Pricing Challenges In The Used Fashion Market

The fashion industry is restaging itself through the used fashion market.

Kishore Rajpgopal
Kishore Rajpgopal
Founder & CEO

If you thought it was a small and niche market, just wait till you hear the results of the secondhand market assessment carried out by Thredup. As of date, the used clothes market is worth $24Bn, and is all set to reach $51Bn in the next five years. Millennials and baby boomers have made this segment popular. At least 65% women claim they are fine with buying second hand apparels and accessories.



What we are talking about here is the blur in the lines that demarcate the product from the brand.
Remember the famous dialogue from Spiderman- With power comes responsibility? It’s the same with used fashion. In this case, the power they have on the fashion retail market has rendered some challenges for them.

Why Do Customers Thrive on Used Fashion?

The gen-z’s and the millennials are making conscious attempts towards sustaining the environment around them.

  • Sustainability: Their need for sustainable clothing has given rise to the second hand market, as it consists of refurbished or recycled clothing.

  • Affordability: This customer segment is also looking at getting access to the latest fashion trends in an affordable way, which is satisfied by the resale segment.

How does the Used Fashion Market Work?

Let’s say Tom has a few clothes and handbags to sell. You would connect with them, offer a lucrative price and make the purchase from them.

Next on, you need to sell this product. Here are a few costs associated with the sell.

  • The investment you have made by purchasing the product

  • You need to recycle or refurbish the product before it is ready for the sale

  • You will need to set up infrastructure to market the product and attract buyer

Once you are done, you need to connect with your potential buyer and complete the sell.

The segment is dependent on two factors:

  • Getting more sellers on board to get items such as apparels, and accessories

  • Acquiring customers to whom you can sell these fashion products to gain profits

No niche is complete without some challenges. The used fashion market has to responsibly price the products, which will enable them to maximize their profits. However, pricing remains a challenge.

Pricing Challenges

  • Unlike fast fashion, here the attention is garnered towards the products. That means, your pricing structure should be such that the person buying it from your platform considers it worthy
  • The resale is all about buying from one customer and selling it to another. You will need to include your purchase cost in your sale price to make the deal profitable for you.

You will need a good pricing strategy that will help you combat your costs, and get exclusive profits.

A Case-Study Solution

We were approached by a Europe-based resale fashion retailer.
A person say, Laura approaches the resale fashion retailer. They buy the products from them, refurbish these goods, and then sell it into the European markets. They were finding it difficult to achieve profits, which is why they wanted our help.

  • They wanted a higher sales velocity, which means they wanted to sell the products as soon as possible
  • Total revenue of the company should go up

  • The average price for the product within a product group should also increase.

  • The average price of the product per product group should increase

So, here’s what we did to help them achieve their goals.
We primarily factored price elasticity, and demand of the product in setting the price for the product.

  • Price elasticity helped us understand the demand for each product at certain prices or price ranges. We knew when the customer is likely to purchase the product, and when they will claim it to be unaffordable

  • The demand forecasting helped us know the demand for the product. If the product demand was high, we could easily mark it up slightly higher as against the product that does not showcase demand.

  • The conditional probability of a product being sold at a given point of time based on their attributes

Each of the product were put into their respective clusters based on the common attributes, and these clusters were then analyzed. That helped with pricing strategies.

Here is a depiction of how we approached with the solution.




We also took into account the average sales and average profit generated by these clusters along with a few external factors such as the holiday season and the amount paid to the product’s seller to define our pricing strategy.
Based on demand forecasting models and considering all the external factors, we were able to recommend prices, as well as the marks up and down in prices.
Here is how our price recommendation helped our client.




We eventually helped determine the conversion rates as well as the fast moving & slow moving clusters.

How do you approach the pricing challenges?

Based on our pilot study and an understanding of the market, here are a few recommendations.

  • The price elasticity combined with demand forecast for the product will help determine the price range.
  • Know how the competition has priced a similar product, and you will get an idea of how it is selling at that rate. You will know how much the customer is willing to pay
  • If you are selling something that is still trending, then you ought to know the market value of the product. It will help with pricing. However, if the product is not in trend, then you need to consider the depreciation value as well, before pricing the product.

Key Takeaways for Used Fashion Retailers

Your pricing strategies can make the difference between success and failure of your business. A data driven pricing strategy learns from trends, adapts to changes and like a car’s cruise control, keeps you on track towards business goals. Here are some takeaways:

  • Firm up pricing goals – is it maximizing sales, or maximizing profits, or clearing out stocks? Early on when you are driving to get traction, you may price for sales. Soon you need to move to price for profits – that is what your investors and board need. You may use different goals for different categories – depending on whether it is an early category or a mature category. Products at the end of the fashion life cycle can be subjected to clearance pricing

  • Adapt pricing continuously – your pricing engine (yes, you need one. It cannot be your Excel spreadsheet) needs to constantly calibrate KPIS such as rate of sale, the estimated demand and the stock available, and adjust pricing on weekly, sometimes on a daily basis.

  • Conduct price experiments – Analyse and understand the price elasticity and also the rate of sale of a particular product group by choosing to vary prices selectively and measuring the impact. Lessons learnt can be ploughed back to main pricing strategies

  • Keep an eye on competition – use Machine Learning to learn pricing not just of the identical products, but similar products and substitutable products. Ensure that your pricing is comparable, or difference can be justified. Identify strategies to increase or decrease prices. And yes, avoid the “race to the bottom” syndrome.

  • Understand your customers- cluster your customers using their profile and buying patterns; you may offer promotions or discounts to selected customer clusters to move stock or increase rate of sale. An overall promotion or discount is often not necessary – you leave money on the table – because you are offering discounts to customer who would have anyway bought at the original price.


Published on Aug. 26, 2019

Get Started

Pain Problems to Solve

Select 3 problems

Over Stocking
Product Expiration/Wastage
Out of Stock
Improper Markdown
How much more COULD we have sold?
Cant Figure out latent Demand
What more merchandise could sell
Food Wastage
Not Responding Speedily to fashion Trends
Over Exposure to Competitor Pricing

Benefit Expected

Select Top one or two

Better Full Price sell through (Less Discounting)
Higher OSA (on shelf Availability)
Higher Inventory Turns
Lower Store or DC inventory
Higher Basket Sizes
Higher Customer Loyalty (More Repeat visits)
More Effective Planning