Does peer-to-peer resale make sense for Urban Outfitters?

Discussion
Source: nuuly.com
Aug 31, 2021

Taking on popular marketplaces such as Poshmark, Thredup and Depop, Urban Outfitters (URBN) plans to launch a peer-to-peer secondhand marketplace, Nuuly Thrift, this fall. URBN will carry pre-owned men’s, women’s and kids’ apparel and accessories from any brand for purchase starting on its iOS app.

Nuuly Thrift will become a sister brand of Nuuly Rent, URBN’s subscription rental service for women’s apparel launched in 2019. Richard Hayne, CEO, told analysts last week on its second-quarter conference call, “Both Nuuly platforms, Thrift and Rent, will support its mission to be a curated destination for anyone who loves fashion and is exploring how to wear, buy and sell it in ways that are gentler on the planet and on their wallets.”

Like many other retailers, URBN is seeking to capitalize on the fast growth of recommerce. ThredUp’s 2021 Resale Report projected the $36 billion secondhand market would double in the next five years, reaching $77 billion, led by younger generations.

URBN found that three-quarters of its shoppers have made secondhand purchases in the past year and nearly half have resold items. URBN’s brands, which also includes Anthropologie, Free People, BHLDN and Terrain, consistently perform strongly on secondhand marketplaces.

Other retailers, however, have taken different approaches to resale. Macy’s and Madewell have partnered with Thredup in setting up their platforms. Levi’s, Patagonia and Lululemon only accept their own brands in their programs, that also include repurposing and repairing product.

Creating a peer-to-peer marketplace heightens the cannibalization risks around the sale of new merchandise. Nuuly Thrift counters that in part by incentivizing sales across its businesses. Sellers are given the option of receiving their payout directly into their bank account or choosing “Nuuly Cash,” earning a 10 percent credit on purchases at any of URBN’s businesses. Mr. Hayne told analysts, “This should create a cycle of buying and selling within the URBN ecosystem while also creating value for the customer.”

URBN also expects to benefit from its internal logistics and software platform, already built to support Nuuly Rent, as well as a tighter focus on curation versus other resale sites.

DISCUSSION QUESTIONS: Do you see a big sales opportunity for Urban Outfitters and other retailers in establishing peer-to-peer resale marketplaces? What do you think of the risks of cannibalization?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Much like brick-and-mortar creates a halo effect of increased online sales, resale's halo effect will be increased lifetime customer value and net revenue."
"For Urban Outfitters, if the products are restricted to their own brands I am not sure how compelled people will feel to buy and sell."
"The transition for many, including Urban, will undoubtedly be arduous and probably not profitable at first — especially if you’re going it alone."

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12 Comments on "Does peer-to-peer resale make sense for Urban Outfitters?"


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Bob Phibbs
BrainTrust

So much money chasing such a niche of a niche market. I just don’t see how they all survive without very deep pockets until one platform reigns. And exactly where does the profit lie? Much less sustainability, with all the packaging back and forth – it doesn’t seem socially all that sustainable.

Neil Saunders
BrainTrust

There is a very solid sales opportunity for Urban Outfitters in the resale part of the market. However peer-to-peer sites do carry risks in that they are reliant on the honesty and integrity of their members. They also require more effort from sellers who have to manage the listings and fulfillment of orders. That’s a double edged sword. On the plus side it reduces complexity for Urban Outfitters and it can create a very strong social dimension to the site. On the negative side, Urban Outfitters has less control over the process but has its brand fully exposed if things go wrong.

David Naumann
BrainTrust

Recommerce continues to be a shining star segment of retail. The combination of great values and sustainable shopping is appealing to many consumers. Since Nuuly Thrift includes all brands of clothing and consumers receive an extra 10 percent if they use their credit on items sold to purchase items from one of URBN’s brands, there shouldn’t be much cannibalization.

DeAnn Campbell
BrainTrust

While I don’t see this generating significant revenue, this is a strong branding move that will pay off by strengthening overall loyalty and overall sales with their Gen Z base. Resale is shaping up to be an important sales support system. Much like brick-and-mortar creates a halo effect of increased online sales, resale’s halo effect will be increased lifetime customer value and net revenue.

Lee Peterson
BrainTrust

There is no doubt that the resale market potential is huge — by some estimates, only 5 percent is tapped currently. Having said that, the execution of a resale business is SO different (opposite?) of what retailers have been employing for centuries. The transition for many, including Urban, will undoubtedly be arduous and probably not profitable at first — especially if you’re going it alone. My guess is that after an early “attempt” period, most will find out that partnering with someone who’s set up for resales will be the way to go. Just like with delivery, it’s such a different business model, it will be more cost effective and profitable to pair up with a pro.

Melissa Minkow
BrainTrust

Resale is a smart movement to invest time and effort in as a retailer. Gen Z prioritizes sustainability when making purchase decisions, and so many other big brands (Nike, Lululemon) are entering the resale world. The idea that resale would cannibalize existing business is an outdated concern, much like thinking that online would cannibalize offline – consumers are going to shop where and how they want, so you might as well make as many avenues as possible available to them to remain in the consideration set.

It would much better serve URBN to partner with an established resale platform because it will be very challenging to drive shoppers to a separate site, apart from the Urban brands for Urban brand items. I would advise all brands to leave resale heavy lifting to the retailers whose sole operation is resale since they already have perfected the key details and have the brand awareness when consumers start thinking about thrifting.

Bob Amster
BrainTrust

I see moderate opportunity in the resale segment. It appears that the Nuuly Thrift model will address the cannibalization issue. This will pose a bit of a challenge to, albeit not enough to be a replacement for, the established thrift businesses such as Goodwill, Salvation Army, Savers/Value Village, Red White and Blue, and America’s Thrift Store.

Suresh Chaganti
BrainTrust

A peer-to-peer resale platform helps when the underlying product is at a luxury level, where buying a new one is prohibitively expensive and the item is long-lasting. Logically this lends itself well to brands like Chanel, Fendi, and a bit lower at Ralph Lauren, etc. These brands also have entry-level products to the top of the line running from a few hundred dollars to thousands of dollars per piece. Above all, such brands have brand equity that people feel is aspirational and want to trade up, resell, etc.

For Urban Outfitters, if the products are restricted to their own brands I am not sure how compelled people will feel to buy and sell. Obviously there will be a market but, at its price point, it isn’t aspirational. We will have to wait and see.

Gary Sankary
BrainTrust

A peer-to-peer marketplace, open to any brand? I’m not sure about the benefits for Urban Outfitters. How exactly is this on brand for them? How does this not just get lost in the plethora of other peer-to-peer resale sites out there? Unless they can figure out a strategy that extends the Urban Outfitters brand experience and value prop, this will be a distraction with little benefit to the company.

Venky Ramesh
BrainTrust

Are recommerce initiatives resulting in the production of new apparel? If that’s not happening, it’s not really good for the planet to ship more back and forth. I think the industry needs to come together and see if combined they are making a net positive impact on the planet.

Raj B. Shroff
BrainTrust

I think it makes sense. As for a big sales opportunity, not sure how “big.” Although it’s open to all brands, my gut is lots of the supply will be URBN clothes. Their assortment fits well with the thrift audience, it’s cool and in aggregate, used URBN clothes would make for a fun treasure hunt. I don’t see a risk of cannibalization, I actually see it bringing in new audiences and exposure.

Craig Sundstrom
Guest

Maybe I’m missing something, but isn’t the whole point of “peer-to-peer” transactions to avoid a retailer? Mark my ballot “nil.”

wpDiscuz
Braintrust
"Much like brick-and-mortar creates a halo effect of increased online sales, resale's halo effect will be increased lifetime customer value and net revenue."
"For Urban Outfitters, if the products are restricted to their own brands I am not sure how compelled people will feel to buy and sell."
"The transition for many, including Urban, will undoubtedly be arduous and probably not profitable at first — especially if you’re going it alone."

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