We’re here to help brands get the most out of resale. Implementing a successful resale program takes planning and coordination.

We like to break a resale program into four parts — peer-to-peer marketplace, returns, buy-back, and side-by-side. Which parts we recommend implementing varies based on each brand’s goals and available resources. What’s always important though is that the brand understands the benefits and costs of each part, and how the parts fit together to maximize the benefit of the overall program.

We decided to share our methodology in order to help educate brands who might be considering resale, but also to spark a conversation with others who are working in this space. Branded resale is still relatively new. We all benefit from an open conversation about what works (and what doesn’t). We welcome your feedback and questions.

Part 1: Peer-To-Peer Marketplace

A peer-to-peer (P2P) marketplace allows individuals to buy and sell a brand’s products secondhand within a marketplace operated by the brand itself (that’s important to differentiate it from general marketplaces like eBay or Poshmark). The brand’s P2P marketplace is almost always a standalone site that sits outside of the brand’s primary e-commerce store but that can be accessed from the e-commerce store through links.

How does it fit into the resale program?

A P2P marketplace forms the foundation of a branded resale program. By starting with a resale marketplace, brands establish a channel through which other parts of the program can flow. Without this marketplace, it becomes difficult to develop a clear destination for the secondhand products.

What are it’s benefits?

Starting with a P2P marketplace is key. Doing so avoids complex logistical issues associated with handling inventory and fulfilling orders that can quickly sap enthusiasm away from the project. Products stay with sellers until they are sold, at which point the sellers are responsible for shipping the products to the buyers. This approach keeps things simple.

Also, a P2P marketplace generates new revenue quickly. Brands earn a fee from sellers whenever an item is sold through the marketplace. In addition, sellers can choose to redeem their marketplace proceeds in the form of a gift card that can be used to purchase new products from the brand. In that situation, the brand benefits from any overspending that takes place ($60 on average), and they will receive the seller’s account balance that went towards redeeming the gift card.

Lastly, as we’ll discuss below, a marketplace provides a channel through which to sell returns that would have otherwise been liquidated or discarded.

There is also a marketing benefit to starting with a P2P marketplace. The act of launching a marketplace is highly visible. Doing so communicates the brand’s commitment to sustainability and gives the brand’s customers a reason to engage with the brand for a reason other than buying new products. It is this communication that draws new customers to the brand, and helps to start a virtuous cycle of shoppers participating in the brand’s resale program.

Finally, a P2P marketplace is the quickest and least expensive part of the program to set up…when done with a partner. When a brand chooses to work with a partner, a P2P marketplace can be put in place in days and with little investment (particularly when the partner is integrated with the brand’s e-commerce platform).

What are it’s challenges?

If a brand wants to manage its own P2P marketplace, the challenges are many. Marketplace operators are required to comply with a myriad of regulations, including verifying the identities of sellers (known as “know your customer”), collecting and submitting sales taxes, making timely state and federal filings, processing payments and payouts (and handling the various PCI and banking regulations associated with those functions), and facilitating shipping. There is also the matter of handling customer support and making sure that all of the data from the marketplace is easily available to the support team. All of these challenges can be overcome, of course, with enough time and money.

If a brand chooses to work with a partner though, the challenges are far fewer. The primary challenges have to do with the design of the marketplace, reviewing the marketplace before launch, and planning customer messaging. The partner (should) handle every aspect of managing the marketplace, and do so for far less than it would cost the brand to do alone.

Part 2: Returns

Returns are a challenge for all brands, but particularly for online brands. The race to compete with large e-commerce players has resulted in free shipping and lax return policies. This combination has created an environment that fosters unsustainable shopping behaviors, such as shoppers buying multiple sizes of the same product only to return everything that doesn’t fit.

As a result, returns have become a thorny issue for brands. On the one hand, the losses associated with returns are huge! On the other, tightening return policies is likely to risk agitating customers, which in today’s social media world, could result in damage to a brand’s reputation. Thankfully, resale can help turn this problem into an advantage.

How does it fit into the resale program?

Brands hesitate to sell returns as new because it’s expensive to figure out if a returned products is suitable to be sold as new, and because they worry about their reputation. However, returns can be safely sold as secondhand through a resale marketplace.

What are it’s benefits?

Selling returns as secondhand will earn the brand far more than it would from liquidating them (or worse, destroying or discarding them). Separating the resale marketplace from the primary e-commerce store also helps brands separate full-priced items from discounted ones, which offers the added benefit of avoiding discounts on new products. Price-sensitive shoppers might seize on the opportunity to buy nearly new products at a discount through a resale marketplace resulting in a new customers that may have otherwise shied away from making a purchase.

Returns also provide a constant stream of listings for the resale marketplace, which is a crucial part of maintaining a successful marketplace. Shoppers are looking for deals, but they are also looking for the thrill of the hunt. Channeling returns into the resale marketplace ensures that shoppers always have something new to browse.

Finally, since the workflow for processing returns is already in place, diverting those returns to a resale marketplace doesn’t require too much effort, especially if the brand’s resale platform is integrated with it’s e-commerce platform. Through this integration, the listing process can be largely automated. The only part that remains is the fulfillment of the orders.

What are it’s challenges?

Selling returns requires a moderate investment. While technology can automate the listing process, the brand will need to assign someone to fulfill incoming orders in a timely manner. Also, the listed inventory will need to be warehoused until it is sold, which adds some complexity. When logistics start to play a role, costs tend to go up and execution tends to get more challenging. However, in the case of listing returns in a resale marketplace, those challenges are simpler to overcome.

Part 3: Buy-Back

Buy-back refers to a brand buying back used products from customers in exchange for store credit. The goal of this program is to prevent those products from ending up in landfills while also giving customers an incentive to buy something new.

How does it fit into the resale program?

The tricky part of offering a buy-back program is figuring out what to do with the items that were bought back. Depending on the condition of the item and what it’s made of, the product might be recyclable or it might have to be discarded. However, if the product is still usable, it could be resold through the brands resale marketplace rather than being liquidated.

What are it’s benefits?

A buy-back program generates inventory for the resale marketplace, though it might do so less often when taking the condition of the bought back items’ condition. It also generates new revenue when customers use their gift cards along with the overspend that we mentioned earlier. Lastly, it continues to demonstrate a brand’s commitment to sustainability, and in particular, to managing the end of life of their products. This last point is particularly important because buy-back programs often take place in stores, which substantially raises the visibility of the resale program overall.

What are it’s challenges?

Managing buy-back programs requires a significant investment of time and money. If conducted through physical locations, store associates will need to be trained on how to evaluate the condition of the item and issue the appropriate amount of credit to the seller. Regardless of where the program is offered, brands will need to determine where to aggregate the products so that they can be sorted, graded, and listed, if appropriate. Lastly, there is some research suggesting that shoppers have mixed feelings about buy-back programs. Though it is still early, and there are several examples of successful programs, these concerns need to be addressed when designing a buy-back program.

Part 4: Side-By-Side

The fourth and final part of a resale program is what we call “side-by-side.” The idea is simple. Data about available secondhand products is displayed alongside the pricing for new products on the brand’s e-commerce store. The goal is to highlight secondhand options to shoppers while they are shopping for new products. You’ve probably seen this option when shopping on Amazon.

How does it fit into the resale program?

The side-by-side approach feeds resale data into the brand’s e-commerce store so shoppers can see that a secondhand option exists. By doing so, the brand is tightly integrating the new sales side of its business with the resale side. Displaying the data in this way drives more traffic to the resale marketplace and lifts its status to equal that of new product sales.

What are it’s benefits?

There is no clearer show of commitment to sustainability and accountability than highlighting secondhand products alongside new sales. Doing so communicates that the brand stands behind the quality and longevity of its products, and that it considers secondhand sales to be as important as new sales. Giving secondhand products this level of visibility will also maximize the financial benefits of the brand’s resale program as a whole — it completes the circularity of the resale program itself to the greatest degree possible.

What are it’s challenges?

The side-by-side part of a resale program is also the most complicated and expensive to implement. It requires an integration between the brand’s e-commerce platform and its resale platform to ensure that data is flowing smoothly and in real time between the two platforms. It also requires updating the brand’s e-commerce store to display the data and to provide shoppers with a seamless shopping experience. The investment of time and money can be substantial depending on the sophistication of the brand and the resources it has available for this project.

In Conclusion

Successful resale programs can take many forms. The beauty of the approach that we outlined in this article is that it provides each brand the flexibility to define its long-term goals and chart a path to achieving those goals over time. In the end, what matters most is for the brand to recognize the strategic importance of putting a resale program in place and to make it a priority.