The market for selling used goods is growing at an explosive pace. However, most startups venturing into this haven’t yet realized that they need to create two products simultaneously! One for those who purchase new items, and another for those looking to save money. If you grasp this trick, you can outpace them. And here are some live examples of how this can be done…
THE ESSENCE OF THE PROJECT
With Circular, you don’t need to buy gadgets and electronics — you can rent these devices, paying a monthly subscription for their use. The startup believes that this consumption method is the future.
Depending on the category of the item, you can set up a subscription for 3, 6, 12 or 24 months. Short subscription periods are for temporary jobs requiring corresponding hardware. Longer ones are for owning the device. The founders claim that the startup has twice as many long subscriptions as short ones.
To set up a subscription, you need to send a request, which is approved if the client has a favorable financial condition, similar to the issuance of ordinary cash loans. At the end of the subscription term, you can return the device, buy it out, extend the subscription period, or rent a new device instead of the old one.
Upon purchasing the device, the startup credits half of the amount paid for the subscription for this device. But, as the startup says, almost no one uses this option. In other words, clients do not see the service as a replacement for installment on buying the device — they use it precisely for its rental.
The target market of the startup is Southeast Asia and Oceania. Currently, they have two representatives — in Singapore and Australia.
In the winter of 2022, Circular went through Y Combinator, and now announced that it has raised two rounds of investment totaling 7.6 million dollars. Over the past 12 months, the startup’s revenue has tripled. In the next 12 months, it plans to increase the revenue of the Singapore and Australian representatives by 3 times again, not considering the possible opening of new locations.
What’s interesting
The gadget and electronics rental theme is already well underway in Europe. It’s enough to recall the German startup Grover, also claiming that “the future of tech gadgets is rental, not purchase.”
In 2022, Grover raised a new investment round of 330 million dollars (220 million of which is in the form of debt) — exactly to satisfy the growing demand in Europe. In Southeast Asia and Oceania, this theme is not yet as popular, although there are already similar services. Against this backdrop, Circular aims to take the lead in this theme in the region.
Generally speaking, the resale market for used goods became somewhat noticeable not too long ago — around 2014-2017. But in recent years, it has been growing at explosive rates.
The main categories of goods sold on this market are clothing and electronics. The resale market for used clothing alone amounted to 36 billion dollars in 2021, with an expected growth to 77 billion by 2025. The growth rate of the used clothing resale market is 11 times faster than the overall retail market growth rate for clothing.
But here’s the side of this market I suddenly thought about. Well, it’s considered that the resale market for used goods is growing because the modern generation is ready to save money by buying used goods instead of new ones.
But for some people to have the opportunity to buy used goods en masse, other people must want to sell the new items they bought en masse 😉 Without this, the resale market for used goods won’t “start.”
It turns out that resale services need to learn how to find people who often buy new items and use them while they are new and trendy — and then usually just put them on a shelf or let them gather dust in the wardrobe.
The trick is that in each product category, 10% of buyers usually generate from 30% to 70% of the total sales volume in that category — and these people are called “superconsumers.” If the resale service manages to find and hook them — it will get a supply channel for subsequent resale spanning 30-70% of the market!
The specificity of such superconsumers is that these people usually can’t be bothered to sell their old items through conventional classified ads — spending time and nerves searching for buyers, meeting with them, haggling over prices, and dealing with possible claims that might arise from the buyer after the purchase.
Therefore, it’s much more convenient for them to have a service that will take away outdated or unfashionable goods without extra hassle — buying them for a certain amount of real money or issuing something newer or trendier in return, even with an additional payment.
The startup Croissant took a similar path in the used clothing market. Croissant offers online stores to add to the order form on their sites an offer to buy back the item purchased in the store within a year at a fixed price. As a result, the seller can avoid the hassle of returning purchased items, and Croissant has a channel for obtaining used goods for further resale.
Being still at the Minimum Viable Product stage in July, Croissant managed to raise 24 million dollars in the very first round of investment. It turns out that investors saw good prospects in their business model.
But the same thing happens with gadgets and electronics. There are the same 10% of people who buy almost all technological innovations. And then, as the founder of Circular says, “put them on the shelf, although they are still in good condition” – because they bought the next novelty.
I agree with him because in the photo is my previous phone, just put on the shelf a few days ago when I bought the newly released Google Pixel 8 Pro – and I certainly won’t bother selling it through classified ads. And the fact that the photo looks “futuristic” is because I used the AI built into my new phone 😉
By the way, it’s also written on the Circular website that “subscription is the best way to try all technical novelties.” However, this message is clearly lost among a bunch of words about “circular economy”, “frugality” and “environmental conservation.”
Where to run
The resale market for used goods is really growing well now – its size will grow at least 3 times over the next 10 years. So now is the time to get in here somehow.
But the problem is that resale services need to essentially make two products!
One product – aimed at buying up used goods. Targeting one audience – for example, those very “superconsumers” who often and willingly buy new items at full price.
And the other – for selling used goods. Which should focus on a completely different audience – wanting to save money or improve the ecology of the planet by buying used items.
Combining two different audiences in one product is almost impossible. Otherwise, you’ll end up with a mishmash of slogans like “subscription is the best way to try all technical novelties” and “it’s cheaper to rent used gadgets than to buy them,” as with Circular.
On the other hand, every problem is an opportunity 😉
Therefore, the same Circular could negotiate with online electronics stores to implement on their sites its forms “subscribe instead of buying” or “buy back without hassle” according to the Croissant model – especially for new item buyers.
With the other hand, they could sell or rent used goods on another site of theirs, which will be visited by those who like to save.
By the way, why only on their own site? There is, for example, the startup model of Sella, which I wrote about last summer. They offer people to take the items they would like to sell, but do not want to bother with self-selling through classified boards. And these items are sold through the same classified boards by other people whom Sella finds separately — while Sella acts as an intermediary and guarantor of the process. Last year they raised 3 million dollars in investments in the very first round.
In general, there are many different options here — rental, buyout, sale, implementation on store sites, their own sales site, sale by other hands. You just need to choose in which combination you want to connect this, and exactly how you will divide the marketing efforts to obtain used goods and their subsequent sale.
But the theme is clearly growing and promising. So there’s a reason to rack your brains here 😉