Customer experience
What is the impact of the second-hand market on brands?

What is the impact of the second-hand market on brands?

What is the impact of the second-hand market on brands?

The second-hand market has gained significant momentum in recent years. Whether driven by economic conditions or environmental concerns, both consumers and brands are increasingly embracing it.

While second-hand has long been present through thrift stores, flea markets, and garage sales, it has now emerged online through peer-to-peer websites and marketplaces, quickly finding a strong demand. For example, Leboncoin achieved a record turnover in 2020 (+10%) and is the second most visited website in France, while Vinted is valued at over 1 billion euros, and Vestiaire Collective recently secured a funding round of 178 million euros.

Following this trend, brands have gradually started offering second-hand options as a service. Kiabi Seconde Main, Maje, Bash, Ikea, Le Petit Bateau, and Cultura are just a few examples.

The linear economy is shifting towards a circular economy, impacting various sectors. This transition is evident in fashion and furniture, as well as in the high-tech and cultural product industries.

In this article, we will provide an overview of the second-hand market, its impact on e-commerce, and how gift cards have become a central tool in this process.

The figures of the second-hand market

The global second-hand fashion market was estimated to be $177 billion in 2022 and is projected to double within the next 5 years, reaching $350 billion.

In France, in 2021, the second-hand fashion and luxury market alone reached €7 billion.

All indicators are positive, with double-digit growth observed globally, in Europe, and in France. For instance, in the fashion industry, sales in France have surged by 140% from 2019 to 2021.

Consumer enthusiasm for second-hand products continues to strengthen each year. Today, 80% of online shoppers have purchased refurbished or second-hand items and have themselves sold used products. Specifically, 71% of French consumers have purchased second-hand cultural products, and 51% have purchased used phones. In the case of used cars, a market that is already well-established, 4 out of 5 French people have made a purchase.

So, what is driving this growing trend? Price, of course, but also the reduced environmental impact (-80%), which is increasingly concerning consumers, particularly following various scandals involving different brands in recent years.

The interests of brands in the second-hand market

In response to consumer expectations, brands are increasingly embracing second-hand services, and for good reason. Today, the second-hand service allows brands to regain control over products that consumers no longer want.

By entering a virtuous cycle of selling new garments and then recovering and reselling used clothing at affordable prices, brands can increase their profit margin per product by nearly 40%.

This new service also serves as a new customer acquisition channel, as 60% of second-hand buyers are either new customers or reactivated customers. Customer acquisition and increased profit margins are two factors that tip the scale in favor of brands embracing the second-hand market.

The second-hand service launched by brands

Now, if we delve into the details of the second-hand services created by brands, what are the steps involved? What is the process?

The fundamental principle is based on consumers returning their garments, which the brands then resell on their website or in a dedicated space in-store. In exchange, consumers receive compensation through a specific means.

However, certain elements may vary depending on the brand.

For example, Kiabi Seconde Main offers different options. You can either send your garments via Kiabi Collect and receive a store credit, or you can resell your garments yourself on the dedicated website. The seller’s store credit increases when exchanged, and the buyer also receives a €2 store credit per purchase. Importantly, garments from all brands are accepted.

On the other hand, Hugo Boss Preloved only accepts garments from its own brand. Consumer-sellers send their garments to Hugo Boss, where the team takes care of cleaning, repairing, and reselling them. The consumer-seller receives a store credit to be used on the brand’s website for purchasing new products.

Zara, with its Pre-owned platform, takes things a step further. It follows the same principle as Hugo Boss, except that if a returned garment cannot be sold, the brand donates it to an association. The virtuous cycle continues.

However, Cdiscount has a unique model. With Cdiscount Occasion, consumer-sellers take care of reselling their used products themselves. The monetary value of the products sold on the platform is accumulated in an electronic wallet. The e-commerce platform charges a 5% commission on each product sold, along with a service fee of 7 cents.

Examples of brands using gift cards in the second-hand market

We mentioned the compensation offered to consumers who return their used products to the brand. Among the various available options, the digital gift card is widely preferred by both brands and consumers due to its speed and convenience.

Some of the biggest brands are already utilizing it.

Fnac’s Second Hand Market

Fnac offers its customers the option to resell their old high-tech products either in-store or online. After verification, the brand provides customers with compensation in the form of gift cards to be spent at their retail locations. This provides an opportunity for customers to easily purchase the latest high-tech products.

But Fnac goes beyond that by furthering its strategy and creating limited-time offers. The principle is simple: if a customer purchases a specific product, the brand adds to the compensation, still in the form of gift cards. For example, if a customer returns their old camera and purchases a Panasonic Lumix S5 MII, they will receive an additional €300 bonus along with the compensation for the returned camera.

Cultura’s Second Hand Market

Cultura has implemented kiosks for second-hand products in all of its stores, where customers can purchase used books, games, puzzles, sheet music, and vinyl records.

Cultura has established a semi-automated process for time-saving purposes. Customers independently log into their accounts, scan their products for a value estimate, and then validate to generate a unique code to present in-store.

When customers arrive at the store, all the information is already available to the salesperson who receives the used product. Once the final verification step is completed, the customer automatically receives an email with a digital gift card for the agreed-upon trade-in value. The gift card can be used at Cultura’s retail locations to purchase new cultural products.

Boulanger’s Second Hand Market

Boulanger has also launched a program for buying used products. The currently covered products include smartphones, tablets, Macbooks, game consoles, washing machines, and food processors, whether they are from Boulanger or not.

The principle is straightforward. The consumer brings in their product, and the Boulanger team provides an estimation. If the product is viable, compensation is provided in the form of Boulanger gift cards. Customers can then access the brand’s entire range of offers using this gift card.

The returned products will be refurbished for sale, either in-store or online. If the products are no longer usable, Boulanger takes care of placing them in its Big Collecte program, which was established four years ago to recycle components from household appliances and high-tech devices.

Overall, it’s a well-thought-out circular economy approach from start to finish.

Why is the gift card an ideal tool for the second-hand market?

Many brands venturing into the second-hand market choose to use the digital gift card as a compensation tool, as it is appreciated by both consumers and the brand alike.

Consumer Appreciation

The gift card is appreciated by consumers because it is simple to use, flexible, and transparent. The amount of compensation is clearly displayed on the gift card. Consumers hold a balance on this card that can be spent at any of the brand’s retail locations.

The amount is divisible, giving customers the option to use it as they wish. They can spend it all at once or in multiple transactions. They always know the remaining balance available on the card.

Furthermore, consumers are familiar with how to use gift cards. The majority have already received a gift card as a present from someone. Even without prior experience, using the gift card remains straightforward. A code or barcode is associated with the gift card for easy redemption.

Lastly, it provides immediate value. The digital gift card can be created within minutes. Once the returned item is validated, the customer receives their compensation almost immediately. They can also choose to spend their compensation within minutes if they desire.

A strategic tool for brands

The gift card is part of the brand’s currency, meaning it belongs exclusively to the brand and can only be spent within the brand’s ecosystem. It is equivalent to a bank card but dedicated to the brand.

In the context of the second-hand market, the gift card proves to be highly relevant. By fostering a virtuous cycle both ecologically and financially, it encourages customers who have returned products to reinvest their compensation within the brand by purchasing new products. Thus, the gift card creates a positive synergy where customers contribute to maintaining the brand’s economic balance while actively participating in environmental preservation.

The brand also has control over several parameters, such as the card’s expiration date and the products on which it can be spent. This flexibility allows for strategic thinking and potential strategy adjustments.

From a technical and financial perspective, the digital gift card is simple and quick to generate, and cost-effective as there is no need for printing and delivery processes.

Lastly, the gift card is a valuable source of information. The card is directly linked to its holder, allowing the brand to track how, when, and where it is spent. This provides valuable insights for maintaining a personalized relationship with customers.

Second-hand services are multiplying, giving consumers various options for returning their used devices. This raises the question of competition: which brand offering to repurchase the same type of products should consumers choose? Several factors come into play, such as the compensation tool and the compensation itself. Ease and immediacy are also key criteria. The digital gift card is now a compensation tool that addresses all of these aspects, providing a competitive advantage.

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