Department stores are increasingly losing business to resellers and discount chains, as inflation pushes consumers to become more thrifty when it comes to clothes shopping, according to a new report.
More and more shoppers are finding greater value at off-price chains and secondhand stores, compared to traditional department stores, a report released Thursday by Bank of America Securities found.
“Rather than cannibalizing sales from each other, data points to off-price and secondhand apparel retailers both gaining share from department stores, with off-price emerging as the real winner,” Lorraine Hutchinson, who led the study, told RetailDive.
Last year, the secondhand market in the U.S. grew almost four times as fast as the broader apparel market, according to data from resale site ThredUp.
However, a growing number of Americans also appear to be opting for off-price retailers — like Ross, TJ Maxx and Marshalls — over any other type of retailer. According to the Bank of America report, used apparel retailers underperformed discount stores during eight of the past 12 months.
Even though resale transactions are on the rise, the amount consumers are spending per transaction is decreasing. Last month, spending per household on used apparel rose eight percent year over year, with transactions up nearly 40 percent. However, spend per transaction dropped 22 percent, according to the report.
“We think this is due to the fragmented model of most reselling platforms, which typically rely on many independent sellers,” Hutchinson said. “This makes it difficult to sell at higher prices given the high degree of competition, which has only built in recent years as reselling has become more popular.”
While reselling clothes or other items on the secondhand market may be more difficult these days due to greater competition, off-price markets continue to thrive, Hutchinson said.
“We’re frequently asked whether rising secondhand apparel sales pose a threat to the off-price channel,” Hutchinson said. “Using a new proprietary dataset, we show that while secondhand is growing, it is not at the expense of off-price.”