When Lego began testing a service to take back and reuse used parts, the Danish toymaker soon ran into a problem: People were sending in other things, too. Soda cans, shoes, lots of hair — all mixed in with the iconic plastic parts, according to one senior executive.
The worst part is that one day workers opened a Lego treasure chest and found a whole set of baby teeth inside.
Brands from Shein and Zara to H&M and Lego are jumping into the booming second-hand economy. They join a growing number of startups like Vinted, Depop, ThredUp and Vestiaire Collective trying to cash in on the craze for second-hand and “pre-loved” items, whether due to cost or environmental concerns. Celebrities like Bella Hadid, Rihanna and Sarah Jessica Parker have embraced thrifting, as has even cult TV show Love Island.
“Second-hand is very fashionable,” says Adam Minter, author of Planet of the dump And Used“But the cost of running this business is enormous. It's not easy.”
This week, Ikea also joined the trend, launch of a peer-to-peer marketplace for customers to sell used furniture directly to others. Designed to compete with eBay, Craigslist and Gumtree, Ikea Preowned is being tested first in Madrid and Oslo before a decision is made on its global rollout later this year.
Jesper Brodin, CEO of Ingka, the main operator of Ikea stores, says the group has an even higher market share in the second-hand sector than in the new goods sector. “So we think this will be a good lesson – what types of goods are sold?” he says.
It's easy to see why big brands are tempted by second-hand clothing — it's growing much faster than new sales, though usually from a much lower base. ThredUp, a US resale platform, ratings that the global used clothing market has grown from $141 billion in 2021 to $230 billion this year and is set to reach $350 billion by 2028, at a growth rate he estimates is three times faster than new clothing. Consultants Bain & Company estimate that used luxury clothing sales have grown 125 percent from 2017 to 2023, compared with just 43 percent for new clothing.
Second-hand shopping is also becoming increasingly popular among the youngest consumers. More than 40 percent of Gen Z and millennials buy second-hand at least every few months, compared with just over 20 percent of baby boomers, according to a survey by analysts Euromonitor.
“There used to be a stigma attached to second-hand clothes. But the younger generation cares less about something being new. They care about waste, about value. It's a great investment opportunity,” says one European private equity executive.
But for all the hype, there are also plenty of concerns. In the West, the second-hand economy is dominated by non-profit charities and consignment shops. Can established brands and start-ups make money from it? There are questions about the difficulty of finding the right products, as well as about scams. And there are concerns about the motives of some companies, given their role in producing ever-increasing volumes of new products – is it to save the planet or for marketing purposes?
“There’s a component to this that may be PR-related. Big brands like H&M and Zara – they’re under a lot of pressure, they’re concerned about how unsustainable fast fashion might be,” says Jennifer Hinton, a research fellow at Lund University who has written about the second-hand market.
Shopping second-hand is nothing new.Thrift or charity shops like Goodwill and the Salvation Army in the US or Oxfam in the UK have been offering used clothing, books and more for decades.
“People in the West think that the second-hand economy is emerging. But it’s always been there. As long as there’s been new stuff, there’s been second-hand stuff,” says Minter. “In emerging markets like clothing and furniture, the second-hand economy is dominant, and it’s dependent on exports from developed countries.”
There are already complex supply chains that support the charity sector. A vintage Led Zeppelin T-shirt that can sell for more than $100 in a New York store probably came from a bale of clothing in the U.S. that is first sent to Pakistan or Guatemala to be sorted, with only the very best items then sent back, says Minter. “It’s less than 1 percent that celebrities are interested in,” he adds.
Thrift stores have developed a deep knowledge of what they can sell and what they can export to emerging markets to sell as clothing or recycle into other products, such as pillow stuffing or insulation. “If someone on Depop can’t sell it, it might end up on Oxfam. If Oxfam can’t sell it, they have a lot of options,” says Minter.
There are signs that the arrival of big brands has changed the dynamics of the charity sector, where people sell their best second-hand clothes and donate the rest. Erikshjälpen, which runs charity second-hand shops in Sweden, receives lower-quality donations and now has to pay to burn about 70 percent of the clothes it receives, according to an employee quoted in scientific work Hinton and Ola Persson.
Many big brands have tried to get around these problems by simply offering a marketplace where private consumers meet to buy and sell, with companies acting merely as intermediaries.
For example, a seller on Ikea Preowned enters the name of their item, gets help from the company’s AI to take photos and measurements, adds a comment about the item’s condition, and then lists it for sale. Any buyer must arrange for the furniture to be picked up and inspected for quality themselves. The incentive for sellers is that they can be paid in cash or receive a 15 percent bonus if they choose Ikea vouchers instead. “It’s a good way to reconnect with customers,” says Brodin.
Ikea's marketplace is currently free to use, and if there is a fee in the future, it will be “very modest,” Brodin adds. This is aimed at reducing the fees sellers pay on a platform like eBay, which can be significant for larger furniture items.
But it also highlights how difficult it is for such platforms to make money. Vinted, which does not charge a commission to sellers, has become The first second-hand platform that will start making a profit At the beginning of this year, the company posted a net profit of 18 million euros on sales of 596 million euros.
“Second-hand is still a drop in the ocean. We think the challenge is to get people to look at second-hand before they look at new things,” says Tomas Plantenga, CEO of the Lithuanian startup. Zara, Shein and Cos offer their own marketplaces.
Minter says it’s hard for Depop or ThredUp to compete with Goodwill, the world’s largest thrift store, which operates as a nonprofit. “It’s an organization that gets its inventory for free, it has highly trained staff who know how to sort it, operations managers who know where to sell it. P2P doesn’t have that knowledge,” he adds.
There are other problems.Fraud is a problem, especially for high-end clothing. Vestiaire Collective and Monogram use authentication services to verify that a bag is actually from Gucci. Vinted does this for certain items, too, with the buyer paying a fee.
Some services may have loopholes, such as Ikea's Preowned feature, where sellers can sell to themselves and friends to get free vouchers. “This is something we're still learning every day and we need to understand how, if and where the problem exists to be able to mitigate it,” the company says.
Then there are the companies that make the products themselves. Most Lego products are given to friends, family or as gifts, but the toy maker aims to ensure that the remaining parts are reused or recycled rather than thrown away.
Tim Brooks, Lego's former head of sustainability, said in an interview last year that it took the toy maker several years to learn how to work with “reverse logistics” — the idea of taking back parts rather than selling them — as well as how to sort them, throwing out anything that isn't Lego and cleaning them.
The company is doing this through trials of its Replay service in the US, Canada and the UK, where people donate used Legos and the company then donates them to charities or schools, with nearly 500 tonnes of parts received so far. A separate buyback offer in Germany pays customers €8 gift cards per kilogram of parts or minifigures sent in. “It’s a long way to go for a company that’s used to linear manufacturing. It’s quite a big shift in thinking,” says Brooks.
One thing is clear: the second-hand boom is unlikely to die down anytime soon. Companies are looking for solutions to reduce emissions and make their business circular by reusing or recycling as much as possible.
Brodin himself says his eyes were opened after he sold a crib on a second-hand platform and then had a new baby. “I bought the crib back,” he adds. “From a sustainability standpoint, it’s a smart thing to do to make sure you’re using the materials correctly.”