The Climate Impact of Resale

The Climate Impact of Resale

Can brands make a meaningful contribution towards decarbonisation by launching their own resale programme?

Eerik Toom

The fashion industry is widely known as one of the worst polluters on the planet, producing around 4% of the world’s greenhouse gas emissions and 20% of its wastewater. Many look to circular business models as the answer to how the industry can continue to grow while cleaning up its act and meeting urgent targets for decarbonisation.

But there are sceptics, too. Some fast fashion brands have faced accusations that their resale schemes are just ‘greenwashing’. Kenneth Pucker (a former COO of Timberland) argues that resale and rental have made only a minor contribution to cutting greenhouse gas emissions, and that the search for quick win solutions could even delay the structural changes needed to meet climate change mitigation targets.

It’s clear we need to do more: at its current rate of decarbonisation, the fashion industry is on track to fall 50% short of the target required to limit global temperature increases to 1.5°C above pre-industrial levels.

Here’s what a brand needs to consider to launch a resale programme that’s good for their bottom line and good for the planet:

  1. Resale must extend the life of your products
  2. Resale growth should be decoupled from production
  3. People need to know about it!

Let’s take a look at each of these points in turn.

1. Does resale extend the life of your products?

Based on the average length of secondhand ownership, resale is expected to extend average product life by 1.7x. Brands may be able to double this effect, depending on how their resale programme works.

There are generally two options for brands:

  1. In a peer-to-peer resale marketplace model (such as M.M. LaFleur’s Second Act), customers sell secondhand items to other customers. It’s up to the seller to describe the item, take photos, and ship it directly to the buyer when a sale is completed.
  2. With a centralised model (such as Patagonia’s Worn Wear), the brand takes back secondhand items from customers in exchange for store credit. The brand (or its reverse logistics provider) ensures the item is cleaned, refurbished, photographed and listed for sale to the next customer.

The peer-to-peer model today only works for items that are new or in great condition. If your jacket is missing a button, tough luck! A centralised resale model that includes item refurbishment can double the 1.7x effect, to extend product life by over 3x. The difference in shipping is relatively minor, as shipping makes up just 3% of the lifetime emissions associated with apparel.

2. Is resale revenue decoupled from selling new products?

"To successfully develop circular business models, their revenue must be decoupled from production and resource use. Currently, while they have great potential, these business models do not always achieve this decoupling and the environmental benefits that come with it." — Ellen MacArthur Foundation

Regardless of whether a brand has opted for a peer-to-peer or centralised resale model, customers usually get store credit for the items they trade in. The brand can choose whether to allow the store credit to be used for only new purchases, or both new and secondhand items.

"The Burberry fan who sells a used handbag so they can afford to buy a new one might not be reducing fashion's footprint as much as it first appears." — Sarah Kent, Business of Fashion

That brings us to the final question.

3. How many of your products are actually resold?

We have looked at some of the factors that determine the climate impact of each individual resale transaction — the unit economics, if you will. The overall impact of a brand’s resale programme is a function of that, and how many of its products are actually resold.

Large brands have the reach and influence to see a significant impact from a resale programme that extends product life and contributes to revenue growth without increasing production. They should make the most of it. For brands and retailers that already offer some form of take-back programme, the single greatest barrier to its adoption — experienced by 63% of customers — is lack of awareness that it exists.

Incentivising customers to trade in items for credit they can only use for new purchases is not a circular business model: while each resale transaction may extend the life of the product, it still contributes to a new, linear sale and the environmental footprint associated with producing a new item. Some fast fashion brands have faced criticism for introducing this form of resale as an environmental initiative. By offering customers credit for either a new or secondhand item, brands can build a revenue stream that has the potential to grow without increasing production.

"The ability of a brand to sustain and engage in a secondary market reinforces a desirable aura of craftsmanship, durability and sustainability." — McKinsey & Co.

This is a missed opportunity. Since we are still in the early days of the transition to circular fashion, introducing a well-crafted, impactful resale programme allows brands to differentiate in a way that resonates with the 80% of Millennial and Gen-Z consumers that consider social impact and sustainability important to their purchase decisions. Getting resale right gives consumers confidence in the quality, inherent value and sustainability of a brand’s products: 46% of customers who only buy new products say they are likely to buy more from a brand that also sells secondhand.

The big picture

With no further action taken, the fashion industry is expected to produce 2.7 billion tonnes CO₂e emissions by 2030. We need to cut this to 1.1 tonnes CO₂e to meet the commitment to limit global temperature increases to 1.5°C.

Let’s be clear: the greatest lever available for achieving that goal is decarbonising upstream operations. For example, improving the efficiency of material processing and switching to renewable energy to power these production stages has the potential to save 703 million tonnes of emissions.

As for resale, we need to reach the point where 1 in 5 garments are traded through circular business models by 2030, reducing emissions by 143 million tonnes CO₂e. Though less than the potential gains from decarbonising manufacturing processes, increasing the market share of circular business models promises a significant impact in decarbonising the fashion industry.

"As demand grows, brands will need to implement circular business models in collaboration with retailers and upstream value chain players or risk losing both control of their products and the additional value they hold after sale." — McKinsey & Co., Global Fashion Agenda

What’s promising is that resale adoption has the weight of consumer demand behind it. Across all age groups surveyed, 42% of consumers plan to spend more on secondhand clothing over the next 5 years (compared to 26% who plan to spend more on new clothing marketed as “sustainable”) and these numbers are significantly higher for Millennial and Gen-Z consumers. As a result, resale is growing 11x faster than broader fashion retail, regardless of whether brands like it or not.

And what’s more, emissions are highly sensitive to circular business model adoption. Every 1% increase in the market share of circular models (such as resale) reduces GHG emissions by 13 million tonnes CO₂e — more than the annual greenhouse gas emissions of Estonia.

"We also realize that resale is going to grow whether we like it or not. So we want to play an active role in shaping it, and defining our own place within it." — Grégory Boutté, Chief Digital Officer, Kering Group

Brands are in a unique position to leverage their existing reach to offer resale in a format that extends product life, decouples revenue growth from production, and reduces their impact on the planet. Building a resale programme into a brand’s identity is also an opportunity to win over the next generation of consumers and deepen relationships with their existing customers.

We just need to get the details right.

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