Consumer, Business and Economic Trends Align to Drive New Interest in Recommerce

May 2024

Back in 2021, the recommerce industry seemed to have finally hit its stride, with the sector experiencing a surge in transactions, valuations and deal sizes. At the brink of becoming a major force in the retail and consumer goods landscape, high-profile disappointments and rising macroeconomic challenges put the sector in the background once more.

Now, there are several opportunities in recommerce driven by changes in consumer behavior, economic conditions, new regulations and technological advancements that could see the sector expanding five times faster than the overall retail market through 2025.

Summary

Early IPOs Cast Long Shadow

Recommerce firm Rent the Runway went public in 2021 but has been in a nearly constant state of decline, down 97% from its high at the time of issue. In the UK, musicMagpie also listed in 2021 and having lost 87% of its value in 2022, confirmed in November 2023 that it was exploring a possible sale. Another recommerce player, TheRealReal, went public in 2019, reached its high in 2021, and is down more than 85% overall.

As some of the highest profile deals ever completed in this space post-eBay, many investors have unfairly linked the prospects of these companies to that of recommerce overall. The post-pandemic normalization also did the sector no favors, as a shift from heightened online buying activity back to brick-and-mortar stores hit the sector hard. The growth of online consumer purchases has since stabilized.

Trends Driving Resurgence

Recommerce is now poised for a major rebound, with several market drivers rekindling interest in the sector.

Emphasis on Value: Economic pressures have sharpened consumers’ focus on value and affordability. Rising prices are pushing interest towards cheaper, reconditioned products, with 69% of sellers in the recommerce market saying that they are using the proceeds to pay bills.
Focus on Vintage: The trend to adopt classic older brands and styles goes in and out of fashion. It is now back, with second-hand fashion expected to grow a whopping 127% by 2026, surpassing $200 billion in sales globally, as a focus on frugality, environmental sensitivity and value has diminished the stigma once associated with these goods.
Saving the Planet: Environmental concerns also boost the appeal of recommerce, with consumers increasingly valuing environmental, social and governance (ESG) credentials and emphasizing re-use over purchase of new items.
Regulations are a Flat Circle: European Circular Economy Regulations are playing a critical role in promoting sustainable business practices. These regulations encourage recycling, reuse and refurbishment of existing products, all of which have already and will continue to augment recommerce growth across EU states. While there are no directly corresponding regulations in the U.S., the Biden administration has emphasized the need for a circular economy to enhance sustainability and resilience across various sectors.
Hyper-specific Secondhand Markets: Technology innovations that make it easy to build, market and manage dedicated online marketplaces focused on niche segments have made recommerce platforms more relevant and appealing.
Facilitators and Accelerators: There are now numerous players in this space that are facilitating recommerce transactions, like Watchfinder, which provides watch-authentication as a service, or Blancco, which wipes phones of personal data en masse for commercial re-sellers. There are also technology providers, like artificial intelligence (AI) startup Beni, accelerating the sector’s adoption by connecting new customers with online second-hand marketplaces.

B2C and B2B Brands Embrace Recommerce

Consumer drivers towards recommerce have led to 85% of all shoppers buying or selling second hand goods in the last year, with 27% of those doing so for the first time. Those numbers have led many business-to-consumer (B2C) brands to commit to the space in a big way. Many companies – such as Apple, REI and Trek – are using buy-back and refurbishing programs to demonstrate their environmental sensitivity, control secondary markets and maintain customer engagement.

While recommerce is often associated with consumer transactions, there is robust business-to-business (B2B) activity underpinning the sector. This includes companies like Gearflow, IronPlanet, Liquidity Services and US Mobile Phones which provide major cost savings to buyers, offer revenue to sellers and lower the environmental impact.

Helping a Market Reach its Full Potential

Looking ahead, the recommerce sector is set on a strong growth trajectory with a projected compound annual growth rate of 19.22% from 2023 through 2028.

With this expected growth, firms are seeing attractive margins and a broader array of products that new sellers are funneling into recommerce channels. Combined with surging private equity (PE) interest, these factors set the stage for the sector to take a bigger role in ecommerce overall.

As recommerce evolves, Lincoln International has the industry knowledge and advisory expertise to assist both buyers and sellers, helping PE firms scale across geographies and categories to create market-leading platforms within this niche.

Contact a professional below to learn how we can help take your business to its next success.

Contributors

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David Houser

Managing Director

Chicago

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