Analyst Corner

Profit Potential for Preloved Products? A View of the US Fashion Resale Market with Sunny Zheng

This week, I chatted with a few fashion resale companies about the evolving nature of the market in the US and its potential impact on the retail ecosystem.

What Is the State of The Market?

The US fashion resale market has grown from a single-billion-dollar market in 2008 to a $30+ billion market in 2023, driven by a mix of factors, such as consumers’ growing sustainability awareness, the continuation of sneaker hype, the rise of vintage fashion, inflation and the proliferation of resale platforms (from a supply perspective). In an inflationary environment, consumers tend to seek value offerings to save money, which is likely driving today’s fashion resale market.

Interestingly, we are seeing an uptick in demand for vintage clothing, handbags and watches. A Coresight Research survey of US consumers conducted in December 2023 found that finding vintage or unique products was a major factor for 35% of fashion resale shoppers in their decision to make a purchase—remaining stable from the 33% level when we asked the same question in an October 2022 survey. Many people are drawn to vintage clothing not only for its aesthetic appeal but also for the sense of nostalgia it brings, which is a powerful force in fashion.

“Many people are drawn to vintage clothing not only for its aesthetic appeal but also for the sense of nostalgia it brings, which is a powerful force in fashion.”

Sunny Zheng
Analyst

What’s Next for Fashion Resale Companies?

Although we continue to see growth potential for the fashion resale market in 2024 and beyond, with key players projecting revenue increases, profitability for these companies remains uncertain. This uncertainty largely stems from the fact that the sector still requires significant investments in supply chain, authentication and customer service, especially for online resale service providers.

Despite this, we are seeing some positive signs. For instance, although The RealReal saw sequential losses from 2017 to 2023, in part due to its labor-intensive authentication process and its investments in brick-and-mortar stores, the company’s loss narrowed in 2023, with $168 million loss in 2023 compared to $196 million loss for 2022. Management mentioned on the earnings call in February 2024 that the results in 2023 were a significant step forward on its path to profitability and believes the company can continue to make significant progress on the bottom line as it reaccelerates growth in 2024. The company is beginning to deliver efficiencies from investments in automation and AI (artificial intelligence), according to management. In 2024, The RealReal will focus on enhancing its technological capabilities and processes to improve the product flow in its authentication centers and further automating authentication. There are also some successful industry players such as Fashionphile who has been profitable since it launched in 1999, according to the company.

Overall, it will be interesting to see how fashion resale industry players achieve profitability.

• For more in-depth analysis of the US fashion resale market and proprietary US consumer survey findings, look out for our upcoming research report on the topic, publishing soon.

This Week at Coresight Research

New Research and Data

• Understand the state of in-store retailing and dive into critical opportunities to redefine store operations in our new, free report, produced in partnership with Simbe.
• New survey findings revealed US consumers’ spending expectations for Memorial Day, Mother’s Day and Father’s Day in the second quarter of 2024.
• We tracked surprising declines in US consumer activity in our weekly US Consumer Survey Insights series.
• We analyzed several major macroeconomic indicators and their likely effect on US retail sales in the monthly Leading Indicators of US Retail  Sales series.

Upcoming Reports

• We will present a Retail-Tech Landscape of selected technology companies that provide generative AI infrastructure. Take a sneak peek at this report here, and see the previously published sister report on providers of generative AI applications here.
• Continuing our China Retail Insights series, we will explore opportunities for Western brands and retailers in the China market. You can also view our recent presentation on the topic (delivered at Shoptalk 2024) here.
• Our Weekly US and UK Store Openings and Closures Tracker reports on store closures, openings and bankruptcies.
• We will wrap up the 4Q23 US earnings season with highlights on the performance of major retailers. You can read the latest report in the series here.
• Continuing our China Retail Insights series, we will explore opportunities for Western brands and retailers in the China market. You can also view our recent presentation on the topic (delivered at Shoptalk 2024) here.
• The latest report in our quarterly US Retail Inventory Insights series will analyze inventory trends among major US retailers in 4Q23.

Retaili$tic: The Data-Driven Retail Podcast You Can’t Miss

Join Coresight Research in the Retaili$tic podcast to explore a range of topics at the intersection of retail and technology.

This week, we dissected the groundbreaking ideas and key themes unveiled on days three and four of Shoptalk 2024. From transformative trends to innovative strategies, get an insider’s perspective on the future of retail in this insightful recap.

Stay tuned for more retail insights and inspiration in next week’s episode!

Notes and Methodology

Data in this report are as of March 27, 2024.

Informing the data in this report are two online surveys of US consumers aged 18+, conducted by Coresight Research on October 24, 2022 (402 respondents) and December 11, 2023 (402 respondents). The results have a margin of error of +/- 5%, at a 95% confidence level.

Companies mentioned in this report are: The RealReal (NASDAQ: REAL)