BY DAPHNE KASRIEL-ALEXANDER
Buying used, recycled or re-manufactured items has no longer to
do with saving up. For millions of consumers throughout the Americas, it is all
about taking part in the new so-called circular economy, which implies the
re-entry of previously used items in the production/sales cycle. Consumers are not alone in their ‘thrill of thrift’ –
firms have joined them, forging alliances with their customers and adding value
to used items. Meanwhile, the internet
offers an unprecedented window of opportunity for bargain hunters,
who shop with near-impossible discounts.
KEY TRENDS
·
The new clothing cycle;
·
Virtual communities;
·
The new outlet shops.
COMMERCIAL OPPORTUNITIES
·
Outlet shops mean business per se. An ever larger number of
brands are now manufacturing special products for these shops, which are no
longer the exclusive domain of second- and third-tier products;
·
Saving up knows no social class. Do not be afraid of offering
huge promotions to high-income clients. They are no longer embarrassed – and
they now even regard it as smart – to buy discounted items;
·
The value of used things. Firms such as Apple, HP, Target and
Best Buy pay with cash, credits or discounts for used products, thus boosting
sales of new ones.
BACKGROUND
For
over five decades, the concept of buying, using and discarding a product has
reigned supreme in North America. It was also the dominant model in Latin
America since the 1990s, when most regional economies began growing. However,
the ‘green’ value of reusing things has now begun spreading throughout the
region and so buying used items and selling one’s own when they are not in use
is no longer frowned upon. In the past, millions of people bought used products
more out of need than desire, and they are now joined by mid- and high-income
consumers. Therefore, for a variety of reasons, purchasing second-hand products
has become trendy and is also a clever way of making the most out of one’s
money.
This
trend is strong even in countries where the comparable cost of new products is
low, such as the USA or Panama. In the Central American nation, for example,
websites such as Encuentra24 and OLX are prompting Panamanians from all strata
to save up. According to local analysts, “shopping for second-hand items no longer
implies a lack of income, but actually a person’s smartness, for they can save
up to half the potential cost of a new product,” reads an article from local
paper Panamá América.
Auctions
are another saving method back on the rise. In Peru, auction house VMC Subastas
auctions consumer goods, services and even durable goods such as cars, at a
maximum discount of 40%, and not every item sold there is used. The platform
seeks to captivate bargain hunters, with more than 30 firms auctioning
products, including Pacífico Seguros, Cruz del Sur, Interbank, Química Suiza,
and Perú LNG, according to local paper El Comercio.
THE NEW CLOTHING CYCLE
Used
clothing and footwear make up an ever-tempting market for millions of shoppers,
especially in Latin America. Indeed, some countries, such as Bolivia and
Mexico, have gone as far as to try to regulate such markets. In Andrew Brooks’,
“Clothing Poverty: The Hidden World of Fast Fashion and Second-Hand Clothes,”
the author claims this trend is expanding at a record pace both legally and
illegally. The United States exports about US$700 million a year in used
clothing, especially to Canada, Chile, Guatemala, Mexico, Honduras and the
Dominican Republic, according to UN statistics from 2013.
In
Central American nations and others such as Bolivia, demand for used clothing
is as large as that for new garments. In Chile and Bolivia, buying clothes from
northern neighbours has actually turned fashionable. Despite the fact that the
Bolivian government banned imports of used clothing in 2006, an estimated 8,000
tonnes enter the country every year. The trend is so strong, that even
second-hand clothing vendors have their own Spanish noun there: ropavejeros
(old clothesmen). Mexico has a similar ban in effect, yet controls are difficult.
In Chile, where people call used clothing “recycled” clothes, these have turned
into an excellent alternative both for entrepreneurs and consumers, who say
they ensure ‘exclusiveness’ and ‘fair prices,’ according to a report from local
TV channel 24 horas.
In
Argentina, sales of used products usually take place in so-called ‘American
fairs,’ a Spanish term alluding to the old American tradition of recycling
clothes and items by hosting garage sales. This trend is now expanding online,
with websites such as RopaRoll, The Green Closet and Renová tu Vestidor, which
make it easier to buy and sell used clothing. These websites are highly popular
among women with high incomes, who shop for brand names and designer clothes
every year and have no space in their closets. Indeed, the trend emerged in
cities such as New York, San Francisco and Chicago, where young people often
live in very small apartments. Clothing is joined by used footwear, handbags,
backpacks and accessories, all in good condition.
VIRTUAL COMMUNITIES
The
growth of online shopping and sales communities has rapidly boosted sales of
second-hand items among individuals. Brands have begun joining the trend. The
rise of eBay in the USA and MercadoLibre in Latin America kickstarted the trend
over a decade ago. Then came websites such as OXL, Alamaula and Craigslist,
among others, offering the possibility of selling and buying without paying a
fee. The latest trend is fuelled by closed virtual communities, which seek to
boost their users’ trust. Another remarkable agent is the ‘professional’
middlemen for those without time or willingness to sell their things by
themselves.
One
of the most important second-hand markets in the Americas is for tech-related
items. According to market researcher Gartner, 41% of smartphones sold in the
USA are second-hand models and sales are conducted between individuals. This is
due to the fact that 60% of them do not replace their phones because of
malfunctions. Where do these devices end up? According to Gartner, 41% are resold.
For brands, this is an opportunity to keep replacement cycles in the 18- to
20-month bracket; this is why many support these processes directly or
indirectly.
HP,
for instance, trains its consumers on what to do with used technology (five
customer service options): recycle, trade-ins, return for cash, donate or
destroy) and specialist shops such as Best Buy and Target offer discounts for
handing old devices. Other options include Gazell and BuyBackWorld, which
specialise in used technology; and Goodpoint, which pays for recycling.
Professional
salesmen take part here too, offering promotions for bargain hunters. In
Argentina, for example, there is Te Lo Vendo, an online platform that sends
‘used-goods specialists’ to the vendor’s home, where they take pictures of
products, upload these on social networks and exchange websites, oversee
product delivery and get the money for them. The slogan reads “sell without
doing anything.” Natalia Schurmann, a young mother of two, took her chances
with the system, as she told local paper La Nación: “My second child, Jazmín,
had been born a few days earlier. I was very busy and Father’s Day loomed on
the horizon. I had no time or money to buy my husband a gift. I visited Te Lo
Vendo and a few days later something of mine sold. With the money I earned,
plus a few pesos, I bought him a 40-inch smart TV”.
Services
such as these emerged in the USA and Canada. One pioneering product was eBay
InstantSale, focused mainly on comfort (“Cash in your used electronics”, reads
the slogan). In North America, services with the same features such as Gone
(http://thegoneapp.com) or Sold (www.sell.com) are on the rise. In Latin
America, security is the main value. Many of these platforms also offer the
possibility of buying products sold by other users, falling under the scrutiny
of bargain hunters for their good prices and secure transactions.
THE NEW OUTLET SHOPS
Brands
used to neglect bargain hunters, dreading the low profitability levels from
steep discounts on their prices. However, they have found a way to reach that
segment in recent years, especially after the 2008 crises, by resorting to
outlet shops. “In recent decades, outlets were places for manufacturers to
unload excess or faulty merchandise. This is no longer a valid option.
Currently, much of what is sold is exclusive items for outlet distribution,
typically those that were popular a couple of years before in retail shops, and
which are now manufactured once again for outlet shops at lower prices” says
Tod Marks, senior project editor at Consumer Reports.
This
organisation conducted a survey on the 58 top brands with outlet sales in 2011.
In general terms, 60% of outlet shoppers said they were fully or highly
satisfied with their shopping experience and almost three-quarters of them
described the quality of articles as excellent or very good.
Outlet
categories have also been expanded in recent years, now featuring dozens of
options: Jockey and Carter’s (clothing and underwear), Harry & David
(food), Corningware (kitchenware), Izod and Van Heusen (clothing) and Coach
(leather items and other accessories).
Another
format currently experiencing growth and which is increasingly esteemed, is the
premium outlet shop category. This format has already reached American cities
such as Miami, Orlando, Las Vegas and Houston, as well as other urban areas in
Chile and Argentina. Indeed, Buenos Aires witnessed the emergence of an even
more upmarket version in 2014: luxury outlet shops. In the latest one to open
there, The Palace, brands offer special promotions with discounts of up to 25%
through benefit clubs and affiliates.
BARGAIN OUTLOOK
Until
a few years ago, buying and selling used or re-manufactured older season
products was seen as a part of the informal economy and disregarded when assessing
a market. However, the growth in demand and its weight on consumer decision
making are turning it into a force to be reckoned with; a universe that must be
researched and taken into account. Countries such as the USA, Colombia and
Chile already have legislation in place to grant warranties and rights for
those who purchase used goods. Indeed, giving used things as gifts is no longer
frowned upon. According to MercadoLibre, an Argentine online marketplace
dedicated to e-commerce and online auctions, sales of used gifts increase
strongly during the holiday season, with a double-digit annual expansion rate.
Author: Daphne Kasriel-Alexander
