The rise of recommerce

What is happening?

Recommerce (which includes reselling, renting, refilling, repairing or reusing goods) is already an extremely valuable business model, estimated by Barclays to be worth almost £7bn in the UK alone and expected by Visa to increase to £82bn by 2030. This growth – particularly in respect of resale – is widely regarded as being driven by Gen Z consumers, over two thirds of whom now prefer to buy second-hand over new goods, in part, due to sustainability concerns.

Why does it matter?

Of course, recommerce as a concept is not new. But driven by the adoption of recommerce business models by luxury retailers such as Selfridges, the increase in number of specialist rental or resale platforms such as Poshmark and Vestiaire Collective, and the shift in focus to luxury goods, these business models seem to be going from strength to strength. 

There are many benefits to recommerce including, sustainability (a particular focus for Gen Z, with 82% expressing concerns about the state of the planet), appealing to new consumers and creating increased demand for new goods, on the basis that they may be considered an “investment”, which can generate income through rental or resale. As such, certain luxury brands, such as Gucci, Rolex and Burberry have embraced recommerce and partnered with existing resale platforms or created their own curated platforms. Retailers such as Selfridges and brands including Mulberry also offer a repair service, which helps to increase the lifespan of products and encourages brand loyalty.

However, other luxury brands are understandably concerned by the risks involved with recommerce, including in relation to the authenticity of goods, parallel imports (also known as "grey goods", where goods put on the market in one territory are later put on the market in another territory without the brand owner's consent) and potential brand damage.

In particular, Chanel has been involved in various high-profile disputes in recent months, against reseller platforms The RealReal and What Goes Around Comes Around (WGACA). Chanel's main complaints in these cases were that these platforms have been selling counterfeit and/or grey goods and misusing their brand by falsely claiming to sell genuine Chanel goods. In response, The RealReal has accused Chanel of "anti-competitive conduct" for trying to stop the second-hand sale of its products. While Chanel recently won its claim against WGACA, the dispute with The RealReal continues and looks set to be hard fought by both sides.

What action should you consider?

While these cases are US cases, so not directly applicable to the UK, it's interesting to see the approach taken by different brands to recommerce, and also how the courts are starting to grapple with these issues. As these business models increase in popularity and value, we expect there to be more disputes of this kind in the future. In the meantime, retailers, platforms and brands adopting recommerce models should be alive to:

• the importance of implementing processes to authenticate goods and monitor legitimate distribution channels
• the benefit of using contracts to govern key issues such as liability (eg for damage to goods being repaired or the late return of rental goods) and restrictions around the use of brands' IPRs by the retailer/platform and the extent of such use, to provide greater certainty and clear remedies in the event of a breach by either party
• committing to continuous monitoring, so that prompt action can be taken in the event that any issues arise (whether that's brands objecting to the treatment of their brand or goods, or retailers/platforms taking action to prevent inadvertent infringement).

Going forward, it will be interesting to see how consumer laws and regulations will develop in response to the increased popularity and adoption of recommerce models.

Explore Retail Compass Spring 2024