Why more returns are ending up in the resale channel

Perhaps no problem is more migraine-inducing for the retail industry than returns. An estimated 15.8% of retailers’ sales valued at $849.9 billion were expected to be returned in 2025, according to a report from the National Retail Federation and Happy Returns. Online sales boomerang even more, with an estimated 19.3% returned.

Chances are those returns are not fetching full price the second go-round. Only 47% of returned items are subsequently sold for full price, according to a 2023 survey of US and UK apparel retail executives by SML RFID, which makes labels and tags to track products from manufacturers to stores. Another 42% are sold at a reduced price, with an average markdown of about 38%. As for returns that are damaged or with damaged packaging, or whose seasonal window has closed, they’re often thrown on a pallet and sold at drastic discounts.

A recent examination by Retail Brew of B-Stock, an online marketplace where retailers and brands sell returned and excess merchandise in bulk, found many returns are drawing bids for a fraction of their original prices.

• An auction by Walmart for five pallets of primarily apparel customer returns with a total MSRP of $15,094 had a high bid of $625 (4.1% of MSRP) with about five hours left.
• An auction by Target for two pallets of customer returns of women’s apparel with a total MSRP of $27,588 had a high bid of $575 (2.1% of MSRP) with about four and a half hours left.
• An auction by Dick’s Sporting Goods for two pallets of customer returns, including NBA and NFL apparel, with a total MSRP of $46,023 had a high bid of $3,225 (7% of MSRP) with about six hours left.

But these days, some retailers are finding a way to recover more value from their less-than-pristine returns. With the rapid growth of the resale industry, some brands are beginning to route returned merchandise into their own resale channels.

“Night and day”: At Archive, a resale as a service (RaaS) company that partners with retailers including Lululemon and The North Face on their recommerce programs, about half of its retail partners are selling damaged returns on their resale sites, according to Ryan Rowe, Archive’s co-founder and chief technology officer.

Rowe told Retail Brew that his company’s partners typically fetch 50%–60% of MSRP on their recommerce sites, compared to 10%–20% in the liquidation channel.

“The amount that you’re going to get when you literally just throw it on a pallet and you sell it for pennies on the dollar, versus if you actually do the work to sell it to your customer—it’s night and day,” Rowe said.

At Treet, another RaaS company for brands including Tecovas and Ministry of Supply, Co-founder and CEO Jake Disraeli estimated brands fetch from 45% to 65% of MSRP on average on returns they sell through their resale sites. About 25% of Treet’s brand partners are including returns on their resale sites.

“Historically, the goal of brands with discounted inventory and B-grade inventory is to break even,” Disraeli said. But through their resale channels, “the core thing is they can actually earn revenue,” he added.

Full stream ahead: For recommerce evangelists, the argument for selling returns through branded resale programs is the same as for the programs in general.

“It overlaps with some of the reasons for owning your resale program at the end of the day, which is acquiring new customers,” Disraeli said.

Unlike selling returns (or overstock) in discount or liquidation channels, selling on a branded resale site could land price-sensitive customers and also get their email addresses.

“Maybe I’m not quite ready to drop $200 on a pair of jeans, but I might drop $100 and then at that point, the brand has that customer’s email address,” Disraeli said.

Terry Boyle, CEO of Trove—a branded resale service whose partners include Patagonia and Carhartt—told Retail Brew in January that between 50% and 60% of customers who purchase resale items from brands are new customers, and that as many as 30% of them subsequently purchase new items from the brand within a year of the initial purchase.

For Archive’s retail partners, about half of resale shoppers are new to brands (read: customer acquisition), and for some it’s as high as 70%, per Rowe. Customers who purchase both on brands’ main and resale sites have a lifetime value of 2–3 times higher than those who shop on just the main sites, he added.

“You end up being able to acquire a new, more price-sensitive demographic into your brand through this channel, and you’re more likely to be able to do that the more recent and interesting your inventory is,” Rowe said. “So unlocking a return stream into this channel has that added benefit.”