From VCs to recommerce startups: let’s add some markers

by MMC
0 comment

Recommerce is a concept as old as the trade itself. Everyone knows about thrifting or has purchased something second-hand – it’s not a new concept. Yet today it has become one of the hottest topics for consumers, brands and investors, with a record ~$6 billion in venture capital funding flooding into recommerce businesses in 2021 and the the market is expected to reach over $250 billion by 2027. This represents growth 5 times faster than the overall retail market.

Why this sudden resurgence of recommerce?

This is largely due to the changing cultural and societal value placed on sustainability. We waste a lot of… everything. In the apparel and textile industry alone, billions of dollars worth of products are destroyed, thrown away or stored every year because brands overproduced or the item didn’t sell. Industry analysts estimate that The global fashion industry contributes up to 10% of all greenhouse gas emissions each year.. We can do better.

To understand how, look at Gen Z’s deep, generational focus on ethical consumption. Generation Z has approximately $150 billion in spending power in the United States, including 40% of global consumers in the early 2020s. As Generation Z enters the workforce, they are beginning to use their growing spending power with value-aligned and sustainability-focused brands. This is clearly stated in a recent IBM survey where Gen Z indicated a willingness to pay an approximately 49% higher price for a basic, sustainably sourced and manufactured white cotton t-shirt.

Recommerce enters the boards of major brands

Historically, brands had low visibility on the second-hand market for their products. Without being able to measure the impact on revenue and bottom line, recommerce has never been at the forefront of boardroom discussions. However, the proliferation of successful third-party resale marketplaces like PoshMark, The RealReal, and StockX has generated hundreds of millions in revenue and valuations of over a billion.

With greater visibility into the resale economy, coupled with shifting consumer sentiments towards sustainability, recommerce has now become a priority. One of the most progressive consumer companies of our time, Patagonia, has publicly stated that it wants ~10% of turnover will come from resale in the years to comerepresenting >$100 million (based on annual turnover estimated at more than a billion dollars).

This makes sense if you think about what recommerce offers brands: the ability to sell the same item multiple times with costs solely related to repurchasing and logistics of the product. Since brands can control the price they pay for a good, this provides a compelling way to increase both revenue growth and profit margin at a low labor cost/ of production.

3 areas that attract venture capital investment

There are three main areas of recommerce that are driving venture capital firms: (1) managed marketplaces, (2) enabling tools and software, and (3) applying recommerce to new consumer-facing industries. We’ll explore them below, along with some food for thought for founders building startups in this (re)emerging space.


There are two main forms of recommerce marketplaces: (1) branded (e.g., StockX) or (2) white label where a startup manages the process for a brand (e.g. Trove). Recommerce companies manage the majority (or all) of the reselling experience, from receiving and authenticating products to merchandising and shipping. Platforms typically charge a small SaaS fee, but most revenue is generated through a take rate on products sold, ranging from 10% to 25%.

The type of market largely depends on the vertical. For example, branded markets are well positioned for consumer electronics given the high price and slowing pace of innovation of new phone models, which creates less cultural zeitgeist around purchasing the latest phone. It also comes with a high level of diligence and a complex logistical process for quality assurance, which is less attractive to existing device manufacturers who prefer to invest in R&D and marketing for the next version . This is one of the reasons why we are seeing consumer electronics recommerce marketplaces like those based in the US and Singapore. Reebelo (an investment made by our firm) and Back Market (valued at over $5 billion) take off.

It’s a different story in fashion. White label recommerce marketplaces allow brands to control second-hand supply, adding unique inventory that attracts new customers and purchases. There is also an important psychological element, with C2C markets having long suffered from the need to commodify trust (whereas established brands benefit from an implicit degree of consumer trust).

The way to do it:

You may also like

Leave a Comment

afriqaa (1)

The news website dedicated to showcasing Africa news is a valuable platform that offers a diverse and comprehensive look into the continent’s latest developments. Covering everything from politics and economics to culture and wildlife conservation

u00a92022 All Right Reserved. Designed and Developed by PenciDesign