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Resale’s Fast Fashion Purge | BoF

Vestiaire Collective is stepping up a fast fashion ban announced last year, blocking 30 new brands including Gap, H&M and Zara from its resale platform.

The privately held Vestiaire, whose investors include French luxury group Kering, said its move to ban fast fashion is more about values than profits — part of a strategy to position the business as an antidote to wasteful overconsumption.

But the focus on higher-value products does also mean more commission per sale, and nudging – or forcing – customers to list more expensive items has proven good for the bottom line at some of Vestiaire’s rivals.

The RealReal changed its commission structure last year, reducing the amount sellers can receive for items valued at less than $1,000 — a change that helped it narrow EBITDA losses from $28.2 million in the third quarter of last year to $7 million this year. Though still focused on the mass market, ThredUp, has also refocused its marketing on more expensive products. While ultra-low-value brands like Shein can still be sold on the site, sellers won’t receive any commission from those listings.

A shakeup in online resale, whether for environmental or business reasons, was a long time coming. The biggest platforms dominated the market by offering relatively generous commissions to anyone willing to sell clothes, bags and other items on their sites. But profits have proven elusive. Since going public in 2019 and 2021, respectively, shares in The RealReal and ThredUp have lost about 90 percent of their value. A third player, Poshmark, was acquired by South Korean tech giant Naver in October 2022, about 18 months after going public.

“A lot of people did lower-value-price points to drive growth, with less of an eye to profitability,” said Piper Sandler managing director Edward Yruma. Shifting focus to pricier products is an “important unlock” in efforts to shift that paradigm, but “it remains to be seen what the long-term economic models of these businesses are,” he said.

Seller Beware

Vestiaire has taken a harder line than rivals in banning, rather than simply disincentivising, the sale of fast-fashion items. Though the company has always focused on the premium end of the market, more than 30,000 active sellers will be impacted by Vestiaire’s new policy and over 100,000 items have been removed from the platform in order to implement it.

“Maybe it’s a risk, maybe it’s not a good business decision. That’s not how we’re deciding it,” chief impact officer Dounia Wone said. “The purpose is not to say how much money we can take out of it; the purpose is to say, if we don’t believe in this model and if we continue to sell it, we are not true to our values.”

The impact on engagement from the first phase of its ban on ultra-fast-fashion brands last year was limited — more than 70 percent of affected buyers and sellers had a new transaction on the platform within six months, said Wone.

The Paris-based business has coupled its fast-fashion ban with lobbying on policy proposals in Europe, where regulators have vowed to “end fast fashion, though what determines whether a brand falls within this category has yet to be clearly defined. Luxury brands have pushed back against metrics like durability that could favour hard-wearing synthetic materials like polyester.

Vestiaire has spent the year since initially blocking ultra-fast-fashion players from its platform working with a panel of nine experts to create its own definition. The brands blocked from its platform have been scored using AI based on a matrix that covers price, product renewal rates, range size, speed to market and promotion intensity.

“What we want to address is overconsumption and overproduction,” said Wone.

Exactly what role resale currently plays in this regard has been the subject of some debate. The market’s growth has done nothing to offset sales of new clothes and many brand-owned platforms are designed to act as marketing tools, offering sellers vouchers to entice them to sign on.

A September study by consultancy Worldly and resale service provider Trove concluded that low-priced fast fashion would never be able to generate enough revenue from resale to displace primary sales and meaningfully reduce environmental impact.

But if the economics of resale demands higher-priced products to work from both a profitability and sustainability perspective, it leaves open the question of what should happen to the growing volumes of discarded old clothes.

“To be frank there is no one solution,” said Wone. “You need regulation and you need people to pay for what they put in the market.”

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