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  • Jan 27, 2022

    Powering the Power Sellers: How We’ll Sustain the Circular Economy

    By Taylor Brandt

    Ask any fifth grader what they want to be when they grow up and they'll say a TikTok star.

    Ask any adult in the last year, and an increasing number might have a similar answer. In the wake of the pandemic, more workers are leaving the traditional workforce for self-employment — and many are attracted to the promise of a profitable career through not only the creator economy, but also the closely-related circular economy.

    The circular economy involves renting, recycling and/or reselling items for increased sustainability and affordability — and buying secondhand is becoming increasingly popular among consumers as a result. The industry got a boost from the pandemic, due to first financial uncertainty and now supply shortages. Nearly half (48%) of Americans bought an item through resale in 2020. Even brands are getting into resale to remain relevant with their customers. 

    The secondhand apparel market is one of the fastest-growing resale categories: Currently worth $28 billion, it’s expected to double in value to $64 billion by 2024. Platforms like The RealReal (the first circular economy unicorn) for luxury items; Poshmark for clothing (as well as beauty and home goods); and Depop, which was acquired by Etsy earlier this year, all allow sellers to turn a profit reselling secondhand clothing. There are even platforms like The Cobblers that connect owners with craftspeople who refurbish things like shoes, bags and wallets. 

    But profits aren’t a given for resellers in this growing circular economy. It grapples with some of the same challenges that both the creator economy and the gig economy (i.e. the Ubers, AirBnbs and TaskRabbits of the world) are reckoning with: How to make resale lucrative enough to retain and attract new resellers, while still ensuring prices are competitive to attract buyers. As the market grows, it will become increasingly important for the platforms and apps facilitating resale to empower the sellers who are driving it. 

    Power Sellers: The Engine of the Circular Economy

    Individual resellers buy in bulk or rehab used items to list for sale on platforms like Amazon and eBay. The opportunity for more resellers to enter the fray is growing as platforms become specialized. Where eBay has a variety of new and used items for sale, many new platforms focus only on one category of item, like used cars or secondhand luxury apparel. Some 52.6 million resellers worldwide resell clothing — and nearly 70% were selling for the first time in the last year. 

    Seeing meaningful revenue through resale as a seller is no easy task. Even ‘power sellers,’ known not only for the volume of inventory they sell, but also their high-quality ratings, often work more than 40 hours per week sourcing, listing, packaging and shipping products. And the platforms take a cut of their sales: On eBay, for example, sellers pay 12.55% of the sale price or lower, plus $0.30 per order. Poshmark keeps 20% of the sale price for everything over $15, and $2.95 for anything under $15. One full-time seller told WIRED she worked 16-hour days, seven days a week to make $80,000 in her first year on Poshmark:

    “My kids were both home full time. While I was running errands with them, taking them to gymnastics or swim class, I would be sharing things, listing things, editing photos on my phone...There was never enough time to get it all done,” she said. 

    It’s a familiar tune to the growing number of platforms that rely on creator and gig economy workers. On Airbnb, for example, the average host makes less than $1000 per month, and many lament the costs of things like cleaning in between stays and managing unruly guests. The creators responsible for drawing in millions of viewers to social media platforms are faced with fickle audiences, huge time investments, and their mental health often suffers. 

    In the short-term, the flexibility and freedom of working as a reseller (or creator or other type of gig worker) might be enough to retain the workforce necessary to bolster these platforms and services. But for the long-term growth of these markets (and the apps and platforms that profit off of them), a shift is necessary. 

    A New Class of Circular Economy Apps

    In my research, I spoke to one power seller making enough money reselling shoes on eBay to sunset his pest control business. One reason for his resale success is an app called Hammoq, a virtual assistant tool that automatically generates listings for every platform using just a photo of the item. The listing process that might have taken him four days of work, he says, now takes about four hours. 

    “I’ve already made more money overnight on eBay than what I’m going to make killing bugs and sweating,” he told me. 

    Flyp and Sella are other examples of a growing category of business empowering sellers with automated tools to manage the time-consuming processes like preparing a listing, posting it to multiple platforms, negotiating with customers and even handling shipping and returns. 

    Other digital tools are also cropping up to ensure the viability of resale for buyers and sellers alike. In luxury resale for example, authentication remains a major challenge. While it’s still unclear what tool is best suited to the problem, startups are already offering solutions: Entrupy and Suede One (recently acquired by Poshmark) use AI and machine learning to verify authenticity while Veracity Protocol looks to solve these issues with blockchain and NFT technology.

    As the need for better tools and compensation grows — particularly as holiday supply-chain shortages strain the secondhand market — the platforms themselves are beginning to shift their practices to improve the sellers’ experience, too. Poshmark, for example, recently released more personalization services between sellers and their customers and a dashboard that provides customer data.

    Offering tools that better support scale will ensure the continued growth of the circular economy for the continued benefit of sellers, brands, platforms and buyers alike. While none currently offer it, financing is another category of services that these apps could provide to better help sellers scale their businesses to profitability. 

    “It’d be a no brainer,” said the seller I spoke with. “That's how you scale your business because at that point it just becomes a numbers game. Basically, they're investing in your company and your brand while you're also investing in theirs.”

    NEXT

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