Embracing the circular economy helps alleviate many pain points apparel retailers currently face: attracting new and loyal customers; reducing pollution and waste; developing sustainable fabrics and materials; reducing costs; and increasing revenue. By implementing a circular economy strategy, retailers can adapt to a quickly changing social environment where Gen Z and Millenials are purchasing used clothing at a growing rate with goals of sustaining both the environment and the economy. In a world where people are buying more clothes more often and keeping them for less time, a recommerce solution is vital for reselling, restoring, and recycling fabrics and materials to 1) keep the environment healthy; 2) keep customers happy; and 3) to increase revenue. To help show this in action, new sustainable materials are now available and take-back and material recycling programs have been implemented by global fashion brands. A recent collaborative report by Accenture Strategy and Fashion for Good, The Future of Circular Fashion, explored this subject. The remainder of this article goes into detail on the Recommerce circular business model.
Recommerce is the recovery and resale of a garment by the original retailer. Say, a customer orders five of the same item but in different colors and sizes; then keeps one or two items and returns the rest. The retailer now has to ship, process, clean, and store the returned items after refunding the cost to the customer. How the retailer decides to resell the returned items is considered recommerce, and it’s the most viable solution for Luxury, Premium, and Mid-market segments as shown in the chart.
Perception, inventory acquisition cost, recommerce price, and logistics are the main challenges when implementing a recommerce strategy. The following sections show how major retailers are changing the perception behind used clothes to reflect a vintage and environmentally friendly message. And finally, there’s a visual diagram of how recommerce can work.
Report findings show that consumer perception of previously owned garments has changed. No longer do customers view used garments as dirty, or yesterday’s trend, or destined for the local charity drive; instead, used clothes are seen as second hand, vintage products with value. The value for the original owner when trading in or returning worn clothes is either cash, vouchers, or some type of store credit. For the new buyer, it means being able to afford a higher quality garment that might have been previously out of their budget.
The report showed that used garments tend to resell at 50% of original market value; while retailers will provide 15 to 40% of value in vouchers back to the original customer.
The following figure perfectly illustrates how a recommerce circular economy works and how apparel retailers can fit this strategy in with their inventory, pricing, and logistics operations.
For certain apparel retailers, reselling individual items back to consumers can make sense. But for retailers with warehouses stocked full of inventory with varying sizes, colors, styles, and maybe even different brands and condition grades, they have a greater challenge in sorting and processing massive amounts of returned items. In that case, liquidating bulk amounts of inventory through an online auction marketplace makes the most sense: selling in bulk to SMB resellers that operate discount, clearance, and rural mom and pop general stores is a great way to quickly reduce inventory from warehouses, reduce shipping costs (by shipping in bulk to a single customer instead of dozens or hundreds), and recover from the high cost of processing returns.
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