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Lululemon is embracing the resale market for 'pre-loved' clothes: Trove CEO

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Lululemon (LULU) is enticing veteran bargain hunters with its promise of yoga pants at half off the $130 retail price. The only catch: They are "pre-loved," i.e., someone else used to wear them.

The high-end athletic brand recently launched its Like New resale program that allows customers to get store credit for trading in their "gently worn" Lululemon gear, which is then resold at a discounted rate. By offering customers value and sustainability, the company aims to cash in on an emerging commerce channel.

"Given the experience we've had over the past ten years, we expect that 30% — so 1 out of 3 items — will come from someone else's closet that we buy," Trove CEO Andy Ruben told Yahoo Finance Live (video above). "The question is just which retailers like Lululemon will take the leadership step and take advantage of this trend."

LONDON, ENGLAND - JUNE 20: Ahead of International Day of Yoga (21st June), yoga teacher Helen Russell-Clark prepares to celebrate the return of lululemon's Sweatlife Festival at Londons Tobacco Dock on June 20, 2019 in London, England. Now in its fourth year, the Festival will see 6,000 people come together this Saturday and Sunday to take part in over 250 classes. See lululemon.co.uk/sweatlife. (Photo by Nicky J Sims/Getty Images for Lululemon Sweatlife Festival )
A yoga teacher prepares to celebrate the return of lululemon's Sweatlife Festival at Londons Tobacco Dock on June 20, 2019 in London, England. (Photo by Nicky J Sims/Getty Images for Lululemon Sweatlife Festival )

Ruben added that "we're familiar with brick and mortar as a channel. And e-commerce is basically required to play right now. Over the next few years, resale will be the same."

Trove has been handling the merchandise and facilitating the resale channel for Lululemon since the apparel company began piloting the program in Texas and California earlier this year. Lululemon announced it would expand its resale program to all 50 states and nearly 400 Lululemon stores and outlets beginning on Earth Day.

"The success of that program... in terms of guest — which is their customer response to basically the ease of the program, the ability to hand back an item you're not using, sustainability on-trend — was fantastic," Ruben said.

'We'd all rather have a Lululemon pair of yoga pants'

Some consumers may be concerned about wearing someone's second-hand gym clothes, but Ruben assured shoppers that the product quality is up to Lululemon standards.

"We do handle all of the physical items," Ruben said. "They are all obviously not just washed but [also] inspected to an incredible degree because Lululemon is standing for the brand."

Given Lululemon's high price point — "Lululemon is priced about 30% to 40% more [than competitors, so] it will be hard to press the envelope down even further," Bernstein retail analyst Aneesha Sherman told Yahoo Finance in March — the Like New program offers consumers the ability to engage with the brand at a lower cost. This comes at a time when Lululemon may have a harder time raising prices than other luxury brands.

"We'd all rather have a Lululemon pair of yoga pants than a lesser brand, so now Lululemon is just making that possible," Ruben said, highlighting how the athletic apparel brand can still cater to consumers seeking value amid inflation.

This isn't Lululemon's first foray into marking down excess apparel. The company's "We Made Too Much" category on its website also lists select items with inventory surpluses at a slight discount. The brand also enjoys popularity in the secondary market and has been a top brand on eBay for years, Ruben explained.

WINTER PARK, FLORIDA, UNITED STATES - 2020/01/18: A Lululemon storefront location. (Photo by John Greim/LightRocket via Getty Images)
A Lululemon storefront location in Winter Park, Florida, on January 18, 2020. (Photo by John Greim/LightRocket via Getty Images)

"What's new is that the brand like Lululemon is now getting a piece of their own revenue for the products they originally made and that they sold," Ruben said. "And brands today need to be playing in this space because if they're not, that just means that third parties like eBay are and others are taking revenue from their items."

And as more shoppers search online for used gear, Ruben explained that nearly two-thirds of customers prefer to buy "pre-loved" items from the brand itself than from a third party.

"That is part of the job that we have and that we work with our brands to decide which items are going to make sense to both take back, what is the value for those items, and which of those items will be resold," Ruben said. "That is an opportunity for brands basically to take back this massive share of a $70 billion market that, right now, is going to other players."

'On the leading edge of a trend'

Trove also manages resale programs for other premier brands including Patagonia's Worn Wear, Levi's (LEVI) SecondHand, and the REI Co-op's Used Gear. In these secondhand marketplaces, one thing Lululemon has in common with Trove's other clientele is its broader sustainability agenda concerning packaging, textile waste, renewable energy consumption, and carbon emissions.

Patagonia founder Yvon Chouinard has endorsed resale options and has even gone further to condemn hyper-consumeristic buying habits, saying in a 2015 interview: "If you don't need it, don't buy it."

Although Lululemon has taken steps, along with other consumer goods companies, to make the fashion industry more eco-friendly, some critics have pointed out that the athleisure brand hasn't always adhered to its long-term environmental impact mission.

Lululemon fashions are displayed in a company store window, Thursday, March 25, 2021, in New York. Lululemon reports earnings, March 30, 2021. (AP Photo/Mark Lennihan)
Lululemon fashions are displayed in a company store window, Thursday, March 25, 2021, in New York. Lululemon reports earnings, March 30, 2021. (AP Photo/Mark Lennihan)

Still, the Like New program is one initiative aimed at covering its bases — and sharing in the sustainability trend.

"When we're not wearing a premium item, what's easier than walking back into a store and allowing that... next life?" Ruben said. "Lululemon is one of those brands that's just on the leading edge of a trend that is coming to all of retail."

Lululemon has also launched new lines of athletic footwear and men's athleisure wear, capitalizing on consumer trends emerging from the pandemic. The company aims to double 2021 revenues from $6.25 billion to $12.5 billion by 2026.

Luke is a producer for Yahoo Finance. You can follow him on Twitter @theLukeCM.

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