Recommerce, the sale of secondhand merchandise, is a hot topic as consumers become more enthused about recycling goods rather than contributing to enormous mountains of landfill waste. While secondhand marketplaces are steadily growing, they barely make a dent in the billions of items today’s consumers generate. Take the U.S. retail segment; the National Retail Federation (NRF) found the value of merchandise returned by consumers last year topped nearly $750 trillion. There is clearly a mounting and significant return waste problem.
The resulting ecological and financial disaster left behind by liberal return practices is an ongoing topic of concern for brands, retailers and consumers. Another stain on industry practices is what actually happens to the 5 billion-plus pounds of returned items that never make it back to the shelves. It either becomes dreaded waste or is severely discounted, resulting both in a growing problem for the planet and a financial loss for merchants.
So why aren’t merchants processing these returns in efforts to recoup these massive losses? One of the main reasons is the heavy manual effort it takes to categorize, sanitize and relist these items for resale. This is compounded by rising labor costs, even while consumer demand for secondhand products swells. The process is clearly broken and as a result a whopping 85% of used garments end up in landfills or burned.
Moving from Waste to Resale
Fortunately, there are remedies to fix this broken process. The solution often starts with tech-enabled operations and automations, leveraging new tools such as artificial intelligence (AI) and machine vision. Automation can significantly impact the successful processing and remarketing of secondhand and returned goods. As a result, waste can be minimized and merchant losses reduced.
Consider these three ways retailers can tackle return waste head-on, improving sustainability and recapturing revenue from returned inventory that may otherwise have been written off as a loss.
- Analyze and Act. The first step is to recognize and declare your returns operations are not functioning at optimal levels. Studies have shown retailers significantly underestimate their return rate, and a slight 4% track the impact of returns at all. This is a missed revenue opportunity. Without a thorough process for capturing and analyzing return data, retailers are not acutely aware of the revenue that is simply being tossed out.
Be certain to accuratelyestimate your return rate, particularly for those items that are sent back without original tagging. These typically slightly used items still have high value and can be efficiently resold without the heavy liquidation discount that most retailers anticipate.
By populating them effectively back into the secondhand recommerce market, retailers and consumer brands alike can not only recoup lost revenue but also gain consumer goodwill by becoming a sustainable recycle-first organization. In fact, there are a few leading brands taking a lead and building consumer loyalty by exposing secondhand products to buyers that may not have otherwise experienced their goods. By knowing your return waste exposure and creating actionable processes to efficiently repurpose these slightly used goods, your retail business will realize significant return on investment, both in terms of revenue and brand equity.
- Leverage Technology Automation. A retailer’s returns operation can begin to fail the minute a customer sends a return item back to your site. The rule of thumb is that it can take several weeks for that return item to go from the customer’s location to the retailer warehouse. If proper tags are intact, it can be relisted and ready to sell again in just over a month.
But if tags are missing or the product shows signs of use, it is no longer considered new — even if it was simply tried on or worn just once. This one-time use often results in a complete financial loss. Products are lumped together and sold off to a liquidator for pennies on the dollar, or dumped to the landfill. All value is lost.
Within the total loss area is where advanced AI automation technology can really prove its value. Even without tags, retailers can easily assess product price and even automate the listing of products to secondhand marketplaces with a simple picture of the item. Machine vision technology can automate the collection of product attributes, value and even populate marketplace listings. The process is rapid, labor efficient and can potentially recoup as much as 50% of the original item cost, compared to the 5% or less when products are sent for liquidation or waste disposal.
- Capitalize on the Sustainability Trend. The secondhand product market, particularly for fashion retail, is red hot. In the U.S., secondhand product sales are expected to rise 200% by 2026, to $82 billion. The secondhand fashion market specifically is predicted to grow by 127% by 2026, three times faster than the global apparel market overall. Why wouldn’t traditional retailers want a piece of the action?
According to the BBC, 81% of consumers agree that the demonstration of a sustainability commitment adds brand value and 79% find sustainability practices an important consideration when making product decisions. This is driving many forward-thinking brands to open their own secondhand and previously used product online storefronts. As examples, Patagonia has a program called “Worn Wear,” Lululemon partnered with Trove to launch its “Like New” program and REI offers a “Good & Used” trade-in program for used sporting gear. These smart ventures not only recoup revenue that may have otherwise been lost, but also enhance brand value for consumers that increasingly appreciate corporate acts of recycling and sustainability.
Uncovering Secondhand Value
In 2020, consumers returned products totaling $428 billion. The NRF estimates the cost at $101 billion. Over the next few years, this return waste will swell to a trillion-dollarproblem for retailers.Apart from sustainability goals, getting these goods back up on ecommerce sites to recoup costs offers both an economic benefit as well as positive social equity. Improving the returns and listing processes is an important step in this recovery and it can be done using a combination of strategic analysis and technology automation.
In the fashion goods business, the tide is clearly turning toward recommerce resale as more consumers are inclined to reject ‘fast fashion’ in favor of secondhand options. 75% of retail executives are either providing or thinking of offering secondhand goods. This trend is the future. For retailers both large and small, it’s the perfect time to be thinking of leveraging technology to be in the forefront of this consumer recommerce revolution.
Ty Blunt is the Co-founder of Hammoq, a company that automates the recommerce process for resale returns and used goods. A resale innovator, Blunt created a new system of resale, marketplace day trading — selling up to 15,000 units in just 12 months and creating more than $153 million gross merchandise value (GMV) in the past three years. A sustainability advocate, Blunt’s ventures saved 1 billion liters of water in 2021.