Dive Brief:

• Macy’s and second-hand apparel site ThredUp are piloting sales of used clothing in 40 Macy’s stores nationwide, Macy's CEO Jeff Gennette announced to analysts Wednesday morning.

• Macy’s won’t take ThredUp consignments or returns, except for returns of ThredUp merchandise purchased at Macy’s stores, a ThredUp spokesperson told Retail Dive in an email.

• ThredUp also has a similar partnership with department store Stage Stores, the spokesperson said.

Dive Insight:

With this tie-up, Macy's is aligning with one of the best growing segments in apparel retail.

Transactions for used apparel rose a whopping 254% over the past two years at B-Stock, a B2B marketplace for returned and excess apparel, according to a report emailed to Retail Dive. Handbags and other bags, denim, footwear, jackets and fine watches were the top five categories in used goods, B-Stock also found.

Consumers are increasingly gravitating to such items. Some 64% of women last year bought second-hand fashion or "are open" to it, up from 45% in 2016, according to ThredUp's most recent resale report. A quarter of department store shoppers also buy used goods, ThredUp found, while luxury second-hand site The RealReal in its own report on the segment said that 93% of its customers "regularly shop department stores like Saks Fifth Avenue, Nordstrom, Neiman Marcus and Bloomingdale's."

The enthusiasm is found among shoppers of all generations, with 33% of millennials, 31% of baby boomers, 20% of Gen X and 16% of Gen Z buying used fashion, according to ThredUp. That could be in part because consumers view the practice as an exercise in sustainability, according to both reports. Nearly a third of consumers now shop resale rather than fast fashion, according to The RealReal.

"The younger customer views secondhand fashion as a sustainable buy," Jane Hali, CEO of investment research firm Jane Hali & Associates, told Retail Dive in an email. "Resale is also driven by nostalgic millennials."

Gennette, speaking to analysts Wednesday morning, said the ThredUp pilot is a response to that, as well as an opportunity to offer styles and brands not normally found at Macy's. It's a good use of store space, and a good match, Hali said. "ThredUP is blazing a trail in the $24 billion secondhand market," she said, noting that, with 30,000 new arrivals every day, "thredUP is no small operation."

"All retailers have to think out of the box about their square footage and assortment," Hali said. "Offering secondhand brands the store might not carry could add value. The merchandise should be targeted toward the gen Y&Z offering.  Urban Outfitters has been doing this for a while — selling regular price business plus their Vintage section."

The department store could use a boost. Macy's missed expectations in the second quarter as sales sagged due in part to a fashion miss in women's, the department store said on Wednesday. The partnership with ThredUp could both drive traffic to Macy's stores and burnish its "reputation as a sustainable retailer," Deborah Weinswig, CEO and Founder of Coresight Research, a global research and advisory firm specializing in retail and technology, told Retail Dive in an email. 

"We believe that they could partner with other circular economy companies as well as philanthropies over time, for example, Goodwill," she said.

But the company must keep a careful eye on the effort's results to ward off any cannibalization, according to Alex Fitzgerald, manager in the consumer and retail practice of global strategy and management consulting firm A.T. Kearney. "This is a good program for Macy’s, it’s a signal of their ambition to test the extent to which they can capitalize on new and growing retail models," she told Retail Dive in an email. "Success will hinge on their ability to closely track and react to the results, whether it be that this is an effective acquisition tactic to lure the young consumer or if this negatively impacts their core offering."