Online Consignment Shops: Here to Stay or Just a Fad?

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Published July 24, 2014

| FOXBusiness

We have no problem buying “previously-owned” cars and “refurbished” technology; and as soon as the consignment industry figures out a clever catch phrase, people won’t think twice about buying used clothing.

“Whatever the buzz word is, it will put a stamp of approval and the mindset will change. That means buying clothes on resale will become so mainstream people won’t even think twice about it,” says James Reinhart, CEO of online consignment ThredUp.

Reinhart admits the biggest hurdle his four-year-old company faces is getting the first bite. “We need to get the user over the hump to place that first order. We send the item in a beautiful box with tissue and a sticker, it’s very Nordstrom-esque. We are the Apple of boxing resale clothing. Once they’ve made that first purchase….people repeat at predictive rates.” 

The hook word his shop is pushing is “practically new” and he says the acceptance level of buying used is gaining strength. The proof is in the rise of flash sale sites. “People have no problem using sites like Gilt to get good deals on items. It’s only a matter of time when they see the value we are providing and move to consignment.”

The popularity of consignment shopping exploded in the wake of the Great Recession and brought a flurry of online stores allowing people to buy and sell used clothing. “This has always been a recession –proof industry that flourishes during slow economic times. Once people get their first good buy, they are hooked,” says Adele Meyer, executive director of the Association of Resale Professionals.

Brick-and-mortar consignment shops have been around for decades, but as consumers increasingly shift to online shopping, resellers are also popping up online. But the worry that these online shops will do what Amazon is doing to traditional retailers isn’t applicable for this sector, says Meyer. “Online will supplement, but not replace. For many consignment shoppers, it’s about the experience of going into a store. It’s a very social thing with very personal service.”

Pam Danziger, luxury market expert and founder of Unity Marketing, says the retail industry is partially to blame for the rise of consignment shops. “Go into any store and everything is on sale because they can’t sell it at list price. There is entirely too much stuff out there and consumers have an austerity attitude. The consumer goods business is going to have to right size itself.”

EBay has been selling used clothing since 1996, but today’s online consigners have evolved and are striving to distinguish themselves in a quick-growing sector. For instance, Reinhart at ThredUp says his target shopper is moms while the founders of Bib+Tuck are going after millennials.

Peer-to-peer fashion site Bib+Tuck launched in November 2012 and co-founder Sari Bibliowicz says nearly three-fourths of shoppers are between ages 18 and 36 with the average order coming in around $135. The average seller has sold nearly six garments, she said.

“We are a startup and we aren’t moving in the same direction of the economy. We’ve experienced explosive growth with sales and registration numbers going up consistently 30% month-over-month.”

While growth has been steady for Bibliowicz, she recognizes it can easily become saturated and expects consolidation in the space in the next few years. “We’ve seen a rise in a lot of players in this space in the last two to three years when it didn’t even exist five years ago.” Those that will succeed will be the ones that figure out how to best find and deliver the products that consumers demand, she adds. “Liquidity is the name of the game. If you have a pair of shoes that you want to sell quickly, whoever can build the fastest platform to connect shoppers and buyers will win.”

Clothing and accessories have traditionally been top sellers in the re-sale world, but furniture and household goods are quickly gaining market share, according to Meyer. In fact, EBay (EBAY) recently launched a new app to sell electronics, kitchen appliances, sporting goods and antiques.

Consignment experts agree that getting a customer to make their first resale purchase is their biggest hurdle and offer the following tips for first-time buyers:

Stick with Brands You Know. Reinhart recommends newbies focus on brands they already have in their closets. “This way it reduces your chances of having a bad fit. If you know what size you are in Banana Republic, you will look more tailored and likely to keep the item.”

Check the Return Policy. Fake and misrepresented items are often a top worry among consignment shoppers, so be sure to check a store’s return policy.

“Know what the buyer protections are before you make a purchase,” recommends Bibliowicz. “We have a zero tolerance and 100% refund for fakes, but make sure you know what you are getting into before committing.”

Ask Questions. When purchasing from a peer-to-peer site, Bibliowicz suggests asking the buyer questions before making a purchase. “If you want to know if it’s been tailored or altered, the condition or anything else, don’t be afraid to ask.” She says the more social a customer is when consignment shopping, the better the experience.

“Look at people’s social media accounts or reviews, get to know them a little better. Once you have a sense of who you are buying from you form a level of trust. Plus, once you find someone with similar tastes and size, that makes shopping much easier.”

Get Social. Meyers says many consignment stores will post new items on their Twitter and Facebook accounts to let shoppers know when they get new products.

“Many stores have learned they can increase their sales through social media, and that’s to the shopper’s advantage.”

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