Trading used goods—recommerce—is a growing business trend

Written by ProfitGuide Staff

We’re all guilty. Our garages, basements, attics, closets and drawers are filled to the brim with stuff.

Although for many Canadians, the days of mindless, rampant ­consumerism are over (or at least on pause), our homes remain packed with shopping conquests from headier days. Increasingly, consumers are looking for an easy way to unlock the latent value of their used goods. Enter “recommerce.”

Declared one of the top consumer trends for 2012 by U.S. marketing consultancy, recommerce is a business model in which the trading in of used goods generates value for consumers. Put simply, people want their old stuff to be worth something—and more and more companies are happy to oblige.

Consumers have always resold large, long-lasting goods, such as houses and cars. But now, almost anything is ripe for resale or a trade-in—and technology is helping to make the used-good market more liquid. (Think: eBay.) Recommerce represents a growing opportunity for consumer-focused companies to attract and retain customers.

Three drivers propel recommerce. The most obvious is financial strain caused by tough economic times. “It’s a sign of the times that recommerce is growing in popularity now,” says retail analyst John ­Winter of John Winter Associates in Toronto. “With the middle class being squeezed, the 99% are looking for ways to be more ­frugal.” Another factor: despite shrinking bank accounts, many people can’t help but lust for the latest gadgets and fashions—and recommerce offers them the chance to trade in to trade up. Finally, recommerce taps into a basic human need: status. Trading in or buying a used item keeps it out of the landfill, giving the consumer “green” credentials. It also can signify shopping savvy, which, argues, is increasingly how consumers get their status fix. (Conspicuous consumption? That’s so 2007.)

Ignoring the recommerce trend could be a mistake. It’s beginning to affect even consumers’ initial purchase decisions, as they factor an item’s resale value into the cost of ownership for a growing range of purchases. Indeed, says David Soberman, a professor of strategic marketing at the University of Toronto’s Rotman School of Management: “There is a trend toward people trying to get the maximum out of what they consume.” Fortunately, thanks to online platforms, mobile marketplaces, and buy-back and exchange schemes, companies of all shapes and sizes can and are taking advantage of recommerce.

Bricks-and-mortar retail chains, for example, have begun taking back customers’ used goods in exchange for a discount toward something new. Electronics chain Future Shop, for example, appeals to customers’ desire to trade up by offering a gift card, valued at up to $350, in exchange for used iPads. In the hope of luring shoppers who want to save money and do their part for the environment, last year, clothing retailer Gap offered a 30% discount to customers who brought in old clothes, which were then donated to Goodwill.

Video game chain EB Games has long offered a discount to customers who bring in used games, which are then resold. But now smaller firms are getting in the game. Looking to provide an alternative to cash-strapped young gamers who nonetheless want the latest titles, Jean-Paul Rehr recently launched Waygoz, a website that hooks up people looking to meet in person to trade used video games.

“With new games being so expensive, used games seem much more appealing,” says Rehr, who’s based in Toronto. “Gaming used to be seen as a recession-proof business, but not anymore.” The appeal of Waygoz is that it cuts out the middleman, letting gamers decide among themselves the value of a particular game, explains Rehr. The site launched in November and already has thousands of local users. Rehr plans to expand to more North American cities this year.

Sport Swap, a Toronto retailer of new and used sports equipment, has a popular, long-running “half-back” program whereby customers may bring back specific sports equipment purchased at the store within the previous two years in return for a credit note valued at half the price originally paid for the items. Although Sport Swap owner Allan Chow admits that some of the equipment he takes back ends up on the garbage heap, he says the program builds longtime customer loyalty. More than half of all winter transactions at the store involve the half-back program. “We’re starting to see the third generation of families,” says Chow. “Eventually, the kids get older and branch out into different things, and they come in and buy more than just skis.”

The half-back program has helped Sport Swap build bonds and retain customers who could easily opt to shop at one of the big-box sporting stores. At the same time, customers like clearing their closets and basements of gear that no longer fits their children, says Chow. The program might sound expensive, but Sport Swap offsets the revenue lost to discounts by reselling most of the used goods; over time, Chow has learned which items and brands he will accept and which are likely not to be resold.

For some consumers, the value of recommerce derives more from being green than getting some green for their used goods. Western Canada retailer London Drugs allows customers to bring in any old electric and electronic items that were originally purchased at London Drugs for recycling—anything from TVs and cellphones to kitchen and personal-care appliances.

Among other things, the practice helps to build brand loyalty, and happy customers spread positive word-of-mouth, says Maury McCausland, retail operations administrator for London Drugs, which is headquartered in Richmond, B.C. As part of its recycling efforts, the 74-store chain teamed up with Panasonic last year to offer customers a $15 gift card when they brought in an old microwave for recycling. “It was very, very successful,” says McCausland. “People like the feeling of recycling.”

What’s more, the program has generated revenue for the retailer. For one thing, customers who return with the gift card usually spend more than $15. Plus, the chain has partnered with a recycling firm that strips the electronics and resells some of the elements. “We’re actually making money on recyclables,” says McCausland.

When recommerce is done right, everyone benefits. “The customer gets a discount and you get a sale. It’s a win/win for everybody,” says retail analyst Winter. With consumer confidence still weak, a recommerce scheme could be just the catalyst your business needs to get today’s fickle shoppers shopping again.

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