Published November 12, 2021
As secondhand clothing sales surge to all-time highs, new research from the School of Management has identified which resale strategy is best for the environment — and the bottom line.
Driven by a desire to live sustainably, more consumers are purchasing used clothing, pushing big names like REI, Levi’s and Lululemon to open resale brands. In turn, the U.S. apparel resale market is projected to exceed $50 billion in revenue by 2023, according to ThredUp, an online consignment retailer that went public last spring.
“Apparel companies once viewed used products as competition to their newest styles, but today many brands are looking for ways to resell preowned clothing and capture these customers,” says lead author Aditya Vedantam, assistant professor of operations management and strategy. “With the trend toward a circular economy, retailers need to adopt a resale strategy that will maximize profits and minimize their climate impact.”
Vedantam’s study, available online ahead of publication in Production and Operations Management, is the first to quantify the profitability and environmental impact of different apparel resale models.
The researchers looked at two popular strategies: In a peer-to-peer (P2P) marketplace, used by the H&M-owned COS brand, the company takes a commission as customers sell and ship items directly to one another on the brand’s website. Meanwhile, in the trade-in model Patagonia uses, customers trade in old clothing for a discount on new merchandise, while the company resells their used threads to other customers.
“Encouraging reuse seems like an eco-friendly move, but advocacy groups accuse some apparel firms of ‘greenwashing,’ or misrepresenting their impact,” Vedantam says. “For example, trade-in deals can incentivize customers to buy more and actually increase overall consumption. With this research, we wanted to help companies align their business and climate goals.”
To quantify the impact of these competing strategies, the researchers turned to game theory, a scientific way to model real-world decision-making between competing players — in this case, companies and customers — based on a series of interactions or conditions. In addition to profitability, they evaluated a product’s environmental impact across its life cycle, including production, use, resale and disposal.
Their findings showed the trade-in model is a win-win for planet and profit with highly durable products, like jeans, suits and items from brands known for quality, like Patagonia. With this strategy, companies set higher prices for quality pieces, thus increasing revenue. Environmentally, the trade-in model is ideal when a piece’s impact mainly comes from regular use and washing, as is the case with many durable products.
Conversely, the P2P strategy keeps costs low, helping to boost profits. The model is a win-win for pieces with moderate to low durability, where the bulk of their carbon footprint comes from production — making it a smart move for brands like H&M.
“Waste in the fashion industry is a growing problem, as millions of pounds of textiles end up in landfills each year,” Vedantam says. “Our findings provide a road map for brands to evaluate their resale business — and for consumers to verify the claims they make.”
Vedantam’s co-authors are Emre M. Demirezen, assistant professor of information systems and operations management at the University of Florida’s Warrington College of Business, and Subodha Kumar, the Paul R. Anderson Distinguished Professor of Marketing and Supply Chain Management at Temple University’s Fox School of Business.