As the fashion industry grapples with a significant spike in online returns, innovative software platforms are emerging to transform this challenge into a profitable growth opportunity. These platforms specialize in helping brands resell slightly damaged or returned goods that would otherwise be unofficially categorized as unsellable.
The apparel sector naturally experiences one of the highest return rates among industries, with a staggering 26 percent of items returned to retailers. According to Loop Returns, 18 percent of all online orders in the US were returned last year—up from 17 percent in 2022. Such statistics highlight a pressing need for viable strategies to combat the financial burden of high return rates.
Recent startups are addressing this issue head-on by creating marketplaces that cater specifically to fashion brands. Notably, Bazar, a startup launched in 2023, offers a dedicated platform where brands can list items unfit for restocking. Bazar works closely with fast fashion retailers, such as Cider, known for generating a considerable amount of waste. Another player, Revive, assists brands like Michael Kors in refurbishing their returned products and reselling them either through the brands’ own platforms or third-party marketplaces like Poshmark and eBay.
While established retailers are introducing return fees to manage their losses, companies like Bazar and Revive allow brands to enhance their profitability amidst the return chaos. By focusing exclusively on fashion products, these startups refine their services compared to broader platforms that deal with various categories across e-commerce.
Despite their recent emergence, Bazar and Revive showcase promising growth metrics. Bazar has surpassed $1 million in revenue and plans to triple its earnings year-over-year in 2024. Meanwhile, Revive anticipates reaching revenues over $3 million this year and expects to increase the volume of refurbished goods by 25 times from January.
Critics, however, question how sustainable this model can be in the long run. Established platforms like Trove and Archive also offer resale and returns refurbishing as part of their broader service packages. This makes it uncertain whether these newer startups can maintain their competitive edge.
But, the ambition remains high. Revive’s CEO, Allison Lee, projects that the company will achieve $100 million in revenue by 2029. Addressing sustainability alongside profitability, experts like Scot Case from the National Retail Federation tell us that “better solutions will focus on making it incredibly cost-effective and convenient for both the retailers and the consumers.”
Solving the Inventory Problem
The current landscape demands that brands not only embrace innovative solutions to reduce returns but also capitalize on them. Reselling returned items can create a new revenue stream, turning a potential loss into a profit generator.
Returns often arrive with minor imperfections—everything from slight wear and tear to lingering scents from previous owners. Most warehouses employ staff trained for efficient logistics, not for assessing resale potential. Enter Bazar and Revive. Bazar collects returned products and integrates them with a network of warehouse partners to analyze the returns and list them for resale. This approach targets affordable fashion goods, allowing brands to cut losses they would otherwise face with unsold items.
Revive, however, operates on a slightly different model. By focusing on deriving value from higher-priced items, Revive commits to restoring returns to their original conditions within three weeks, subsequently driving sales at full price on various platforms.
While the environmental benefits are appealing, brands are primarily motivated by improved financial outcomes. Revive’s partners reportedly experience as much as a tenfold return on their investments in refurbishment services.
Burnishing a New Growth Machine
The marketplace for supporting resale is broadening. As Millennial and Gen-Z consumers grow more receptive to purchasing pre-worn products, there lies significant potential for brands to attract these price-sensitive shoppers. According to GlobalData, the online resale market is expected to grow annually by approximately 21 percent over the next five years.
Ryan Rowe, co-founder of Archive, confirms the lucrative nature of resale, revealing that some partner brands aspire to have resale revenues represent as much as 20 percent of their total sales.
Yet, to realize these ambitious growth targets, brands must prioritize returns management. For instance, Faherty, a Californian apparel company, is working with Archive to increase the staffing in its warehouse, aiming to escalate the resale share to 5 percent of its overall sales from just 1 percent.
Still, these platforms have not yet established themselves as major revenue channels for all their partners. Companies like Halara leverage marketplaces like Bazar primarily to achieve sustainability goals rather than for significant sales boosts.
In summary, fashion brands and emerging marketplace solutions are on a path to reshape the narrative around online returns. Recognizing the economic potential behind unwanted stock can convert challenges into lucrative opportunities.
This is just the beginning of an expansive trend in retail. As brands and innovators continue to explore ways to tackle the high volume of returns, transforming these lost causes into profit-generating ventures appears to be a win-win for both the environment and the bottom line.
