In September, eBay held its first pre-loved fashion week in London and New York, showcasing a collection of second-hand luxury fashion on the runway. Created in partnership with the Council of Fashion Designers of America (CFDA) and the British Fashion Council (BFC), the reselling platform reaffirmed what sustainable investors all coming to accept: that second-hand fashion is not going anywhere.
eBay has become one of the largest reselling platforms, boasting a 4.1% increase in revenue to $10.1bn (£7.6bn) revenue from 2023 to 2024, according to the Business of Apps. The platform allows sellers to upload and sell a vast array of items, from video games and computers to cars and clothing. The Endless Runway show was curated by eBay UK’s pre-loved style director, Amy Bannerman, and demonstrates the influx of apparel pieces purchasable on the site, and more widely, how reselling websites like eBay contribute to the circular economy.
Although sustainable investors are keen to tap into the opportunities that arise from this consumer shift, PA Future found that many remain cautious of the long-term viability of resale platforms. This is especially the case with specialist resale platforms, that for example, only exclusively sell clothing or luxury items. Many investors are wary that these platforms lack the significant global scale they consider an essential criteria when making an investment.
Beyond this, investors spoke about luxury pre-sale market investments, how the online fashion resale market can be accessed in portfolios, and the opportunities and challenges that arise when making investments in these platforms.
Whilst, eBay – which has a presence in over 190 markets worldwide – is an example of the durability and scalability platforms are capable of fostering, leaving investor’s future ambitions for the market high, given that the appetite for resale continues to increase.
The circular economy
Sustainable investors understand a circular economy is an economic model focused on reducing waste and maximising the lifespan of products, both for the betterment of people and the planet. In recent years, many business models have been created and redesigned to feed this economical structure, particularly in the fashion industry.
The Ellen MacArthur Foundation estimated a bin lorry full of clothing is dumped, landfilled or burned every second. In the UK, more than three-quarters of the 1.7mn tonnes of clothing and textiles discarded each year are either sent to landfill or incineration. Service-based business model options like resale, swapping, upcycling and sharing will prove key to creating a circular economy for the sector.
This is called circular fashion – or slow fashion – where the fashion industry works towards a closed-loop industry. Examples of this include retailers, such as Zara and Zalando, creating pre-owned platforms that encourage customers to ‘maximise the life of their clothes.’
Re-selling businesses have also grown in popularity and allow consumers to shop sustainably for a generally lower price tag. These business models prevent clothes from being stored in landfill by encouraging people to sell their items to other willing buyers.
A tricky investment case
However, despite the growth opportunities of reselling platforms like eBay, amid increasing consumer popularity, the same cannot be said for investors. Fashion resale platforms remain highly inaccessible to investors, and are considered a “tricky” investment.
Currently, the only listed fashion re-sale platforms is The Real Real, a platform to buy and sell designer bags, jewellery and clothing, whilst Vestaire, Depop and Vinted remain unlisted, and Poshmark was delisted in October 2022.
Dora Buckulčíková is the portfolio manager of Robeco Fashion Engagement Equities strategy, which is classified as an Article 8 fund and is the first active strategy focused exclusively on fashion. Dora explained the difficulty of investing in fashion resale platforms: “There remains very few companies listed on stock exchanges around the world that provide pure or even large exposure to the online fashion resale market. Multiple private companies are at partnership/scale up stages, and several previously listed businesses have been acquired by larger ecommerce players.”
Swetha Ramachandran, manager of the Artemis Leading Consumer Brands fund (the fund), who has built an extensive career investing in luxury goods, including fashion brands, echoes this observation. Her portfolio is classified as an Article 8 fund and was launched in December 2023.
Swetha suggested that returns from investments in fashion resale platforms are “hard to find.” She says: “The circular economy presents a huge growth opportunity but the business model of many of these specialist companies is far from ideal. It is very hard to find a profitable business model in retail.
“For example, Poshmark was listed in the US just after the pandemic. It had a huge amount of fanfare at launch but early on things started to go quite badly in terms of its profitability. It has now been taken over by a South Korean conglomerate.
“Others, like Vinted, remain private companies. It’s very hard to find a listed viable, sustainable resale platform business. Everyone is still looking for that sort of silver bullet of how to make it work, even though the consumer appetite for resale is still very much there.
“I wonder if, for example, Amazon can make the numbers work, because it seems like this is an area of the market where you really need scale to drive profitability. At the moment, the platforms that we have, even though they’re very loved by consumers, are quite local and lack significant global scale.”
Indirectly accessing the fashion resale market
However, there is no excuse for investors not to contribute to the resale market. This is because, as Swetha says, investors can still gain exposure to the resale market without directly investing in reselling platforms.
She commented: “A more indirect way of getting exposure to the resale market would be by investing in brands that are themselves at the forefront of resale. For example, Inditex, which is expected to launch Zara pre-owned in the US shortly, in addition being in the UK and 14 other European countries.”
Investors can still take part in the circular economy without sacrificing returns in the process, investing in large global businesses that are putting circularity – i.e. pushing resale purchases – at the forefront of their business models.
Is global scale a necessity?
Although re-selling platforms such as eBay have a wide global reach, investors reflected it remains “incredibly hard” to lay out a credible investment strategy for fashion resale platforms due to lacking reach in the global market.
However, Dora “does not necessarily think global scale is required” to invest in fashion resale platforms. This is because “businesses must either have a sufficient density of buyers and sellers in a specific region for delivery to be fast and costs to be reasonable, or the inventory on the platform needs to be sufficiently differentiated for customers to be willing to wait a long time for their order to come and pay high prices for such service.” So, for Dora, it is more about how a company acquires a customer and “keeps them coming back and making repeat purchases.”
This type of business model generates income for the company and returns for the investor, yet these benefits still remain out of reach because the majority of fashion resale platforms are in the “scale-up stages.” This means that they do not have the level of scalability to be considered a “smart investment”, and thus, investors remain cautious of investing in these platforms that remain in its early stages.
eBay’s Circular Fashion Fund
Potentially, funds such as eBay’s Circular Fashion fund could push specialist resale platforms to expand globally – and thus, increase the investment flows to this market. The fund which was launched in 2021 in partnership with the BFC and environmental charity, Hubbub. It supports small businesses and start-ups that specialise in innovations in circular fashion technology and solutions, such as encouraging brands to adopt recyclable materials to integrating digital product passports.
Under the fund’s scheme – which attracted thousands of applications from ‘circular economy innovators’ – Swoperz, a pre-owned children’s clothing business was granted £25,000. This comes as five further business received £15,000 each, as well as a mentoring on how to scale and market their business in the economy.
Just recently, it was announced that the fund has been extended and will be launched in the US and Germany. Investments are set to total $1.2mn (£923,000), and the finalist is set to receive an extra investment of $300,000 (£230,000). Funds like these are a push in the right direction as with the help of generous investments, the selected resale businesses can leverage their place in the market, pushing more consumers and investors to contribute to the circular economy.
A pre-loved luxury market case study
Beyond this, Swetha spoke extensively about the pre-loved luxury fashion market and how it is influencing the fund’s investment strategy.
According to eBay data, an overall $50bn (£37bn) worth of second-hand luxury fashion products were sold worldwide on the platform in 2023. This suggests that a higher percentage of luxury goods are being purchased second-hand rather than outright. Swetha suggested this trend is heavily influenced by younger consumers who seek an affordable entry point into a traditionally expensive market.
This led me to question whether entry-level luxury brands are being impacted by this consumer shift. In an earlier article for PA Future, I questioned if investors hold the key to ending the fast-fashion hype. In reaction to this, Swetha responded that the entry-level luxury has been challenged by the resale market. This is because “you can buy a second-hand bag from a leading luxury manufacturer for the same price as a brand new product.”
eBay’s GM head of global fashion, Kirsty Keoghan, echoed this. She says that eBay’s fashion show “taps into into Gen Z’s desire to access luxury items in a more thoughtful way, especially at a time when there is a focus on newness.” This suggests the generational push to consume more sustainably has impacted traditional consumer habits, which according to Swetha, has impacted the return rates on the investments the fund has in luxury brands.
This is because, as Swetha explained, the resale market is a helpful guide as to how strong the name of a brand is. “Some branded products can retain over 90% of their original purchase price value when sold second-hand, and in one or two cases the second-hand price might even be higher because of the scarcity of supply,” she comments.
However, some the strength of some luxury brand names have weakened. “Many younger consumers would prefer to buy, for example, a Louis Vuitton bag second-hand and in good condition over a first-hand Michael Kors bag if it’s the same price. They prefer the stronger brand. That’s definitely a shift that is taking place, and it is polarising the market even further between stronger and weaker brands,” Swetha concluded.
Continue encouraging second-hand purchases
General manager, global luxury and sneakers at eBay, Mari Corella, suggested eBay’s marketing strategies have contributed to this polarisation. eBay regularly collaborates with well-known brands, celebrities and large fashion industry events to encourage more people to shop second-hand.
She said: “eBay have collaborated with Balenciaga for their Winter 24 collection and partnered with Elton John to auction some of his designer looks. At the Met Gala, Madelyn Cline walked the red carpet wearing eBay jewellery, and Endless Runway featured a ‘shoppable’ catwalk that featured garments from £24 to £1,000, offering a more accessible entry point to the market.
“As our partnerships grow and perceptions shift, the long-term impact is that pre-loved is no longer seen as a ‘trend’ but a regular part of how everyone buys and sells.”
Further, Corella said authenticity guarantees are making consumers more confident to purchase luxury items second-hand. This overcomes the challenge of trustworthiness that many resale platforms face, where the risk of selling counterfeits remain high. eBay offer an Authenticity Guarantee for timepieces valued at £1,500 or more, or for a handbag or jewellery of £500 or more, which is verified by independent authentication partners.
“As Gen Z gains spending power and buys their first luxury watch or handbag or piece of jewellery, it’s essential that they can do it with confidence,” Corella concludes.
This suggests that marketing strategies play a big part in pushing the ‘second-hand’ boom because it makes it easier for customers to sell and purchase second-hand.
Only time will tell
It is clear from my conversations that it takes support from all sides – from the consumer to the investor – to push the expansion of the online fashion re-sale market.
Despite this, the investment case for online fashion resale platforms will remain tricky as investors prefer to access the resale market via well-known, global retailers that host internal reselling hubs, such as Zalando and Zara.
Only time will tell, but as consumer awareness of and demands for circular items intensify, fashion resale platforms will grow and hopefully become more accessible to investors along the way.
