Q&A with Peter Whitcomb, TROVE
Fusion Associates talks to Peter Whitcomb, VP of Growth and Partnerships at Trove about the Circular Economy and Trove’s Re-commerce platform.
Q&A with Alex Pescott, CEO at Fusion Associates.
What is recommerce? And what does TROVE do?
Recommerce, or resale, is the selling of previously used goods. Recommerce is ultimately about honoring the quality of a product and giving it as much life as it deserves. There are a number of existing and emerging recommerce models today. These include peer-to-peer marketplaces such as Poshmark or Craigslist, where consumers buy and sell used goods, managed marketplaces, such as eBay or The RealReal, consignment and thrift websites and stores, or the white label offering Trove provides that allow brands to own their own end-to-end, branded resale channel.
I very much think of recommerce as the third channel that complements a brand's ecommerce and retails channels. Trove has built technology and operations that allows brands to take control of this third channel and own their resale market. Specifically, we enable brands to resell secondhand products and take back items from their customers’ closets (and garages) while maintaining and enhancing their brand equity.
Today we do this with some of the best brands in the world, including Patagonia, REI, lululemon, Artc’teryx, Levi’s, and Eileen Fisher, amongst others. We have proven that brands who build a resale channel will drive incremental sales, acquire new customers, deepen customer loyalty and build meaningful sustainability credit. Our model is very much rooted in building a more sustainable retail ecosystem. I deeply believe that recommerce is as close to business nirvana as a model can get; it allows a business to drive more revenue and profit while mitigating their impact on the earth.
Isn’t the goal of any retail business to sell as many things as possible? Why should a retailer care about recommerce?
Consumers will always want to buy new things, that is not going away. However, what is emerging in the next generations of consumers is a desire to consume more sustainably, and this consumer is demanding that brands and retailers offer circular shopping options. In fact, I will go as far as saying that retailers that don’t offer a circular option in the next decade or so will be at risk of irrelevance. Retail is all about the consumer and meeting them where they want to be met. Younger consumers are increasingly seeking recommerce buying options from brands and retailers, so to not care about it is quite risky in my opinion.
The secondhand apparel market in the US is expected to be $64 billion by 2024 and it is the segment of retail where consumers expect to shift most of their spending over the next 5 years. I spent some years working at Amazon as they were really ramping up their retail business and I see the shift to recommerce akin to the shift to ecommerce a couple decades ago. The brands that did not invest in ecommerce fell off the back, lost out to marketplaces like Amazon, and are either gone or still playing catch-up to be digitally relevant. The next big shift is to recommerce.
To this end, allowing third-party resellers to control a brand’s resale business and customer experience leaves money on the table and devalues the brand’s legacy and quality, all the while losing valuable data on the consumer and their journey.
Why would someone want to buy a used jacket or dress, even from a premium brand? What’s driving this next generation of customers to resale?
There are a number of reasons why recommerce is attracting consumers, especially younger generations. The reasons are all largely rooted around value and values. ‘Value’ meaning consumers will always want to buy premium brand products at more accessible prices. Resale allows premium brands to have an off-price channel, but offer it in an authentic, innovative and sustainable way. ‘Values’ meaning consumers are shopping more consciously. We know that sustainability is increasingly influencing consumers’ purchase decision making, with 64% of millennials and gen Z reporting that they are influenced by sustainability when making a purchase. Finally, as a consumer’s income and buying power grows, they may be more likely to trade-in old products and trade-up to first hand goods from the brands they previously bought via recommerce.
A thriving recommerce marketplace may also reduce barriers to purchase for firsthand luxury consumers, with 44% of luxury consumers considering the resale value of the goods they purchase when they buy – a figure that is even higher amongst Gen Z and millennials, at 57% and 50% respectively. Therefore, the prevalence of recommerce may be a win-win for all, acting as a stepping-stone for first-time luxury shoppers while also increasing willingness to purchase amongst current luxury consumers.
Do you only work with apparel brands? What type of brands benefit the most from the Trove platform? Is there a typical brand profile?
Today, Trove works with premium brands across the Outdoor, Athletic and Contemporary Fashion retail sectors and we are making a thoughtful push into Luxury this year. We seek partners who make desirable, durable, and beautiful products that command strong resale prices year over year. As I mentioned, resale is ultimately about honoring the quality in a product and giving it as much life as it deserves. The brands that have this code of honor in their DNA are excellent partners for us.
Importantly, our partners also must have a deep commitment to innovation and sustainability. Having built out an innovation team at REI, disrupting the status quo at many of these large, premium brands is exceedingly challenging, so the support must come from key executive leaders or unrelenting innovators. On the sustainability front, we are lucky to work with many of the leading brands in this arena and they recognize that recommerce is simply one of the best ways to engage their consumers in their impact agendas. Specifically, each consumer purchase diverts a half pound of waste from the landfill and saves an average of 44% CO2 emissions vs. buying new. On this score, all of our partners deeply listen to and serve their consumers as their behaviors shift. I see Trove’s job as building the pipes of this new channel for brands so they can focus on growth and storytelling while staying true to their brand’s heritage and showcasing the quality of their products.
What is the size of this recommerce market? And how big can this market grow for brands?
The secondhand apparel market has boomed over the past 5 years, more than doubling in value from 2015 ($14 billion USD) to 2020 ($33 billion USD), and is set for further exponential growth estimated to reach $64 billion USD by 2024.
Further data from COWEN research shows 52% of shoppers plan to spend more money on secondhand over the next five years and 43% on sustainable fashion, which is up 139% from 2018.
How much is recommerce worth to brands and retailers?
Recommerce is growing more than 20x faster than traditional retail. Our long standing brands are seeing net profit margins ranging from 25-45%. They have also seen very minimal cannibalization with 50-65% of recommerce customers are new to the brand. Trade-in customers also shop and spend 2x as much as non-secondhand customers.
Other than Amazon, resale and rental are the only segments of retail that are expected to grow over the next 4 years and resale is expected to grow at a more rapid pace than any other segment. This shift in wallet share is simply too large to ignore.
You can read more about the benefits of brands owning their own resale channels directly from our partners here.
You provide a white-label and end-to-end technology solution to your customers, typically how long does it take to onboard a new customer?
Building a new resale channel from the ground up is challenging and expensive. As I mentioned, it is in effect an entirely new business. Trove can get a partner’s recommerce business launched typically within a matter of 3-5 months, which is a significantly faster time to market with less business risk and investment than trying to do this in house. When I was building out the resale business at REI, we did some math to estimate the cost to do it properly in house and it was well into the eight figures and would have taken years of work.
Trove makes what can otherwise be a fairly complex business model, low complexity. Our platform allows for brand’s customization, creative control, and flexibility of program phases to test, learn, iterate and scale. With our deep expertise in circular shopping, we help brands make business decisions on how the brand wants to go to market. All of our partners today have a recommerce website, but they also have the option to provide their consumers with trade-in options on Trove’s proprietary technology in-store, digital (through mail in trade-in), or both.
Trove’s San Francisco operations center