Is it Worth Expanding to Recommerce?

Is it Worth Expanding to Recommerce?

August 3, 2021 | by Mike Skoropad

Recommerce refers to the act of selling pre-owned products online. 

The recommerce market has been booming in recent years, addressing consumers’ growing concerns about reducing the size of their carbon footprint, and the ever-increasing demand for more affordable products. Although the recommerce market is currently dominated by P2P marketplaces like Thredup and Depop, there is no reason why an existing retailer selling new products cannot add a recommerce arm to their offerings. As a retailer of new and used tires, this is something that we (Utires) have done in the last 18 months, with excellent results.

A successful pivot to recommerce hinges on four factors. These are:

  • Having a sound way of gauging that there is sufficient demand for second-hand products in your niche
  • Having a reliable means of getting your hands on high-quality, second-hand products for prices that allow a decent margin.
  • Developing a system that ensures quality control of the condition of the preowned items that you sell.
  • Being able to position your brand as synonymous with high-quality pre-owned products in your wider industry.

I will now go through how to do each of these, using my online store’s pivot to recommerce as an example in some cases. 

1. Gauging demand for second-hand products

Two big indicators of the demand for second-hand products are: 

1. That there are already successful second-hand retailers in your niche

2. That there is a vocal demand for more affordable products in your market

The quickest way to judge whether businesses already making a success of selling second-hand products in your industry is by making a Google search that indicates an intent to buy a relevant pre-owned product. The most obvious keyword to use here is: “buy used [product]”. When you search for these types of keywords, you want to see the results populate with PPC advertising and a map of physical locations where you can buy such products. This not only means that there are businesses selling used products, but that businesses are successful enough to either run paid advertising or to justify the overheads of a brick and mortar store.

You can see below how our industry, selling used tires, has both of these:

Example of a Google search on used tires

One of the best ways of ascertaining whether an expansion to recommerce can be justified by consumers’ desire for more affordable products is by looking at patterns around the price points of your current best-selling products

If there is a strong connection between your products’ affordability and how much volume you sell, then it’s likely that you will be successful in selling second-hand products at an even lower price. If the products that you sell have a long lifetime, and there is a conversation around their sustainability, then these are further indicators that there will likely be a viable recommerce market in your industry.

2. Finding reliable vendors of second-hand products

Finding places where you can consistently source pre-loved products to sell is the most challenging aspect of rerommerce. While you may have some success with closeouts and liquidation auctions, these do not occur with enough regularity for you to be able to build a business around them. Rather, you want to form long-term partnerships with businesses that end up with used products as waste.

Try and create win-win situations where they can make money off their waste, and you can have consistent merchandise at a price that allows for a sizable margin.

For example, Utires has partnerships with collision repair shops. When a vehicle is repaired, often healthy tires are replaced, and these shops end up with a surplus of tires. Although they could sell them themselves, we offer them a guarantee so they can get rid of stock immediately. This is a mutually beneficial relationship.

If you are interested in exploring the recommerce market, we would recommend that you first plan a means of sourcing second-hand merchandise consistently, as developing a way of doing this was our biggest bottleneck to success. 

3. Managing an inventory of pre-owned products

When selling second-hand products, you need to account for the fact that not every product you sell will be in perfect condition. Consumers are often willing to buy products that have some form of wear and tear, but you need to offer complete transparency to customers about the condition of each product. To add, you will also need to price each product accordingly, depending on the condition.

You can only manage this if you have an objective set of criteria for the condition of products that you are willing to sell. You need to categorize different types of wear and tear that typically occur to your products and then group the severity of wear and tear in each category. This should allow you to set clear pricing based on the condition of each product, and leave little room for dispute with customers.

For example, with our tires, the two most common types of wear and tear are reduced tread and uneven tire patterns. We have categorized each of these into three levels, with objectives for each, and have specific prices for each condition. The exact definition of these categories is made clear on our website.

Utires refuses to stock or sell any products that have types of defects outside of the ones that are specified. This leads to less wasted inventory as well as simplifying product management. Ideally, if you’re dealing with large volumes of content, use a PIM tool. Plytix, for instance, is a catalog management system used to centralize data. You can store, manage and optimize content and visual assets in one place, making it easier to keep track of your inventory and content.

4. Brand positioning for recommerce

Since the two main motivations behind people buying second-hand products are affordability and sustainability, all your marketing efforts should be playing to one of these angles. The best way to position yourself as the most affordable option in your market is to offer price guarantees against your competitors.

If you are going down the price guarantee route, then you should complement this by reaching out to websites that cater to frugal living (making personal finances go further) and college students. These websites are only too happy to feature content that helps their audiences save money. If you want to position yourself as a sustainable brand, you may benefit from publishing data around wider environmental issues in your industry. When doing this, your ultimate goal should be to get wider coverage in publications that cover issues related to sustainability.

We’d also recommend optimizing each product in your web store around terms such as “second-hand”, “used”, and “preowned”. If there is a market for second-hand products in your industry, then it's likely that people are searching for keywords with these terms. Optimizing for these keywords specifically should see you rank higher than the competition who do not specialize in preowned products.

For more information on Plytix PIM, get in touch with a sales expert

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Mike Skoropad

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