A Secondhand Opportunity: How brands are reaching revenue and sustainability goals through circularity

Retail is at a critical juncture: with increasing pressure from consumers, policymakers, and competitors alike, brands are racing to find ways to reduce impact without losing returns. The industry's path forward lies in circularity, and brands are discovering that extending product lifecycles not only reduces emissions but drives profitability. As consumers increasingly embrace secondhand luxury and durable goods, innovative software solutions are enabling brands to “close the loop”—transforming returns and aged inventory into new revenue streams while strengthening customer relationships. At Energize Capital, our research shows that the future of fashion belongs to those who recognize a fundamental truth: in this industry, sustainability and profitability can be two sides of the same coin.

At a time of economic and sustainability pressures, retail is turning to resale

At Energize, we’re seeing 2025 as the year for climate solutions to play a key role in corporate outcomes. Even as headlines report that some companies are shying away from public ESG and net zero targets, demand remains for tools that enable resilient planning, drive operational efficiency, and enable transparent and sustainable scale. Case in point: computing. In December, we forecasted that AI’s energy demand will create a new interdependence between big tech and climate tools, both driving sustainability goals and reducing resource expenditures. (For more on that, check out our Data Center Deep Dive.) But climate applications don’t stop there. From transportation to manufacturing and beyond, many industries rely on smart climate decisions to drive smart business outcomes, and nowhere is this more necessary than in the retail industry.

The retail industry at a time of reckoning. In the fashion vertical, an explosion of garment production—driven by fast fashion trends—is meeting sluggish revenue growth and pessimistic forecasts, miring brands in massive inventories, skyrocketing return rates, and narrowing customer bases. At the same time, retail has become one of the most environmentally harmful industries, accounting for more than 25% of global emissions and 35% of microplastics pollution, and garnering policy reactions across Europe and California. Fortunately, the two-pronged problem of profitability and sustainability is finding a unified solution. Enter circularity.

At Energize, we have tracked the rise of the circular economy over the past few years as a key part of our decarbonization thesis. We’ve watched as consumers evolve away from high-waste practices toward longer-life materials, higher value, and pre-used items both for economic and environmental reasons, and we’ve seen marketplaces emerge to meet this demand—diversifying the infrastructure of resale into e-commerce. New channels have allowed the market to balloon: Since 2018, the industry has grown by 2.5 times, and is on track to become a $350B global market opportunity by 2028.  10% of the fashion market expected to be secondhand in 2025¹. These revenue opportunities come with clear carbon reduction benefits: In the fashion industry, doubling the lifespan of garments could reduce emissions by 44%.

The software tools unlocking a secondhand opportunity for brands

Until recently, the only major brands taking advantage of this growing market have done so for sustainability reasons alone, with others claiming that the resale market is too complex or difficult to break into. But this is changing as new software tools arise to streamline the process. The infrastructure of recommerce has evolved out of legacy business models like Goodwill and Salvation Army, through a second wave of business model innovation that produced online marketplaces like Depop and in-house inventory and logistics managers like ThredUp, and into its third wave: software-enabled scale. Today’s cutting-edge tools are asset-light, flexible solutions that can plug into brand systems and operate through third-party logistics providers, making circularity more accessible—and more profitable—than ever.

Three Benefits of Software-Enabled Circularity:

1. Rediscovering margins from returned products: In 2023, consumers returned retail products worth a staggering $743 billion, or 14.5% of total sales. Because retailers lack the internal capabilities to process this volume of repairs and cleaning, return policies have resulted in massive losses—in 2021, the National Retail Federation estimated that U.S. retailers lost $400 billion a year due to returns. Now, software solutions are emerging to move returned goods to secondhand markets rather than the landfill, providing white-label platforms that advertise returned goods under pre-loved label to attract a whole new segment of customers.
2. Liquidating aged inventory: Brands produced an estimated 2.5 to 5 billion items of excess stock in 2023, representing between $70 billion and $140 billion in sales. As margin pressures rise and brands look to improve cash flow, they are increasingly desperate to get products out the door and working capital back in hand. While brands have previously relied on auctions to distribute goods to storefronts like TJ Maxx or Ross Dress For less, resale platforms are now stepping in to facilitate the sale of aged inventory to curated resellers, channeling garments to higher-paying customers while protecting brand reputation.
3. Acquiring and reactivating customers: Over the past few years, brands have watched third-party resellers pull away potential customers with promises of budget-friendly prices, trendy vintage pieces, and longer-lasting goods. To recover the value generated by their garments, retail companies are using in-housed secondhand marketplaces and credit-based recycling programs to attract customers across spending categories and develop brand loyalty among entry-level luxury shoppers.

The results speak for themselves. A recent study reports that among brands that have begun to offer resale, 87% have advanced sustainability goals, 80% have generated more revenue, and 67% have acquired more customers. 67% believe resale will generate a meaningful revenue stream for the company within five years.

A New Future for Retail

In an industry previously notorious for compromising sustainability targets to achieve profitability ones, circularity marks a turn of the tide. Consumer sentiment, market cues, and common sense align to support the fact that, with today’s tools, extended product lifecycles can meet bottom-line goals. While customer access and digital infrastructure were once obstacles, climate software solutions have stepped in to provide clear pathways toward the next chapter of retail—one with new channels of value creation, stronger customer relationships, and reduced environmental impacts.

¹Energize Analysis, Global Data

‍