VCs to Remarket Startups: Let’s take some accounts


It is a re-business concept As old as business itself. Everyone knows thrift stores or has bought a used product – this is not a new concept. However, today it has become one of the hottest topics for consumers, brands and investors with ~$6 billion in venture capital funding flowing into recommerce companies by 2021 and the market is expected to reach $250 billion+ by 2027. This is a 5x faster growth than ever recorded. General retail market.

Why the sudden resurgence in recycling?

This is largely due to changes in cultural and societal values ​​towards sustainability. A lot… we waste everything. In apparel and textiles alone, billions of dollars worth of products are destroyed, thrown away, or stored because brands overproduce or the item doesn’t sell. Industry analysts estimate that the global fashion industry contributes 10% of greenhouse gas emissions each year. We can do better.

To understand how, take a look at Gen Z’s deep, ethical consumption of generations. Gen Z has nearly $150 billion in spending power in the US, predicted to comprise 40% of global consumers by the early 2020s. As Gen Z enters the workforce, brands are beginning to shift their growing purchasing power toward value-based, sustainability-focused brands. This was made clear in a recent IBM poll showing that Gen Z is willing to pay ~49% more for a basic white cotton t-shirt that is sustainably sourced and produced.

Remarketing enters large product board segments.

Historically, brands have had poor visibility into the secondary market for their products. Without the ability to measure top-down and bottom-up impact, rebusiness was not at the forefront of boardroom discussions. However, the proliferation of successful third-party resale marketplaces like PoshMark, The RealReal, and StockX have generated hundreds of millions in revenue and billion-plus valuations.

With greater visibility into the economics of resale, coupled with a shift in consumer sentiment toward sustainability, remarketing is now a priority. Patagonia, one of the most progressive consumer companies of our time, has publicly stated that they want ~10% of revenue to come from resale in the coming years, which is >$100 million (based on estimated >$1 billion in annual revenue).

This makes sense if you consider what remarketing offers brands: the ability to sell the same item multiple times with the costs associated with repurchasing the product and logistics. Given brands can control the price they pay for a good, it provides a compelling way to increase both top-line growth and bottom-line margin with minimal labor/production costs.

3 areas attract VC investment

There are three main areas of remarketing that will drive VC take off: (1) managed marketplaces, (2) enabling devices and software, and (3) implementing remarketing for new consumer-facing industries. We’ll explore each below, along with some food for thought for founders building startups in this (re)space.

Market places

There are two main marketing platforms: (1) a brand (eg, StockX) or (2) a white label where a startup manages the brand process (eg, Trove). Resale companies manage most (or the entire) resale experience – from product receipt and verification to merchandise and shipping. Platforms typically have a small SaaS fee, but most revenue comes from a 10%-25% take rate on items sold.

The type of marketplace is mostly determined by vertical. For example, branded marketplaces are well-positioned for consumer electronics, given the high prices and slower pace of innovation in new phone models – creating less of a culture of getting the latest phone. It also comes with a high level of diligence for quality assurance and a complex logistics process, which is less appealing to existing device makers who invest in R&D and want to market the next version. This is one of the reasons why we look to consumer electronics remarketing marketplaces like US and Singapore-based Rebello (an investment made by our company) and Backmarket (estimated at $5 billion).

It’s a different story with fashion. White label remarketing marketplaces handle secondary supply for brands, adding unique items that attract new customers and purchases. There is a strong psychological element to C2C marketplaces that have long suffered from the need to carry trust (while established brands benefit from an implicit level of consumer trust).

How to proceed:



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