Rise of RaaS (Resale-as-a-Service) Platforms
Resale Solutions for the Circular Economy
Introduction
Recommerce is growing rapidly worldwide, with resale in the apparel industry projected to reach $350 billion by 2028.1 This growth is being accelerated through the rise of Resale-as-a-Service (RaaS) solutions. By leveraging digital platforms, inventory management systems, data analytics and process automation, RaaS vendors are enabling brands to launch and scale resale programs more quickly and efficiently than could be done in the past.
The rise of RaaS represents a significant shift. Brands have spent decades creating and optimizing business ecosystems that support their primary sales—i.e. sales to their first customers. RaaS provides brands with a complementary ecosystem that serves second and third customers, extending the lifecycle of their products beyond the initial sale. This approach effectively creates a new ecosystem where buyers and sellers can exchange pre-owned goods. It complements and extends the traditional ecosystem brands have established for designing, manufacturing, and distributing new products. By the end of the decade, it is not unreasonable to expect that most retail brands will have resale programs, supporting the shift to a more circular economy. Some brands may try to build their own resale capabilities, but most are likely to adopt turnkey solutions.
Since RaaS emerged in 2017, it has helped to normalize secondhand shopping and making it more accessible to a broader audience. The scalability of RaaS solutions means that as more brands adopt these programs, the network effect associated with online platforms will accelerate. As a result, these “second-life” digital ecosystems will increasingly shape how brands compete.
In this article, I cover important aspects of RaaS and the central role that platforms play in these solutions. First, I explore the challenges that brands faced in resale before RaaS service providers emerged. Second, I review the leading RaaS providers. Third, I examine the three primary RaaS models presently existing in the market, each offering distinct advantages and features to brands looking to enter the resale space. Fourth, I explore the central role that online platforms play in delivering RaaS to brands, serving as the technological and operational backbone for these services. Finally, I look at how RaaS APIs enable seamless integration of resale capabilities into existing business systems, facilitating real-time data exchange and automated workflows.
Life before RaaS
Before the rise of Resale-as-a-Service (RaaS), retail brands faced significant challenges in launching resale programs. One of the primary obstacles was the lack of specialized infrastructure needed to handle secondhand sales, which differ considerably from selling new products. Setting up systems for inventory sourcing, management, and fulfillment for resale was complex and resource-intensive. Additionally, many brands lacked the technical expertise required to develop the necessary technology for listing items, managing sales, and providing analytics, as their core competencies typically lay elsewhere. Operational complexity further compounded these difficulties, as resale operations involve unique challenges such as authentication, grading used items, pricing, and managing variable inventory.
Many brands were not equipped to handle these complexities efficiently. Customer service also posed a challenge; managing interactions for secondhand sales requires different approaches and skills compared to new product sales. Furthermore, building an in-house resale platform would have demanded significant time and resources, risking a poor customer experience and failed projects.
Scalability was another concern. Brands struggled with how to implement resale at scale while managing the added complexities of used inventory. Integrating a resale channel into existing e-commerce and retail operations presented technical and operational challenges as well. For luxury and high-end brands, ensuring the authenticity and quality of resold items was particularly critical, raising concerns about brand image and the potential for cannibalizing primary sales markets. Moreover, brands had limited access to data on the secondhand market for their products, making it difficult to make informed decisions about resale strategies.
The emergence of RaaS providers addressed many of these challenges by offering turn-key solutions, expertise in recommerce, and the ability to launch resale platforms quickly and efficiently. This innovation has made it much easier for brands to enter the resale market without the need to build the entire infrastructure and expertise from scratch.
Growth of RaaS Providers
The growth of companies providing RaaS services has been significant in recent years, driven by the increasing consumer interest in sustainable fashion and the circular economy. Trove is one of the pioneers of the RaaS model. Founded in 2012, Trove initially started as a peer-to-peer marketplace but pivoted to resale as a service in 2017.2 This pivot was driven by growing interest from brands in taking more control of their resale journey. Trove responded by offering a full omnichannel resale experience with both in-store and digital trade-ins.
ThredUp is another major player in the RaaS market. The company has become a leader in the space, offering white-label, turn-key solutions that allow brands to quickly launch their resale platforms. The company formally launched its RaaS offering in August 2019 and secured $175 million in new funding to expand its platform and power resale for other retailers and brands.3 While ThredUP had been testing partnerships with several retailers, Madewell, a J.Crew brand, was ThredUP's first major RaaS customer. The resulting "Madewell Forever" program enabled customers to come into stores to trade in old jeans from any brand at Madewell stores for $20 off a new pair. Online, customers could utilize so-called ‘Clean Out Kits’ that include a pre-labeled bag for packing up gently used items and a free shipping label, allowing customers to send their clothes to ThredUp for assessment and resale on its centralized platform.
More recently other companies have entered the market. Companies like Recurate, Archive, Treet, and Reflaunt offer specialized services that address various aspects of the resale ecosystem. Recurate provides a full-service platform supporting peer-to-peer resale and take-back programs, while Archive focuses on creating custom, differentiated resale experiences for each brand, including warehouse solutions and physical touchpoints. Treet specializes in building branded resale marketplaces that facilitate P2P transactions, fostering community and engagement among customers. Reflaunt, catering primarily to fashion and luxury brands, provides technology and services for take-back programs, recommerce, and access to curated, high-quality inventory.
RaaS providers have signed up over 100 brands across various segments of the apparel industry. In the high-end fashion sector, luxury brands have recognized the potential of resale to extend the lifecycle of their products while maintaining brand integrity. Oscar de la Renta, for example, has partnered with Archive to create a customized resale experience for their clientele. Similarly, Balenciaga has collaborated with Reflaunt to facilitate resale transactions and incentivize customers to participate in the circular fashion economy. The outdoor and athletic wear segments have been particularly proactive in adopting resale programs. Brands like Patagonia, REI, Canada Goose, The North Face, Peak Design, Arc’Teryx and Lululemon have embraced RaaS solutions. Trove has been particularly successful in this segment. Mainstream casual wear brands have also recognized the value of resale programs. ThredUp, for example, now powers the resale programs run by GAP, Abercrombie & Fitch, Tommy Hilfiger, Banana Republic and American Eagle.
Alternative RaaS Models
There are serval RaaS models, each offering distinct features to brands looking to enter the resale space.
One model is the Managed with Branded Resale approach. This is a fully managed service where the RaaS provider creates and maintains a dedicated branded resale website for the client. In this model, the provider handles all aspects of the resale process, including inventory management, authentication, pricing, listing, fulfillment, and customer support. This comprehensive service allows brands to offer a seamless resale experience to their customers while maintaining full control over their brand image. Additionally, this model provides detailed brand-specific analytics, enabling companies to gain valuable insights into their resale operations. Archive, Recurate, Trove, and Treet are examples of vendors offering this model.
A second model is the Managed with Centralized Marketplace approach. In this model, the RaaS provider maintains a branded storefront for the client on a larger, open resale marketplace. Supply for this approach is provide in part by "Clean Out Kits" to customers, allowing them to turn ‘gently’ used clothing and accessories from any brand into shopping credit for the client's brand. The RaaS provider handles transaction processing and customer service, while sales occur on the open resale marketplace. This model allows brands to participate resale without the need to manage their own dedicated resale platform. ThredUp is a prominent example of a vendor offering this model.
The third model is the Managed with Distribution via Network of Marketplaces. In this approach, the RaaS provider manages the intake, authentication, and listing of items, but then distributes these items across multiple resale marketplaces. This model offers centralized management of listings, sales, and logistics, potentially maximizing exposure and sales opportunities for the resold items. By leveraging a network of marketplaces, this model can help brands reach a wider audience and potentially increase sales. Reflaunt is an example of a vendor that offers this type of service.
As illustrated in Table 2, each of these models offers unique benefits and trade-offs. The Branded Resale eCommerce model provides the highest level of control and brand consistency but may require more resources and commitment to overcome less traffic. The Centralized Marketplace model offers ease of entry into the resale market and more traffic but less control over the customer experience. The Distribution via Network of Marketplaces model can potentially offer wider reach but may result in less brand-specific experience for customers.
Role of Platforms
Online platforms play a crucial role in creating value across the various RaaS models. Whether in the form of eCommerce website or centralized marketplaces, the platforms serve as the technological and operational backbone of these services. RaaS providers create and manage branded online storefronts for companies, allowing them to offer secondhand items under their own brand name. These platforms are designed to seamlessly integrate with the brand's existing e-commerce presence. They also provide comprehensive inventory management systems for sourcing, managing, and tracking secondhand inventory, often including tools for customers to initiate trade-ins or resales of items.
The platforms offer sophisticated listing tools that help categorize, price, and present secondhand items effectively on the branded resale site. They handle the entire sales process, from listing to transaction processing and fulfillment. Additionally, these online platforms provide brands with valuable data and insights on secondhand sales, customer behavior, and product performance in the resale market. This information can inform production decisions and overall strategy.
RaaS providers often manage customer service for the resale operations through their online platforms, handling inquiries, returns, and other customer interactions. These solutions are typically cloud-based, allowing brands to access and use the service without needing to install or maintain their own infrastructure. This cloud-based nature also enables RaaS solutions to be easily scaled up or customized to meet the growing or changing needs of brands.
Advanced RaaS platforms, like those offered by some providers, incorporate AI for quality control and authentication of items, streamlining the resale process. Some RaaS providers also offer platforms that support both online and in-store trade-ins, creating a seamless omnichannel resale experience. By leveraging online platforms, either eCommerce websites or centralized marketplaces, RaaS providers enable brands to enter the resale market without having to build the entire infrastructure and expertise from scratch. This allows brands to focus on their core competencies while still capitalizing on the growing secondhand market and advancing their sustainability goals.
Process Automation
RaaS providers offer APIs as part of their service offerings, enabling businesses to integrate resale capabilities into their existing systems and platforms seamlessly. These APIs typically serve multiple functions that are crucial for managing the resale process efficiently. One of the primary purposes of RaaS APIs is to facilitate the exchange of real-time product information, pricing updates, and order status between the resale platform and the business's systems. This allows resellers to access up-to-date inventory data, ensuring accurate product listings and availability. Additionally, these APIs enable the synchronization of customer data, which is essential for providing personalized experiences and maintaining consistent customer profiles across platforms.
RaaS APIs also often support automated workflows, streamlining processes such as item listing, order processing, and fulfillment. For instance, they may enable businesses to automatically create listings for secondhand items, update inventory levels, and manage the entire lifecycle of a resale transaction. Some APIs provide functionalities for managing returns, refunds, and customer support tickets related to resale activities. Furthermore, these APIs frequently a real-time database to identify, categorize, and value each secondhand clothing item they receive to determine the optimal listing price. Over time, more data creates more value. For example, over the course of a decade ThredUp, has built a proprietary data set with over 125 million unique items, across 35,000 brands, and 100 categories, enabling more efficient customer acquisition, engagement and process automation.4
Conclusion
The rise of RaaS marks a significant shift in the retail landscape, with online platforms playing a pivotal role in its success. These digital platforms have become increasingly sophisticated, making it an attractive and effective solution for fashion brands looking to enter the resale market. In the process, they have addressed the numerous challenges brands previously faced when considering resale operations. By providing turnkey solutions for inventory management, listing, sales processing, and customer service, these platforms have dramatically lowered the barriers to entry. The cloud-based nature of these services allows for scalability and customization, enabling brands of all sizes to participate in the circular economy.
The importance of these platforms is further underscored by their ability to offer valuable data insights, AI-powered authentication, and seamless integration with existing e-commerce operations. These features not only streamline the resale process but also provide brands with strategic information to inform their broader business decisions. As the global secondhand apparel market continues to expand, the role of online platforms in enabling RaaS solutions will continue to grow. RaaS is transforming retail by enabling brands to extend their product lifecycles through secondary markets, complementing traditional business models and supporting a circular economy.
Footnotes