Besides making a fashion statement, secondhand clothing is a burgeoning industry. According to research by used clothing marketplace ThredUp, the US pre-owned apparel industry has increased 144% since 2018, and sales are projected to reach $74 billion by 2029. Ecommerce has contributed to this boom by making the shopping process simpler. Secondhand marketplaces pair thrift stores and discounted prices with the convenience of online shopping.
Discover the advantages of building a secondhand marketplace. Learn about common marketplace business models, how to get started, and key considerations.
What is a secondhand marketplace?
A secondhand marketplace is an ecommerce platform, often an app or website, for selling and purchasing used, vintage, or previously owned goods. Marketplaces, such as Poshmark, eBay, and Mercari, are distinct from online stores. While traditional stores offer a selection of new items from a single seller or vendor, secondhand marketplaces are a venue where buyers can browse used items from multiple sellers in one location.
Benefits of creating a secondhand marketplace
For brand owners, the secondhand market can help broaden your customer base and enter new markets. Discounted secondhand prices offer a way to introduce price-sensitive consumers to your business. Over time, these buyers may become loyal customers.
Brands like Patagonia, Diane Von Fursternburg, and Levi’s participate in resale by operating their own secondhand marketplaces. This lets them profit from secondhand sales and retain greater control over brand image. A negative experience with your products can affect how customers perceive your brand, even if they purchased the item from a secondhand retailer. A counterfeit or inaccurate listing may harm your reputation. When brands oversee resale, they can protect the consumer experience by ensuring products are authentic, presented in a favorable context, and depicted accurately.
For the sustainable furniture company Sabai, resale helps reinforce their brand image. On an episode of the Shopify Masters podcast, founder Phantila Phataraprasit describes the furniture company’s resale channel as “very similar to other secondhand marketplaces, but owned by Sabai and only including Sabai products. When someone needs to get rid of a sofa for whatever reason, we take that product back, facilitate a resale, and they get a commission.” Offering secondhand sales supports Sabai’s core sustainability mission by reducing waste, extending the product life cycle, and “minimizing any opportunity for Sabai products to end up in a landfill.”
Business models for selling secondhand items
Your secondhand marketplace business model defines the relationship between buyers, sellers, and the platform. It determines which party holds items before sale, who fulfills orders, and when and how much sellers are paid. The best choice depends on a variety of factors, including how much you’re willing to invest upfront, your target market, and long-term goals. Here are the three most common models:
Consumer-to-consumer
On a consumer-to-consumer (C2C) marketplace, individuals sell directly to shoppers. The platform provides a place for buyers and sellers to connect, taking a percentage of each sale from the seller’s pocket. With this model, the marketplace never takes possession of items listed for sale. Sellers open accounts, upload product photos, create listings, and fulfill orders by shipping directly to the customer. Craigslist, DePop, and Grailed are examples of C2C marketplaces.
This model reduces overhead costs for the platform by eliminating warehousing and inventory expenses, but it comes with significant risks. Because items pass directly from seller to buyer, there’s little or no opportunity for quality assurance, authentication, or buyer or seller verification. Platforms may end up managing disputes between buyers and sellers.
Consignment
In a consignment model, the marketplace takes ownership of merchandise. It accepts goods from individual sellers and takes on the responsibility of photographing products, creating listings, and fulfilling orders. Sellers receive a percentage of the price once an item sells. The RealReal and ThredUp are both examples of secondhand consignment markets. This approach reduces the effort required to sell items. It may help attract individual sellers who don’t want to spend time finding buyers.
Trade-in
Similar to consignment operations, trade-in marketplaces take ownership of goods and handle product photography, descriptions, and listings. A trade-in approach, however, involves paying sellers for merchandise upfront. This model may appeal to sellers looking for quick income with minimal effort. From the business’s perspective, although it requires upfront investment, it may lead to higher profitability, because trade-in marketplaces typically purchase items for resale at steep discounts. Apple’s certified refurbished program and Patagonia’s Worn Wear ecommerce site are both examples of trade-in programs.
How to start a secondhand marketplace
- Identify essential platform features
- Find the right fee structure
- Acquire initial inventory and attract sellers
- Ensure product quality
Starting out with a smooth, functional website, sustainable fee structure, and built-in quality assurance can help your secondhand platform provide a positive experience to buyers and sellers alike. Over time, this foundation will make it easier to scale your platform. Here’s how to get started:
1. Identify essential platform features
The exact function of your platform depends, in part, on the business model. On C2C websites, for example, sellers need the tools to upload images, write product descriptions, and create listings. Offering a user-friendly interface or simple on-platform photo editing features that make it easy to build listings might help your marketplace stand out. With a consignment-based model, on the other hand, a custom dashboard that tracks sales and income could help sellers feel confident that their products are in good hands.
Mapping out your ideal buyer and seller journey can help you identify essential features before building your website. Consider the user experience as well as your own operational needs, such as vendor management and data collection.
2. Find the right fee structure
Determining a viable fee structure can be a bit of a balancing act. If your fees are too high, sellers might choose to work with a different platform. If fees are too low, your business won’t earn a profit. Finding the right middle ground requires a strong understanding of your operating costs and your competitors.
C2C platforms typically have lower overhead costs, letting them charge lower fees. In the women’s clothing and apparel category, for example, eBay charges sellers a 15% commission on sales of less than $2,000 and a 9% fee on sales that top $2,000.
Consignment-based platforms keep a much larger percentage of each transaction. For new sellers, The RealReal uses seven different commission tiers ranging from 80% for sales of less than $99 to 30% for sales that exceed $5,000. This sliding scale ensures that the platform makes enough money to cover the cost of processing, photographing, and storing less expensive items, while allowing customers to earn more from selling premium items.
3. Acquire initial inventory and attract sellers
Secondhand marketplaces need to draw in sellers to provide the products and buyers to purchase them. It’s hard to have one without the other. This can make securing initial inventory before your launch uniquely challenging.
Make a plan for populating your marketplace with products before you officially open shop. Popular techniques include recruiting a strong pool of initial sellers, offering special incentives, such as favorable commission structures for early vendors, and stocking initial collections yourself until your seller base grows.
Do a competitive analysis to understand the commission rates and services that your competitors provide. Then, determine what sets your platform apart. Does it let sellers keep a larger percentage of sales, reduce the effort of selling, or offer a more valuable customer base? Niche market platforms, for example, may attract highly motivated customers who are willing to pay a premium for rare collectibles. Other platforms might provide easy-to-use tools or a seller-rewards program.
4. Ensure product quality
Buyers and sellers are both wary of getting scammed on secondhand marketplaces. Buyers fear counterfeit items and misleading listings. Sellers worry about fraudulent purchases and missed payments. Providing quality assurance can help put both parties at ease.
Consider the risks and challenges associated with your business model, and make a plan for quality assurance. For C2C marketplaces, this may involve offering authentication and certification services for high-value items and providing seller verification and public reviews to help build trust. For consignment or trade-in operations, efficient inventory management is essential. Delayed shipments and undelivered items create a negative experience for both buyers and sellers. Using tools like Shopify’s multilocation inventory management feature can help ensure smooth order fulfillment for buyers and quick payouts for sellers
Secondhand marketplace FAQ
How much does it cost to start a marketplace?
Startup costs for a secondhand marketplace vary depending on the business model you choose. Initial expenses often include professional website development and design support, as well as transaction processing capabilities. Once you’re up and running, you may also be responsible for server fees, payment processing fees, and platform maintenance expenses.
What is the easiest thing to resell on a marketplace?
Popular resale categories include clothes, shoes, small home goods, luxury items like designer handbags and accessories, and tech products. Offering in-demand products can help attract consumer attention, but it doesn’t mean making sales will be easy. Resale success requires a smart listing strategy and appealing product presentation.
How does a marketplace make money?
Secondhand marketplaces earn money each time a transaction is completed on the platform. Depending on the business model, a marketplace may use a percentage-based commission fee to keep a portion of each sale or pay sellers upfront for secondhand items and keep any profit.
Are secondhand marketplaces the same as thrift stores?
No, secondhand marketplaces and thrift stores have a few key distinctions. While both sell used or dead stock items, thrift stores generally are brick-and-mortar shops. Some are run by nonprofits and sell donated items, while others operate on consignment or trade-in models. Secondhand marketplaces, on the other hand, are online platforms run by for-profit companies, like eBay, that allow sellers to list products online.
