The ‘Thrill of Thrift’: From Circular Economics to Online Bargain Hunting in the Americas

The ‘Thrill of Thrift’: From Circular Economics to Online Bargain Hunting in the Americas

The ‘Thrill of Thrift’: From Circular Economics to Online Bargain Hunting in the Americas

By Daphne Kasriel-Alexander – Consumer Trends Consultant
Published by Euromonitor

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.

Discounters in Selected Countries: 2009-2014

Source: Euromonitor International from trade sources and national statistics

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.

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.

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