The boom of second-hand fashion and the circular economy

How consumer behaviours change

Second-hand clothing stores are nothing new. However, something in the consumption models has changed. There is a new perception of second-hand garments. What used to be a "second-best" is now a "smart & cool" choice, especially for the new generations, from Millennials to Zoomers. The combination of the new perception with the age of digital technologies, e-commerce, and peer-to-peer platforms did the rest, generating a whirlwind growth of the market.

A study by Vestiaire Collective, one of the leading second-hand clothing platforms with 11 million registered users in 80 countries, and the Boston Consulting Group estimated the value of the second-hand fashion market to be US$40 billion globally. The average forecast growth in the next few years is 15% -20% per annum, an acceleration that will inflate the market value to around US$75 billion in 2025, with more sustained growth in high-income countries.

The BCG study also analyzes the motivations for purchase. The news is that for a very high share of consumers, the main reason for buying in second-hand channels is to find unique items and a wide variety of styles and brands - wider than in the new garments channels. There remains a share of consumers looking at second-hand for bargains and buying items otherwise out of budget. Finally, a minority, albeit not a small one, approaches second-hand mainly for environmental awareness.

2019 is the ignition year for the boom that the pandemic has strengthened and not slowed down. The website Business of Fashion has recorded at least 13 international new platforms dedicated to second-hand that went live between 2019 and 2021 in a run-up involving consumers, fashion brands, and investors.

Despite the boom, this channel's future is still a mix of lights and shadows. Different business models are competing on the market whose economic sustainability has yet to be demonstrated: C2C sharing, consignment brokerage, brand-owned platforms (reserved for brand products or open) or independent, B2B platforms of Resale as a Service (RaaS). The achievement of adequate levels of profitability remains an open challenge that the startups in the sector and the related business models are still far from winning. An example is the performance of the three platforms listed on the stock exchange: The Real Real, Poshmark and ThreadUp; none of them have closed a year without losses so far, and the current value of their shares is below the IPO price.

A primary factor that will support the consolidation of the second-hand channel in the European market will be the entry into force of the Extended Producer Responsibility (EPR) schemes imposed by the European directive 851/2018, which will enforce "environmental contributions" on producers and importers to incentivize more sustainable management of garments end-of-life. 
The directive has already been incorporated into national laws in Italy, France, Germany, Spain and is being incorporated in the other member countries.