Re-commerce or reverse commerce is the opposite of the traditional marketplaces where used goods are re-purchased from customers through a well-defined process. The idea behind this model is to take back obsolete and/or undesired products from their current owners and then either:
- Reintroduce them into the market
- Use them, or
- Gain insights on their age, wear and tear, and market demand for further product development
The recommerce business model gives a second life to used products through e-commerce supply chains. With evolving consumer buying behavior and the need to be more environmentally responsible, re-commerce models help businesses achieve a triple-bottom-line (comprising social, environmental, and financial profits).
An increasing number of businesses and consumers are mindful of the impact their consumption habits have on the environment and are pushing for the adoption of re-commerce models. These companies and consumers are choosing to collaborate with partners committed to sustainability goals. According to thredUP, an online package and thrift shop for purchasing and selling top-notch previously owned clothes, shoppers in the 18-37 demographic are gradually moving to buying used products two-and-a-half times faster than their older counterparts.
The benefits of re-commerce, or reverse commerce are manifold, including:
Sustainability goals: Secondhand goods leave a smaller carbon footprint since they do not require further processing. Environmentally conscious companies and customers most often do business with partners who offer these options.
The side gig economy: First-time buyers get the opportunity to profit from products which may have instead ended up in landfills.
New markets: Consumers who cannot afford to buy certain products firsthand due to high pricing or non-availability now have a secondhand market that provides them with an opportunity to fulfill their desires at reasonable prices.
Product development: When companies buy back products from their customers, they get insights about the product's life cycle, wear and tear, and whether the product is working based on demand trends. Such crucial information helps companies improve their future offerings.
Customer loyalty: Re-commerce promotes deeper customer loyalty. When customers realize that they could earn rewards for selling the used products back to the manufacturer, they tend to stick to the manufacturer or the brand for future purchases.
Ease of buying: Re-commerce through e-commerce takes care of the problems that consumers face in the traditional thrift-shop model. With e-commerce platforms, buyers can find the right product, check for product availability, and get the best value for their money from the comfort of their homes.
Re-commerce models include a range of offerings like resale, rental, recycling, and subscription. All of these focus on increasing the lifetime of the products already manufactured. Broadly, there are three ways through which the entire re-commerce business can be carried out:
Third-party resellers: They have been the pioneers of re-commerce. Resellers like eBay, OLX, Poshmark, and TheRealReal are some of the well-known players in this category. They provide a huge marketplace to bring together buyers and sellers of secondhand goods. Brands can directly work with them as well. Levi’s® launched their “SecondHand” re-commerce scheme in partnership with Trove, allowing customers to trade in their used Levi’s® garments in exchange for store credit.
White-label service providers: Over the past few years, we’ve seen a lot of startups that have captured a significant resale market share. With strong digital and e-commerce tools, these companies have been able to work with renowned brands and bring circularity to their businesses by bringing used goods back into the supply chain. Yerdel, thredUP, and The Renewal Workshop are some of these startups. They partner with brands to build their re-commerce businesses and provide services like discounts, rewards, data collection, and sales to these brands. Reebok partnered with thredUP to bring a re-commerce loyalty scheme for its customers.
In-house channel: Aided by new-age technologies, many traditional businesses have launched their in-house re-commerce channel, further leveraging their brand equity to capture market share and include an additional stream of income by reselling their own refurbished products. To bring used products back into e-commerce, Patagonia’s “Buy Less Demand More” initiative sells used products alongside new products.
Opportunities for tech service providers
The re-commerce industry provides vast opportunities for technology service providers to use the latest digital technologies and engineer re-commerce platforms to help build the necessary ecosystem and infrastructure:
- Smart labeling: This helps manufacturers track the entire life cycle of the product and build confidence among second-time buyers.
- Product assortment: An automated product assortment service would be a crucial offering to reduce costs for the companies and run an effective re-commerce business. Automated product assortment services help businesses do away with the manual assortment of used products and move the entire experience online.
- Order fulfillment: Picking up products from the owner’s source and delivering them to the desired destination could be tricky since it could come with a lot of constraints, which would risk the financial viability to run the process. Providing the right logistic solution backed by the right technological capabilities is another challenge that tech companies can take up.
- Value capturing: Effectively capturing the value of secondhand products can be a challenge for companies. Using digital technologies to effectively capture the wear and tear and remaining life of the product would be an important offering.
- Automation of SKUs in inventory: The applications should have a robust algorithm in place which predicts customer preferences and informs the retailers about the same in real time.
- Predictive analytics and price optimization: When used effectively, data provides valuable insights as well as a competitive advantage. Predictive analytics helps companies estimate the right pricing and the rewards to attract and retain buyers.
- Visual search: AI-based solutions which effectively capture all attributes of the secondhand product at the buyer’s end would improve the ease-of-use factor.
- Improved shopping experiences: Functionalities like getting push notifications can further improve the overall buying experience.
Re-commerce has been around in different formats and models. With an increased focus on sustainability goals and the transformational power of new-age digital technologies, businesses today are in a stronger position to implement re-commerce at a broader level. Mainstream e-commerce players have the financial backing, the ability to take risks, increased responsibility, market opportunities, and a choice of technology service providers to reengineer re-commerce into their operations.