The last year or so has been a perfect storm for the resale market, driven partly by consumer demand and market conditions in the fashion and automotive industries. Global semiconductor supply shortages have stalled new car sales while growing awareness of the impact the fashion industry has on Earth’s environment has created an unprecedented demand for pre-owned goods and the rise of consignment platforms.

Let’s put some numbers to this dynamic. Online resale marketplace ThredUp Inc. (Tii:TDUP) values the total second-hand market at $36 billion and predicts it will reach $77 billion by 2025. That’s a massive pie in which businesses of all sizes are competing. Even old-school brick-and-mortar retailers are looking to get in on the action to entice younger consumers into physical stores. Illustrating this, ThredUp partnered with JCPenney and Macy’s, Inc. (Tii:M) in 2019 to offer second-hand clothing in the retailers’ stores.

Consumer environmental concerns partially drive the popularity of clothing consignment – and rightfully so. The fashion industry is one of the largest contributors to the climate and ecological crisis, responsible for between 2-8% of global carbon emissions, according to the United Nations Environment Programme (UNEP) report, “Sustainability and Circularity in the Textile Value Chain.” The popularity of buying used items on consignment contributed to ThredUp’s 35% year-over-year revenue growth for its most recent third quarter. Similarly, The RealReal, Inc. (Tii:REAL), a marketplace for authenticated pre-owned luxury items, and Poshmark Inc. (Tii:POSH), a marketplace for users to buy and sell pre-owned clothing and accessories, reported strong revenue growth this year.

There has also been considerable activity on the automotive front – in which several major consignment platforms have gone public in recent years. E-commerce consignment platforms operated by Vroom, Inc. (Tii:VRM), Carvana Co. (Tii:CVNA), AutoNation, Inc. (Tii:AN) and CarLotz, Inc. (Tii:LOTZ) are actively competing for market share amid a substantial surge in used car prices caused by the shortage of new vehicles. According to the U.S. Bureau of Labor Statistics’ Consumer Price Index, this scarcity contributed to a 39.8% rise in used car prices since March 2020.

However, this slowdown of new vehicle rollout is a double-edged sword. It has also resulted in much fewer cars entering the commercial consignment market. Auto dealerships are extending leases on existing vehicles since consumers can’t trade up to the latest models – meaning those same vehicles won’t enter the resale market this year. It’s also resulted in newly manufactured vehicles sitting idle in storage lots because they’re missing those critical microprocessors. “That’s been happening at scale where people just don’t have new cars to get into,” says Becca Polak, CarLotz’s General Counsel and Chief Compliance Officer. Polak also heads up the company’s Commercial Consignment Group. “At the end of their lease, it stops the churn of used cars exchanging hands for a new car.” Signs point to this supply bottleneck continuing into 2022.

CarLotz, which is coming off a record third quarter in which net revenues increased 128%, and retail unit sales rose 58%, rolled out an aggressive expansion campaign over the last year, more than doubling its number of hub locations. Once the new vehicle logjam clears, the marketplace may experience a dramatic shift. “When new cars start coming back on the market and as things normalize a bit, will it slow down sales for us? I don’t know,” Polak confesses. “That’s to be seen. I think right now there’s so much pent-up demand for both new and used cars, so I think there’s enough blue sky there for us to continue to grow.”

Regardless of how the auto and fashion industries sort out the challenges they face, the age of the consignment platform is undoubtedly here – and will likely continue as long as consumers engage in e-commerce for easy, convenient and ESG-friendly ways to purchase new and used items.