What’s the best secondhand clothing sales strategy for the environment and business? Depends on the brand and the item, research indicates.
More people are buying used clothing, pushing big names like REI, Levi’s, and Lululemon to open resale brands. In turn, the US apparel resale market is projected to exceed $50 billion in revenue by 2023, according to ThredUp, an online consignment retailer that went public last spring.
“Apparel companies once viewed used products as competition to their newest styles, but today many brands are looking for ways to resell preowned clothing and capture these customers,” says lead author Aditya Vedantam, assistant professor of operations management and strategy in the University at Buffalo School of Management. “With the trend toward a circular economy, retailers need to adopt a resale strategy that will maximize profits and minimize their climate impact.”
Vedantam’s study, available in the journal Production and Operations Management, is the first to quantify the profitability and environmental impact of different apparel resale models.
The researchers looked at two popular strategies: In a peer-to-peer (P2P) marketplace, used by the H&M-owned COS brand, the company takes a commission as customers sell and ship items directly to one another on the brand’s website. Meanwhile, in the trade-in model Patagonia uses, customers trade in old clothing for a discount on new merchandise, while the company resells their used threads to other customers.
“Encouraging reuse seems like an eco-friendly move, but advocacy groups accuse some apparel firms of ‘greenwashing,’ or misrepresenting their impact,” Vedantam says. “For example, trade-in deals can incentivize customers to buy more and actually increase overall consumption. With this research, we wanted to help companies align their business and climate goals.”
To quantify the impact of these competing strategies, the researchers turned to game theory, a scientific way to model real-world decision-making between competing players—in this case, companies and customers—based on a series of interactions or conditions. In addition to profitability, they evaluated a product’s environmental impact across its life cycle, including production, use, resale, and disposal.
Their findings showed the trade-in model is a win-win for planet and profit with highly durable products, like jeans, suits, and items from brands known for quality, like Patagonia. With this strategy, companies set higher prices for quality pieces, thus increasing revenue.
Environmentally, the trade-in model is ideal when a piece’s impact mainly comes from regular use and washing, as is the case with many durable products.
Conversely, the P2P strategy keeps costs low, helping to boost profits. The model is a win-win for pieces with moderate to low durability, where the bulk of their carbon footprint comes from production—making it a smart move for brands like H&M.
“Waste in the fashion industry is a growing problem, as millions of pounds of textiles end up in landfill each year,” Vedantam says. “Our findings provide a road map for brands to evaluate their resale business—and for consumers to verify the claims they make.”
Vedantam’s coauthors are from the University of Florida’s Warrington College of Business and Temple University’s Fox School of Business.
Source: University at Buffalo
