Recurate’s CEO On The Growth Of Brand Based Resale Channels

Insight by

Adam Siegel, Co-Founder & CEO of Recurate, joined Cowen’s Retailing Broadlines and Department Stores Analyst Oliver Chen to discuss how Recurate sets itself apart by offering a tech-enabled peer-to-peer resale service to help brands launch their own resale channel. They also explored the differences in branded resale vs. peer-to-peer marketplaces, resale’s financial and lifetime value benefits, and Recurate’s key priorities ahead.

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Transcript

Speaker 1:

Welcome to Cowen Insights, a space that brings leading thinkers together to share insights and ideas shaping the world around us. Join us as we converse with the top minds who are influencing our global sectors.

Oliver Chen:

This is the Retail Visionary podcast series about visionary ideas and people. My name is Oliver Chen, I’m Cowen’s new platform, retail, and luxury analyst. In this episode, we will race into resell with Recurate. Resell is a topic Cowen has a rich heritage of diving deep into with leading CEOs and companies, we’re thrilled to be featuring Adam Siegel, the CEO of Recurate, which is a company powering resell and circularity for other brands. Adam lives and breeds his passion for nature. His goal is to make the consumer industry more sustainable. He was formerly the SVP of Innovation and Sustainability at the Retail Industry Leaders Association, where he facilitated collaborations on pressing industry challenges, including the circular economy. He has an MS from University of Illinois and an MBA from MIT. Adam, thanks for joining us here today.

Adam Siegel:

Thank you very much for having me, Oliver. Good to talk again.

Oliver Chen:

Adam, so what sets Recurate apart? Could you describe more simply what Recurate does?

Adam Siegel:

Yeah, of course. It’s actually pretty simple. We are a plugin to e-commerce websites and we enable a new experience for those brands’ customers, the experiences that people can sell or buy pre-loved items directly on the brand’s e-commerce site. So if you’ve ever purchased a product from that brand in the past, you can log in, find your purchase history, select an item for resale, and then customers who want to buy pre-loved instead of going to a third-party site can go directly to your brand and purchase a pre-loved item from your customers.

Oliver Chen:

Adam, what about consumers using third-party marketplaces or other places or peer-to-peer versus going to a brand? What are the major differences and why? And how do you help?

Adam Siegel:

The major differences, it’s very similar to buying firsthand. In the firsthand product market, it’s a very rich and dynamic market, you can buy directly from brands, you can buy from third parties,

[inaudible 00:02:36]

department stores, you can buy online, you can buy in-person, you can buy from multi-brand retailers. I think the same is going to happen with the resale market.

Adam Siegel:

Historically, the resale market has been dominated almost exclusively by third parties, the only option, if you wanted to buy pre-loved, was to go to a third-party multi-brand retailer. But now we’re creating this whole new dynamic where brands are benefiting from engaging in the resale market so customers now have choice. They can go directly back to the brand or they can engage in those third-party marketplaces. And we find that customers actually prefer to engage with the brand because there’s more benefit for them to do so.

Oliver Chen:

What are some examples of those benefits, Adam? And, Adam, what would you say are your core competencies in terms of your competitive advantages? Why can’t companies just do this themselves?

Adam Siegel:

As far as the benefits go for customers, there’s really two types of customers that engage in a resale market, there’s the sellers and there’s the buyers. The sellers are the people who have stuff in their closets that they’re no longer wearing, they’ve loved, but they’re looking to find a new home for, and makes the money. So in the case of sellers, a branded resale market is, first of all, easier, it’s easier for them to list, especially with our platform because we’re directly integrated to the brand’s e-commerce system. So the seller only needs to select the item from their purchase history and add a few simple pieces of information in order to list the item. If you go to a third-party, you have to fill out a whole long listing form in order to list that item. So it’s just simpler, there’s much less friction.

Adam Siegel:

But then also with all of the brands that we are working with, the seller has an option of getting a hundred percent payout in store credit. You really can’t go anywhere else on the internet to get a hundred percent of the value of the item that you sell. So that’s just awesome. I mean, it’s a huge customer benefit. Every third-party marketplace is going to take a transaction fee, but the brands benefit by just the opportunity to interact with you and so they’re willing to give you a hundred percent of that as site credit. So that’s on the seller side on.

Adam Siegel:

On the buyer side, now I don’t know if you’ve ever shopped any of the third-party marketplaces, but it’s really a treasure hunt. The pictures are crappy, the filtering is just not that great, it’s a poor online experience. And because we work directly with the brands, we have access to the brand’s product catalog and visual assets, descriptions, filtering, and so we can create a much nicer online experience for customers to come, browse, and buy pre-loved items.

Oliver Chen:

Adam, what types of retailers does Recurate appeal to? Are you seeing better traction in specific areas? Could you speak to some of your partnerships in the brands you work with?

Adam Siegel:

Yeah, of course. Well, it’s interesting because when we started this business, we were pretty specifically focused on apparel and we had great success in the first couple of years getting on some apparel brands, some fashion designers like Mara Hoffman and La Ligne, very well-known in their respective spaces and certainly some exciting brands that have fiercely loyal customer communities.

Adam Siegel:

But we’ve actually got a lot of traction in other categories as well. So like footwear, Steve Madden launched earlier this year, as did Frye and Dolche Vida, and we have a few other footwear brands launching soon. Also, handbags like Claire V. for instance, launched earlier this year, men’s wear. But then what really excites me is that we’re diversifying into product categories even outside of fashion. So outdoors, sporting equipment, gear and accessories, Peak Design, a beautiful brand with higher-end photography accessories equipment, again, a fiercely loyal community, and their products just last. We launched their resale program just over a year ago to tremendous success, and so I really see this model playing out across the consumer industry.

Oliver Chen:

Adam, what about the financial benefits that companies may see? One factor is this enhancement of customer lifetime value. Can you elaborate on what happens in terms of customers of the brands that are powered by Recurate?

Adam Siegel:

Of course, yeah. It’s a great question and certainly the crux of the conversation that we have with retailers and brands as they consider working with us. The financial benefits, frankly are even better than I had initially imagined when I launched this company. If you think about an e-commerce website and what the goals are for an e-commerce brand is really around customer acquisition, loyalty, and of course, revenue growth, and we’re finding that building a resale channel enables all of that.

Adam Siegel:

So like I said before, there’s two types of customers that are engaging in your resale market, there’s the sellers and the buyers. So let’s just start on the sales side. Sellers are former customers of yours, people who have purchased your product in the past, and this opportunity to sell an item provides a really great way to attract those customers back to you and make them even more loyal. So we’re finding that 65% of sellers are either lapsed customers, so they haven’t purchased from you in the last six months or more, or they’re actually new to brand, which means they might have purchased in-store or elsewhere. You don’t have them in your marketing channels and so you can’t build that customer lifetime value with them. So 65% from the sell side.

Adam Siegel:

And then from the buy side, we’re finding 50% of customers that are buying pre-loved products are new to the brand. 50% are new to the brand. So we imagine those are customers that were either buying your products on Poshmark or the RealReal before, or frankly, they just weren’t purchasing your product at all, but this gives them a chance to do it.

Adam Siegel:

And then the final thing to say in terms of the ROI and revenue opportunity associated with this is that, like I said earlier in the conversation, sellers primarily get paid in store credit, and what we’re finding is that they tend to turn around and upspend that store credit by 2 to 4 X. So imagine, Oliver, if you sell something for a hundred dollars through one of our brand’s resale channels, you’ll turn around and buy something for 200 to $400 back on that brand’s website, and that’s really where the ROI for resale comes in.

Oliver Chen:

Wow, those are amazing statistics, very helpful. What are the hardest parts of this, Adam? Certainly, authentication is one factor, but which parts are the hardest parts of this business model and how does that interplay with should a company just do this themselves? Why bother using Recurate?

Adam Siegel:

Well, I’ll start with authentication, even though I know it’s a specific consideration, it’s definitely one that we spend a lot of time thinking about. Ultimately, our goal is to provide the best experience for brands and their customers for engaging in resale, bar none, best experience. And one element of that is ensuring that the products that are listed on the brand’s resale channel are authentic. We already have a number of mechanisms built directly into our product today. Like for example, the primary way to list an item is to select that item from your purchase history.

Adam Siegel:

So, Oliver, you would log in, find your purchase history from the brand’s website, and then you would select the item from your purchase history to sell. That is a layer of authentication. We know you’ve purchased that product before in order for you to list it. But we’ve also recently launched a program with an amazing and rapidly growing New York-based brand called Another Tomorrow, women’s wear brand, very forward-thinking. And in this particular partnership, they have engaged with a company called EVRYTHNG, now owned by Digimarc, that puts a QR code, a unique QR code, in every single piece they sell, and that is what enables authentication. So that enables our resale market, someone will scan that QR code with their phone, and that immediately brings them to the listing form where they can list that item for sale. We know that item is authentic because of that unique QR code. And then once they ship the item, the receiver also scans the QR code, again, to confirm the authenticity of the item that they receive.

Oliver Chen:

Adam, that is a great segue. What do you think about digital identification at large? And a second question, we work with other great companies such as Trove, how is Trove different from Recurate as well?

Adam Siegel:

Yeah. Ha happy to answer the both of those. Digital IDs, I see it as the future, and I think the great thing about digital IDs is that they enable resell really well. They go hand in hand, these two technologies, and I think that the single strongest use case for including unique digital IDs with every product you sell is that you can confirm authenticity and you can further improve the resale experience using digital IDs for authentication. So, to me, they go hand in hand. I’m seeing several retailers and brands now that are including digital IDs in all new products. I think there’s hundreds of millions of products that are already on the market today with digital IDs. I certainly think luxury brands are going to dive much deeper into digital IDs in the future, whether they’re blockchain connected or not, but blockchain further enables authentication. I’m excited that resale will be riding that wave and vice versa, and that’s why we’re excited to partner with the leading digital ID providers.

Adam Siegel:

You mentioned other competitors, there’s really a couple of things that set us apart. One, we’re a relatively young company, just a couple of years old now, but I’m really happy to say that we signed our 50th brand partner today. And so in those short couple of years, we’ve been able to define a market and our asset-light model, which is primarily peer-to-peer. So selling products, peer-to-peer, customer-to-customer, has enabled us to grow really rapid.

Adam Siegel:

This is a nascent market. 50 brands, while a lot, there’s still many, many, many more brands out there, and so I think there’s a long road and a lot of opportunity ahead of us, but that’s the one major differentiator, we’re asset-light.

Adam Siegel:

And then the second major differentiator is that we’re directly integrated into the brand’s website. So if you look at any of our competitors, you’ll see they have a separate disintegrated website. And the benefits of an integrated website is that it’s a single, shared shopping cart, so customers can buy both new and used items in one checkout experience, there’s a single login, and then from the brand’s perspective, all of the data is aggregated all of your customer data, all of your order data, all of your product data, and that just further enforces the value of a resale channel for loyalty and enhanced customer value perspective.

Oliver Chen:

That sounds quite elegant and seamless and very helpful. That begs another question, Adam, about peer-to-peer. What about managed marketplaces relative to peer-to-peer? How do you see this evolving, as there’s many different approaches with different benefits and drawbacks to customers?

Adam Siegel:

Well, I think there’s no one-size-fits-all solution. In fact, part of the future that I see is an all-of-the-above future. Again, just like the firsthand market, it’s omnichannel. I think the resale market is going to be omnichannel as well. There’s going to be in-store, there’s going to be online, there’s going to be take back, there’s going to peer-to-peer, different customers have different needs, different product categories have different needs.

Adam Siegel:

At the end of the day, Recurate is a technology company. We started as peer-to-peer, but actually, now that we’ve launched with so many brands, the fun part about that is that we get a whole bunch of diverse requests for how we continue to grow their program. And so at this stage, we’re actually working with several brands that also collect items in-store, we’re working with several brands that are monetizing non-New returns, so returned items that can’t be sold as new, they’re now monetizing them through their resale channel, as well as some other supply streams. So I see the future as all-of-the-above and we’re actually starting to enable that with a handful of the brands we’re already working with.

Oliver Chen:

Adam, also, congratulations on the completion of your Series A funding. I would love any details around that deal. And also what are your key priorities with capital?

Adam Siegel:

Well, thank you for that, Oliver. I know the investment market is changing already now so I feel very fortunate that we raised when we did and we have such amazing investors. We raised a $14 million Series A, announced just a couple of months ago, that was led by Jump Capital, an amazing Chicago-based investment firm with offices in New York as well. And then a number of our existing investors followed on.

Adam Siegel:

There’s a number of things that we plan on doing, but in essence, it’s really more of the same. Like I mentioned before, I think the inevitability in this industry is that every brand is going to have a resale channel, just like every brand has e-commerce presence now, every brand is going to have a resale channel. It’s going to take time to get there, I imagine it’ll be the next five years or so, but we feel like we have a product and experience that customers love and brands see value in, and so our goal is just to continue to capture the market, get into new categories, further solidify our reach in the categories that we’re already in, and then build new features that further support our mission to simplify and improve the resale experience for brands and customers.

Oliver Chen:

Adam, would love your thoughts as well on customers and the economy right now, there’s a lot of cross currents in the consumer. What are you seeing in terms of the consumer appetite?

Adam Siegel:

Yeah. Well, I hear about the same trends that I’m sure you and your audience does. Certainly, inflation is a concern now, and it seems like we’re entering a recessionary market, that’s obviously very unfortunate for the economy and for society. It does provide a tailwind for resale. Resale benefits. Frankly, one of the reasons why I got into resale a couple of years ago is because I imagined there was a recession on the horizon and I was looking for a business that had the potential to be recession-proof. The benefits for resale is that sellers, customers are looking to get extra cash so they’re looking through their closets to find things that they can list for sale, and then buyers will be looking for a deal. They’re still going to want to purchase, but they’re looking for a deal. So I imagine tailwinds ahead for our market.

Oliver Chen:

And Adam, a final question, what are the two hardest challenges you see ahead? And also a third question is: what aspect of this business are you having the most fun with, and any closing remarks you may have?

Adam Siegel:

I love that final question. So I’m going to start with it. What do I have the most fun with? Honestly, it’s building a team. I feel so fortunate every day, we have such an amazing team. Oliver, you’ve met several of them, but it’s a very wide and deep bench now and continuing to grow every day. People who just have so much experience, but also so much passion. And I think that’s one of the benefits of being a mission-driven company is that you attract people who are passionate about what they’re doing.

Adam Siegel:

In fact, our VP of engineering said to me the other day, “Look, there’s so much work to be done, but I cannot imagine being anywhere else. I come to work every day just so happy to work for a business that’s doing good.” So I get energized from that.

Adam Siegel:

The challenges I think are the typical challenges in the consumer space or e-com space, specifically. Everyone is strapped for time, brands and retailers, teams are always lean. We are a technology integration and so we tend to work with brands’ development or technology teams, and they have roadmaps that are sometimes six months, a year, 18 months out. And so, just making sure that they see that this is a priority and that they have the resources to match ours. So that tends to be the challenge that we face, probably no different than any other e-com enablement system.

Oliver Chen:

Well, Adam, it was really delightful to meet you and spend time with your team and hear about all the innovation happening across what you’re doing and how you’re powering and recreating reCommerce in a new and innovative way. Thanks for your time.

Speaker 1:

Thanks for joining us. Stay tuned for the next episode of Cowen Insights.


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