Poshmark Unveils Brand Closet Program — But Is Resale Best Left To Consumers?

Over the past 18 months, resale platforms have fast gained popularity not only as means for consumers to clean out their closets and make some extra cash but also as a tool for consumers to engage in more sustainable buying practices.

In 2020 alone, the apparel resale market was valued at $27 billion, with marketplaces such as Poshmark, The RealReal and Depop becoming consumers’ go-t0 platforms for buying and selling pre-used items.

It is perhaps not surprising that retailers are now looking to capture this lucrative market. The fashion resale industry has been abuzz with players launching their own resale programs. For example, lululemon launched its first-ever trade-in and resale program earlier this year, while Urban Outfitters launched its secondhand marketplace called Nuuly Thrift.

And that was just the beginning. Farfetch got in on the action and looked to launch its resale initiative dubbed Farfetch Second Life, while New York City-based Rent the Runway made its way into the fashion resale market as an effort to reinvigorate its business.

But as brands and retailers look to gain more control over the market and use it as means to push their sustainability efforts forward, can the new tactic hurt their margins? Or can the effort even taint their brand?

The thought comes to mind as just recently, Poshmark unveiled its Brand Closet Program, an offering that enables brands to open and operate as a brand on the resale app.

The launch of the new product offering is true to the Poshmark experience, with the product’s original price crossed out, highlighting the current sale price. But here’s the problem, now with direct affiliation to the brand, does this new method essentially train customers to always expect a discount?

As most savvy brands and retailers know, it is easy to get caught up in a heavy discounting strategy, so much so that it essentially trains the customer to always wait out for the next discount, making it hard to ever make a sale at full retail price.

While initially heavily discounting may improve conversion rates, it can have a more significant long-term effect as it can ultimately taint the brand’s value unless it’s done wisely. For example, take it from lululemon who is well well known for its luxury athleisure garments. The brand sells its excess inventory under the “We Made Too Much” section on its website. The company offers, on average, a discount of $10–15 off and sometimes deeper discounts depending on the availability of colorways and sizing. The approach helps the brand keep its high-end, luxury appeal.

But what happens when a brand enters a resale platform, known for its markdowns and its user base is almost infamous for its “low-ball” counters/bids to sellers? Poshmark buyers are far from ashamed when it comes to sending “low-ball” offers as they’re always on the hunt for a great “steal.”

Why would such a heavily ingrained behavior change for a brand on the platform?

As brands and retailers look to enter the resale market and leverage platforms such as Poshmark, understanding the platform’s core audience base is crucial and having a strategy behind the offering is critical. For example, maybe offloading unsold merchandise with particularly hard colors to sell at a much lower price tag might be an approach worth considering. Another tactic worth exploring is offering flash sales. Either way, when leveraging a third-party app for resale efforts, it’s critical to understand not only the platform’s experience but also the platform’s core audience.

What the resale market looks like for the one percent of brands.

For luxury brands such as Cartier, which is known to hold an exceptionally high value on the resale market, resale platforms could quickly satisfy margins. Resale platforms, after all, tend to offer additional payment solutions, such as buy now, pay later ( BNPL) plans, making it easier for customers to purchase high ticketed items. But, like any other brand, it could come at a cost in the long-term for luxury brands. Entering the resale market could change the label’s narrative around the scarcity of their products. And that’s a cost the brand is going to have to strategically think through as when it comes to the top one percent of brands — Hermès, Chanel, Louis Vuitton and Cartier; consumers are willing to pay well over the original asking price.

So, as brands look to get their slice of the resale market pie, is it a move for everyone? Can it be a move for everyone if a strategic, methodical plan is put in place? Or should we leave the resale market to the consumers?

Rebag: Hermès, Chanel And Louis Vuitton Hold Highest Resale Value Are Buy Now, Pay Later Solutions Tainting Luxury?

Originally published at https://retailbum.com on November 1, 2021.