The rising stars of retail are not the retailers at all. According to McKinsey, consumer-to-consumer marketplaces, such as platforms for classified ads or apps for second-hand items, are expected to grow 35 per cent annually between now and 2025.
Market doubled in 2020
Thanks to the worldwide web, consumers can find each other more easily and better than ever, without the need for intermediaries or control from above. This phenomenon creates an actual consumer-to-consumer economy, directly from consumer to consumer, taking away a slice of the pie from the traditional retail.
Social media and second-hand goods, in particular, appear to be a match made in heaven: new pages by self-proclaimed vintage sellers emerge daily on Instagram, and Facebook Marketplace is growing rapidly. But more specialised, vertical platforms such as Vinted also see a sharp increase in transaction volumes. According to consultancy firm McKinsey, Gumtree in the UK and Leboncoin in France have even experienced a growth of more than 50 per cent since the beginning of 2020.
Younger generation generates about 50 per cent
During the lockdowns, millions of Europeans cleared out their wardrobes, attics, and garden sheds and sold their unwanted possessions. The largest categories were fashion and family items such as toys. In 2020, the European second-hand market thus doubled from 3 to 6 million euros.
But the phenomenon is not temporary: thanks to growing concerns about sustainability, McKinsey expects a sustained annual growth of about 35 per cent over the next four years. Although consumers of all ages will buy more second-hand items over time, younger people (between the ages of 15 and 24) are taking the lead. They already account for approximately 43 per cent of the market volume, but this could increase to 47 per cent by 2025.
By 2025, CBCommerce estimates that sales of second-hand fashion in Europe will be 1.5 times the size of fast fashion and will make up 13 per cent of the average wardrobe. Meanwhile, 41 per cent of the largest online marketplaces are already selling second-hand goods, from returned electronics at Amazon to actual vintage sections at Asos and Zalando.
Make buyers pay
To make the most of this growth, McKinsey advises C2C platforms to try new revenue models. For the most part, second-hand websites are still using the model pioneered by eBay, i.e. charging sellers and not charging buyers. Why not change that? Vinted and the Spanish C2C site Wallapop already do it the other way around: the buyers are paying, not the sellers.
The reasoning is that if it is free for sellers, there will be more choice, and more choice will automatically attract more buyers. The earnings model can consist of a commission for buyers (e.g. at Catawiki) but could also include a fee for extra services, such as buyer protection or different shipping options. A commission of 2 or 3 per cent for buyer protection would, for example, generate between 80 and 120 million euros in additional turnover in the current online market for second-hand clothing and family items.
Want to know more about consumer-to-consumer commerce and the impact of the growing second-hand market on retail? You will learn all about it in Future of Shopping: Re-set Re-Made Re-Tail, a new book by Jorg Snoeck and Pauline Neerman, which will be published in January 2022.
