Recommerce – the sale of pre-owned goods – is a nearly $40-billion-a-year industry and is expected to double soon. In an article on Bloomberg Law 1, attorneys from international law firm Perkins Coie examine the IP infringement questions facing resellers and brands in the resale marketplace.
The sale of pre-owned goods has ballooned to a $36 billion industry 2, and is expected to double in the next five years. The recommerce market is diverse – bricks-and-mortar are still relevant, but the future of resale is far more suited to the digital environment.
Consumer demand for sustainable goods has created systemic change in the fashion and apparel industry. Part of the trend is the environmental and economic advantages that can be gained from recommerce, but these come with their own set of risks – particularly from counterfeits.
A 2018 study 3 by the US Government Accountability Office found that 40% of a sample of goods purchased on popular eCommerce marketplaces were counterfeit. This, of course, creates reputational and financial risks for resellers, whose success is directly tied to consumer trust. Fakes also pose problems for brands. In 2017, counterfeits amounted to a multi-billion dollar 4 problem. They also significantly harm reputation, goodwill, and brand value.
Despite the counterfeit risk, consumer demand for second-hand products continues to grow. This may be why some brands have invested in or partnered with resellers. For example, The RealReal has established partnerships with Gucci, Burberry, and Stella McCartney, and Alexander McQueen recently partnered with Vestiaire Collective. These partnerships allow brands to authenticate pre-owned goods, which promotes sustainability and fights counterfeits.
In addition to the risk of knockoffs, recommerce brings the risk of purchasing stolen goods. State and local second-hand dealer laws were established to guard against the trafficking of stolen goods. However, they place onerous licensing, information collection, ID verification, reporting, and auditing requirements on resellers. Violations can result in criminal fines or imprisonment.
In response to the abuses of what is widely considered to be the unregulated recommerce online market, eCommerce sites are an increasingly popular target for regulators, so it is only a matter of time before enforcement authorities begin looking for second-hand online dealer violations.
So, it seems that what is true in the physical world is equally applicable to the virtual one. Piracy is a major threat to resellers and brands alike, but it can be managed through strategic partnerships and proper authentication.
3 - https://www.gao.gov/assets/gao-18-216.pdf
4 - https://www.researchandmarkets.com/research/hzjb9c/global_brand?w=4
