Latest / The DTC Marketing Podcast with Fexingo: Direct-to-Consumer Brands, Shopify, and E-Commerce Growth / How DTC Brands Use Secondhand Marketplaces to Grow Revenue
Transcript
- Lucas: Luna, when you hear the phrase 'secondhand marketplace,' what comes to mind first? Luna: Honestly, eBay. Or maybe ThredUp. Definitely not a brand's own website. Lucas: Right, and that's exactly the shift I want to talk about today. More DTC brands are launching their own resale marketplaces — not as a sustainability side project, but as a real revenue channel. I'm talking six- and seven-figure lines on the income statement. Luna: So it's not just about being green, it's about making green. Lucas: Exactly. The poster child here is REI. Their Used Gear program started as a small experiment in a few stores, but by 2025, it was generating over one hundred fifty million dollars in annual revenue. That's not pocket change — that's a meaningful business unit. Luna: One fifty million? That's bigger than a lot of standalone DTC brands. Lucas: It really is. And the interesting part is how REI structures it. They accept used gear from members — tents, sleeping bags, climbing shoes — inspect and clean everything, then resell it at forty to sixty percent off retail. The company keeps about seventy percent of the resale price, and the original owner gets a store credit for the rest. Luna: So it's effectively a trade-in program, like Apple's iPhone upgrade plan, but for outdoor gear. Lucas: Exactly the right analogy. And what REI discovered is that members who trade in gear spend that store credit almost immediately — and then they come back to buy full-price gear more often. The average resale customer has a thirty percent higher lifetime value than a customer who only buys new. Luna: That stat is wild. So the secondhand transaction itself might be low margin, but it creates a halo effect on full-price purchases. Lucas: That's exactly the thesis. Patagonia was actually earlier to this with Worn Wear. They launched it in 2017, and for years it was seen as a brand-building exercise — proof that they walked the walk on sustainability. But by 2024, Worn Wear was profitable on a standalone basis. Patagonia doesn't break out exact numbers, but analysts estimate it's a fifty to seventy million dollar business. Luna: And that's for a company that's famously private about finances. How does the unit math work? Because resale is inherently more labor-intensive than selling new inventory. Lucas: It is, but the gross margins can actually be comparable. Think about it: a Patagonia jacket that retails for three hundred dollars might cost the brand about ninety dollars to manufacture. If they resell a used version for one fifty, their cost of goods is just the labor to inspect and clean it — maybe fifteen to twenty bucks. So the gross margin on that used jacket is around eighty-seven percent, versus seventy percent on a new one. Luna: I see — the cost of acquisition is zero because the inventory is coming from customers. And you're also avoiding the markdown spiral that happens with unsold new inventory. Lucas: Bingo. Eileen Fisher's Renew program takes it a step further. They actually accept any Eileen Fisher garment, regardless of condition. Items that can't be resold are turned into felted textiles for new designs. For a brand that's pricey — dresses often over four hundred dollars — the resale channel brings in younger customers who couldn't afford new. And those customers convert to full-price buyers about forty percent of the time within eighteen months. Luna: So the secondhand marketplace acts as a top of funnel acquisition tool, but with a much higher intent signal than a Google ad. Lucas: Exactly. Someone searching for 'used Eileen Fisher dress' has already self-identified as a customer. They just need a price entry point. And the brand gets to capture that demand directly instead of losing it to eBay or Poshmark. Luna: That's the key point — most DTC brands are losing that secondhand market entirely to third-party platforms. By launching their own, they keep the customer relationship and the data. Lucas: Right. And the data piece is huge. When you sell through eBay, you get a transaction fee and no customer email. When you sell through your own resale marketplace, you get the full profile — what they bought used, what they searched for, what they traded in. That feeds your personalization engine. Luna: So what does it take operationally to set this up? I imagine the authentication and grading process is the hard part. Lucas: It's the hardest part, and it's why a lot of brands partner with third-party logistics providers that specialize in resale. Companies like Trove and Recurate run the entire back end — they receive items, grade them, photograph them, list them, and handle shipping. The brand just provides the platform integration and the brand voice. Luna: So it's a white-label solution. What's the typical cost structure? Lucas: Most providers take a twenty to thirty percent commission on each resale transaction, plus a per-item processing fee of maybe three to five dollars. For the brand, that's still cheaper than acquiring a new customer through paid ads, which for many DTC brands is now north of fifty or sixty dollars. Luna: And the customer is effectively paying for the inventory acquisition with their trade-in. That's a beautiful flywheel. Lucas: It really is. Now, not every DTC brand should jump into resale tomorrow. There are three questions I think a brand needs to answer first. One: do you have a product that holds its value? A fast-fashion T-shirt wears out after five washes — nobody's buying that used. But a well-constructed leather bag or a technical jacket? That's resalable. Luna: So durability is a prerequisite. That explains why you see resale from Patagonia and REI but not from, say, Boohoo. Lucas: Exactly. Question two: do you have enough volume to create a meaningful inventory pool? If you've only sold ten thousand units ever, the secondhand supply will be tiny. You need a critical mass of past customers who own your product. Luna: So this is really for established brands with a few years of sales under their belt. Lucas: Right. And question three: can you handle the reverse logistics? Accepting returns is one thing, but accepting random items from customers requires a different kind of warehouse operation. If you're a small team, it might be too distracting. Luna: So it's not a strategy for every brand, but for the right brand, it's a powerful moat. Lucas: Exactly. And there's one more benefit I haven't mentioned: resale actually reduces return rates on new products. When customers know they can sell a used item later, they're less likely to return it after a single wear. REI saw return rates on new gear drop by about twelve percent after the Used Gear program gained traction. Luna: That's a huge operational saving. Returns are a massive cost center for DTC — shipping, inspection, restocking, markdowns. Lucas: If these marketing conversations have sparked something you've actually used in your own strategy, there's a small way to keep them coming. We keep this show ad-free, and listener support is what makes that possible. Luna: Yeah, it's a low-bar way to say this content has value. No pressure, just if it's worth a coffee to you. Lucas: Exactly. That link is buy me a coffee dot com slash fexingo. And we genuinely mean it — every bit helps keep the podcast independent. Luna: Alright, back to resale. Lucas, you mentioned authentication earlier. What about fraud? How do brands prevent people from sending in fakes or damaged goods? Lucas: That's the biggest operational risk. Most brands use a combination of AI visual inspection and human experts. Patagonia, for example, trains its graders to spot fake logos, misaligned zippers, and fabric weight differences. They reject about eight percent of items submitted. And the customer doesn't get any credit for rejected items — they can either pay for return shipping or donate the item. Luna: So there's a deterrent built in. And the rejection rate also helps maintain quality standards for the marketplace. Lucas: Exactly. And once you have a marketplace of, say, ten thousand used items, you also need dynamic pricing. A Patagonia Nano Puff jacket from 2020 in excellent condition might sell for one hundred twenty dollars, but the same jacket from 2018 with a small stain might go for eighty. You need an algorithm that adjusts based on condition, brand demand, and seasonality. Luna: That's basically what ThredUp does, but for a single brand's inventory. It's a mini stock exchange. Lucas: Exactly. And some brands are now using this data to inform their own production decisions. If they see that a certain style of jacket consistently resells for high prices and fast, that's a signal to make more of that style in the next season. Luna: So the resale marketplace becomes a real-time product research lab. That's smart. Lucas: It's one of those flywheel effects that makes the investment worthwhile even beyond the direct revenue. And I think we'll see more DTC brands enter this space over the next two years. The technology is getting cheaper — platforms like Trove now offer a tiered pricing model starting at a few thousand dollars a month — so even mid-sized brands can get in. Luna: What about branding? Does having a secondhand marketplace dilute the premium feel of a brand? Lucas: That was a concern early on, but the data shows the opposite. Luxury brands like Gucci and Balenciaga have launched resale programs, and their full-price sales actually increased. It reinforces the idea that the product holds value. Plus, the secondhand section is usually clearly separated — it's a different URL, different visual design. It doesn't cheapen the main store. Luna: So it's a halo effect. The used section actually elevates the brand by emphasizing longevity. Lucas: Exactly. I think the key takeaway for any DTC brand listening is this: if your product has durability, you have a customer base of at least ten thousand, and you can handle or outsource reverse logistics, the resale marketplace is a serious growth lever. It improves LTV, lowers acquisition costs, reduces returns, and gives you product intelligence. Luna: And it future-proofs you against the secondhand economy. Because whether you participate or not, your products are already being resold somewhere. Lucas: Right. Better to own that channel than lose it. That's the episode. I'll be curious to see which DTC brand launches a resale marketplace next. Luna: I'm watching the shoe brands. Allbirds has the durability question, but On Running? Their shoes have serious resale potential. Could be interesting. Lucas: Good call. Let's check back in six months and see.