One person’s return is another one’s treasure

With supply chain disruption and inventory shortages aplenty this holiday season, a few outcomes are likely to unfold:

• Recommerce sites selling higher-end secondhand products will see a surge of traffic—buoyed by an already-apparent shift: the global resale market is expected to triple in size from 2017 to $130.6 billion by 2024
• Shoppers will end up buying their second or third choice for holiday gifts. And the further down the contingency stack consumers go, the more likely it’ll be that the gift will end up as either regifted to someone else or—more likely—returned by the (politely appreciative, yet unmistakably disappointed) recipient.

So, with returns peak coming soon, we decided to dig into how these trends might converge to open new opportunities for retailers in the months and years ahead.

The popularity of recommerce has been accelerated by COVID-19. According to Chairish’s 2021 Home Furnishings Resale Report, the top three factors that move buyers toward resale are increased awareness of environmental benefits of buying used, supply chain issues slowing delivery (and limiting availability) of new items, and renewed desire for home improvements during the pandemic.

Shopping secondhand products proves to be hugely popular, with more than half of consumers in our most recent BOXpoll surveys telling us they’re likely to buy gently used items in almost every product category if given the option. Unsurprisingly books, music and videos are the most popular secondhand item. Home décor is next on shoppers’ lists, with 59% of all consumers and almost two-thirds of Gen Zers (64%) and Millennials (63%) likely to buy secondhand.

From regifting to recommerce

The stigma of secondhand clothing appears to be long gone, with 57% of shoppers likely to buy used. According to ThredUp’s 2021 Resale Report, the used clothing market is projected to double in the next five years, reaching $77 billion.

Our BOXpoll surveys also shows that one-third (31%) of all consumers and more than half of Gen Zers (51%) are open to secondhand shoes. Recommerce giants Poshmark and eBay are investing resources in this arena as the resale sneaker industry grows, with both recently acquiring sneaker authentication companies.

Retailers are taking notice. Anthropologie has opened up its site to 3^rd parties selling gently used selections of its products. Madewell partnered with ThredUp to launch an online platform for pre-loved jeans, tapping into ThredUp’s network and platform to wring multiple sales over the lifetime of one pair of jeans. We expect to see more retailers use recommerce to reduce the impact of returns on margins, provided they have a way to inspect, refurbish and resell returned items cost effectively.

Could regifting become…peer-to-peer recommerce?

The National Retailer Federation estimated that last year, shoppers returned $428 billion across channels. Even excluding shipping, online returns can cost retailers $10-$20 per item. And the average 6 days consumers wait before returning an online purchase (“trunk time” as we’ve termed the behavior) can diminish resale value, erode margins, and create uncertainty around labor and space planning.

So, while recommerce creates an opportunity to recoup these costs—and even turn them into a revenue source—we wanted to know whether there was an opportunity for retailers to avoid these costs entirely, by encouraging consumers to regift instead of return.

One in five consumers (22%) said they regifted in the past year or plan to this holiday season. While that may seem like a small number, the proportion jumps up to nearly one-third among Millennials.

What would encourage consumers to regift more often? For one: the promise of helping the environment.

Half of consumers (47%) believe regifting is better for the environment, with strongest support from Millennials (53%) and Gen Z (51%). This indicates that leaning in on sustainability messaging is likely to help increase the adoption regifting.

But what else could help?

The number one way to increase those odds? 47% of consumers, consistent across generations, are more likely to absorb the cost of an unwanted item if they can help another person or family. For entrepreneurs and VCs reading—here’s an opportunity—but at minimum it’s a promising nudge for retailers to form partnerships with charities to reroute returns.

The personal factor of giving to someone in need is important, because the percentage of people interested in regifting an item as a general charity donation drops by almost half. Just one-quarter (28%) of consumers would consider the nameless, faceless donation.

One-quarter of both Gen Zers (28%) and Millennials (23%) would consider regifting if the retailer offers a discount on shipping the item to another recipient. That’s not surprising, given that earlier this year, shoppers ranked paying for return shipping second in returns process pain points.