand as a part of brands' offerings. Their existence allows brands to outsource much of the hassle and complexity that comes with resale. While each RaaS platform varies, mainly, they offer a branded resale website (the selling channel), inventory sourcing systems (and management, depending on the RaaS model), listing technology, sales management, analytics, and customer support.
There are two primary types of RaaS resale offerings: managed platforms and peer-to-peer platforms. In managed experiences, the RaaS business will be responsible for ultimately housing the inventory and fulfilling the sales along with all of the technical support. The brand may incorporate a take-back program to source inventory, but otherwise, the RaaS business will do the rest. In a peer-to-peer experience, the inventory doesn't have to be managed because the customer is responsible for shipping the product (like on Poshmark or Depop) but the RaaS business creates the branded experience, maintains the secondhand storefront, and manages customer service.
Industry Role
RaaS businesses essentially run secondhand online shops on behalf of the brand. Thanks to their pre-existing infrastructure and specializations, RaaS platforms boast being able to launch re-commerce sites in a matter of days or weeks— a task that would undoubtedly take way longer for a brand to do themselves. Some RaaS sites also come with analytics perks that track popular secondhand sales and customer behavior that brands can use to inform new production. By recognizing what products fare better in the secondhand market, brands can make strategic decisions that match customer demand, ideally lessening unnecessary production.
RaaS businesses serves brands, first and foremost, but they are also typically the ones managing the customer experience. They also often have recycling and repair partners in which they pass unsellable inventory onto. Essentially, RaaS companies are acting as a conduit for several facets of the secondhand industry. They streamline the process for brands to enter resale, they serve as the customer-facing resale representative of the brands, and they provide a pathway for clothes to have a second life, whether that's through being resold or being feedstock to their recycling partners.
RaaS businesses help to address clothing waste in both the production and post-consumer stages. By making it easier for brands to integrate a circular model, RaaS incentivizes brands to leverage resale to grow revenue rather than new production by providing an outlet for the brand to capture value on the back end of a garment's first life. This both diverts clothing from landfill and gives brands reason to slow production without worrying about profit loss.
Major Players
The RaaS champion is ThredUP— they do own the registered trademark of resale-as-a-service after all. The secondhand site launched in 2009 and has been trailblazing re-commerce ever since. After streamlining selling secondhand online at scale (which is no small feat), ThredUP launched its RaaS model in 2018 to help brands do the same. With fully managed model, it hosts resale platforms for some of the most recognizable retailers like Gap, Tommy Hilfiger, Reformation, Kate Spade, and many others.
Trove is another RaaS business, which launched in 2016, that has helped many major brands such as Patagonia, REI, and Levi's to integrate branded recommerce models.
Treet offers peer-to-peer branded resale. They claim to host the majority of the branded resale sites currently, though their partner businesses are smaller in scale than that of ThredUp or Trove. Additional RaaS businesses making a splash are Archive, Recurate, and ReCircled.
Opportunities & Challenges
RaaS businesses are a massive opportunity for brands, immediately boosting their brand image thanks to the sustainable quality of secondhand. But that's not all. RaaS platforms claim their services often result in more sales for the brand thanks to trade-in incentives and customer willingness to buy more secondhand than new.
The existence of RaaS businesses means that brands really have no reason not to engage in secondhand business models. They provide a win-win for everyone involved— the brand adopts a new revenue stream, RaaS partners gets their cut of that, and customers get increased access to their favorite brands at a lower price point. Oh, and the planet benefits from less clothing piling up in landfills. The potential value-add of RaaS is as endless as the amount existing brands and the need for clothing to be redistributed. Beyond serving new brands, the expertise of RaaS could also be redirected to help launch entirely new secondhand stores apart from brands. Because scaling and automating the sale of secondhand is so difficult, the technology and infrastructure that RaaS is building and refining will be valuable to the industry at large.
Of course, there is always the challenge of inventory that is unsellable, and managed RaaS businesses now have a role in redirecting those unusable clothes collected in take-back programs. That's why, next week, we will explore the role of textile recycling and what really happens with clothes that can't be resold.
