Smart returns platform Returnly released its first consumer behavior study on Wednesday, focusing on shoppers’ behaviors at the point of product returns.

Surveying 4 million shoppers from across the U.S. who shopped at some of the country’s fastest-growing DTC e-commerce sites, Returnly found that 80% of consumers give some consideration to what it would be like to make a return before buying — and 73% won’t make a repeat purchase from a brand after a poor experience.

“Our goal is to give direct-to-consumer brands insights on what modern shoppers expect when returning and exchanging products online,” Returnly founder and CEO Eduardo Vilar said. “Our return personas give brands a blueprint to offer memorable return experiences that turn first-time returners into loyalists.”

The “2020 State of Report” underscored the importance of returns in earning a customer’s loyalty, saving sales and even boosting spend, analysts said.

Female shoppers are 1.5 times more likely to return goods than men, and to take action more quickly. One-quarter (25%) of women initiate the return process one day after receiving an order, compared with 22% of men. Both groups are likely to make a return within two or three days from when a product was delivered.

Notably, more than half (56%) of shoppers use their mobile devices to start their online returns, but almost three-quarters (72%) of consumers use desktop computers when initiating returns on products valued at $300 or more. This suggests a wariness of the mobile return process when it comes to high-priced items, analysts said.

Shoppers are also vexed by slow refunds on their returns — more so than any other frequently occurring issue throughout the return process. “Where is my refund?” ranks as the top support contact request after a return is initiated.

According to the survey, 10% of the average brand’s customer base is made up of “loyalist” returners who buy frequently and return often. While a relative rarity, this type of shopper accounts for 39% of the average brand’s revenue, as they return undamaged merchandise in a timely fashion, allowing brands to restock and remarket items at full price.

While many retailers perpetuate the myth that National Returns Day happens on Jan. 2 each year, the study found the most popular day for returns to be Dec. 26 — the day after Christmas. The most popular time to initiate a return is between 10 a.m. and 11 a.m., analysts said, questioning whether access to office equipment to print out labels might account for this trend.

“Our data shows that today’s shoppers are not returning on Jan. 2, they are simply shipping back their unwanted gifts on that date. The moment of truth for returns is December 26, when shoppers start returns online,” Returnly founder and CEO Eduardo Vilar said.

“This is when brands have the opportunity to get the right item in a shopper’s hands before they even drop off their unwanted packages in early January,” he added. “Brands planning their return strategy around Jan. 2 have missed the mark to connect with customers in their moment of need.”

Editor’s Note: This story was reported by FN sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.

According to a joint study from PYMNTS and USA Technologies, younger generations are interested in shopping “unattended” retail channels like vending machines and kiosks.

Of 2,300 people surveyed across the U.S., 35% of millennials and 29% of Gen Z shoppers said they’d be willing to spend more at these unorthodox shopping channels if nontraditional products were offered. By contrast, only 26% of Generation X and 16% of seniors and baby boomers said the same.

All generations ranked health and beauty products as the items they’d be most likely to purchase through vending machines or kiosks. However, 61% of millennials and 59% of Gen Z respondents said they would also be willing to buy clothing and accessories through those channels, and 54% of Gen X and 45% of seniors and baby boomers agreed.

“Our joint report with PYMNTS underscores not only the size of the unattended channels, but the expectations of consumers that unattended retail [will] become an everyday way of life, particularly with younger generations who are most willing to buy more and spend more when using them,” said Maeve McKenna Duska, chief marketing officer for USA Technologies.

“We believe this presents a unique opportunity for retailers to not only offload high-touch tasks, such as key cutting, to kiosks which enable store employees to focus on higher-value tasks,” she added, “but [also to] expand their footprint outside of the store through vending machines and kiosks, increasing opportunities for revenue while simplifying purchasing for consumers.”

The survey also accounted for the reasons that consumers of all age cohorts were driven to use unattended retail options in the past. Speed of use was the prevailing response, with 33% of Gen Z, 55% of millennials, 52% of Gen X and 42% of seniors and boomers ranking it as their top reason.

However, not having to talk to employees was also a palatable concept for all parties surveyed. Gen Z dreads human interaction most, with 41% of respondents weighing in against it, while 27% of Gex X, 38% of millennials and 35% of seniors and boomers also voted for machines over people.

Only Gen Z respondents ranked the enjoyment of using new technology as important, with 37% saying they looked forward to trying it out. Just 20% of millennials, 17% of Gen X and 12% of seniors and baby boomers said the same.

Editor’s Note: This story was reported by FN sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.

Want more?

Run the Numbers: Millennial and Gen Z Shoppers Trust Social Media More Than Family and Friends

Why Installment Plans Aren’t Just for Millennials Anymore

Fashion Designers, Execs Break Down Gen Z

Young Generation Z and millennial shoppers are becoming increasingly conscious of the impact of the products they’re buying. And with each off-the-rack or online purchase, they are voting with their wallets for advancements in supply chains and materials — and better working conditions for the laborers who make their garments.

This newfound, value-driven approach to consumerism appears to be a direct reaction against the retail culture that largely dominated the early 2000s and most of the 2010s.

An avenue for cost-conscious shoppers to enjoy the latest trends, disposable garments were once an undisputed norm. But with cheap, mass-produced apparel piling up in landfills at an alarming rate, are consumers turning away from the fleeting fads that once oiled the fast-fashion machine?

Growing up Generation Z

The answer is yes, according to Nora Kleinewillinghoefer, a principal consultant for Kearney (formerly A. T. Kearney) who focuses on retail and lifestyle brands.

The firm’s consumer research shows that over the past 10 years, product purchases increased by 80%. But as shoppers from a new generation begin to realize their spending power, the tides could be changing.

“There’s been a significant increase that’s taken place in terms of the number of items that people are buying each year, but Gen Z is not following that trend,” Kleinewillinghoefer said.

This young generation of consumers, who range in age from about 7 to 22 years old, have already had to contend with a sense of “global instability” that their millennial predecessors largely skirted during their formative years.

“They’ve seen things like high data and security risk to their information, they’ve seen the collapse of a lot of global organizations that historically have created and maintained order, and they’ve seen much more war in their lifetime,” she added.

“Their needs for security, safety and emotional stability,” Kleinewillinghoefer said, “are much less fulfilled.”

While Gen Z shoppers have years to go before they reach their peak spending potential, their eyes have been opened to these issues — along with the climate crisis — at a much earlier juncture in their development.

That makes them less likely to accept the fads and follies that have consistently driven consumers who are just a decade older.

“There’s much more of a shift away from consumerism,” Kleinewillinghoefer said, adding that Gen Zers feel that they’re “bearing the burden of the decisions that have been made” about the environment.

As the eldest millennials approach age 40, the Gen Z cohort may feel it’s been left holding the bag. Engaging in the activism and political pressure that will drive organizations to act has become their cross to bear.

“For millennials, buying things was a social activity, and it created a sense of fulfillment,” Kleinewillinghoefer said. There was a lack of understanding and visibility into the impacts of those behaviors, she added.

Retail has capitalized on that blissful ignorance for years.

“For fast-fashion companies, a lot of what makes them successful is their ability to make people consume in large volumes. They inspire people to make very regular, very frequent purchases,” she said.

Fueling the consumer addiction requires constant infusions of new product. H&M and Zara both offer 24 seasons a year, Kleinewillinghoefer said. On average, shoppers get about six to eight wears out of each garment before it’s discarded.

In addition to making changes to supply chains, investing in fully circular solutions, and changing the culture of consumerism overall, brands must address the issue of output.

“There are big initiatives from fast-fashion brands about reducing overproduction. They’re realized the sheer waste that comes with it, and its impact on their margins when they have to discount product,” she said.

With increased reliance on data and machine learning in planning and product development, Kleinewillinghoefer is hopeful that brands will better target resonant trends and determine how much product to produce.

“Brands have been grasping in the dark, and data could be the key to changing things,” she said.

The fast-fashion perspective

In the years since H&M launched its first U.S. store in 2000, the Swedish company has come to epitomize the fast-fashion movement.

Now, the brand that once sought to “democratize fashion” — by making trend-forward design accessible through its impossibly low prices — is striving for a more sustainable future.

While the company has been slammed over its penchant for overproducing and landfilling unsold product, it’s attempting to turn over a new leaf.

Data is, indeed, driving much of that effort, according to the H&M spokespersons.

“With the help of advanced analytics and AI, we can, for example, be much sharper in aligning supply and demand,” they said.

New AI functions support various processes across the entire value chain, from design to customer experience. “By reinforcing the decision-making of our designers and buyers, we can ensure that we are designing the right products,” the spokespersons said, adding that tech tools also help forecast trends and ensure products are optimally allocated to stores.

H&M Group’s circularity-focused projects encourage the reuse and recycling of old products.

“We run renewal and remake projects, turning old clothes into new fashion favorites through reprinting, repurposing and remaking,” the spokespersons told Sourcing Journal. “A big part of our ambition to become circular is to offer our customers garment-collecting options, so that we can give a second life to old garments that would otherwise end up in landfill.”

The fashion firm’s multiple brands tackle different objectives in search of a sustainable approach that sticks.

Premium minimalist brand COS launched a collection of thoughtfully revived used garments, while contemporary fashion label & Other Stories sells pre-worn clothing through Sellpy, a secondhand sales platform co-owned by H&M Group.

Denim and streetwear brand Weekday upcycles worn goods into redesigned styles and also offers on-demand printing for T-shirts, mitigating product overruns.

In November, the H&M brand piloted a rental program out of a store in Stockholm, allowing shoppers to rent garments from its Conscious Exclusive collection made from eco-friendly materials.

On the whole, H&M Group is also looking to use more recycled fibers, like cotton from collected garments, across its brands.

As the company works to refurbish its waste-making image, it’s still holding fast to the principle that popularized its namesake brand: affordability.

“For H&M Group, it is important that everybody — regardless of income — shall be able to have clothes that, for example, are made using more sustainable materials,” the spokespersons said. It shouldn’t be reserved only for the wealthy, they added.

Industry sustainability experts have long speculated that reversing fast fashion’s toxic impact is actually a job for the category’s key players.

While innovative newcomers and a rash of direct-to-consumers upstarts have promised to disrupt the retail space, it will take time for them to develop the scale and reach of an H&M Group — even collectively.

For that reason, the company has chosen to evolve, rather than allow itself to be pushed into obscurity.

“We believe that our long-term investments in sustainability will provide us with long-term business opportunities that will keep H&M group relevant and successful in our rapidly changing world,” the spokespersons said.

Economy versus ecology

The retail landscape is evolving quickly, bolstered equally by brand innovation and new consumer attitudes, according to Mark Shayler, founder of Ape, a U.K. retail sustainability consultancy.

“We are seeing a massive shift in the consumer, and in 30 years I’ve never seen anything like it,” he said.

The modern shopper is questioning the status quo and seems to have an understanding that “they can’t carry on as they’ve been doing” when it comes to buying blindly and discarding regularly, Shayler told Sourcing Journal.

“The consumer is beginning to see through the Band-Aid of fast fashion” as a mechanism for staying abreast of the latest trends, he said.

Leaders in the space are working on shaping a future where a successful economy coexists with a thriving ecology, he added.

“Both words share the prefix, ‘eco,’ which comes from the Greek word, ‘oikos,’ which means home,” Shayler said.

“One refers keeping your ‘house’ or environment in order from a resources point of view, and the other is about keeping your home afloat financially,” he said. “Now, as a society, we’re no longer seeing economy as an enemy of the ecology.”

“We’re beginning to understand that looking and feeling great are the same thing — and no one is going to feel great knowing that harm has been done to the person who made their clothes, or to the environment,” he added.

Most fashion brands are quickly righting their attitudes, Shayler said, because they realize their survival depends on it.

“Some of them will disappear, and we’re beginning to see it already,” he said, referencing the rash of bankruptcy filings and restructuring strategies that plagued fast fashion in 2019.

“The ones that stay ahead are the ones that are making sure that they’re not caught out,” he said, adding they’re “the ones that make the most noise and headway about recovering, reprocessing, and making specialized products that last a long time.”

They’ll also begin to think of themselves as service providers rather than purveyors of products, he said.

Leasing and buy-back programs, like the ones that H&M Group is currently testing, could provide the mechanisms for circularity that the industry has been lacking.

“That kind of business model innovation is where we’re going to see these companies die or survive,” Shayler said.

While fast fashion has undoubtedly exacerbated retail’s waste problem over the past two decades, Shayler also believes they also have the greatest opportunity to right the wrongs of the entire industry.

“If anyone is going to solve the trickiest problems, it will be them,” he opined. “They have invested the time and the money into solving this problem. They bear the responsibility of making this right, and they know it.”

Editor’s Note: This story was reported by FN sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.

Want more?

Everyone’s Talking About Sustainability — Why the Red Carpet Still Hasn’t Caught Up

Third-party relationships are essential to thrive in the current retail climate, according to analysts at Edited, which released a new decision-making tool to help brands optimize their wholesale strategies.

Despite the undeniable allure of social media-savvy brands that drum up countless likes on Instagram, these companies lack a true brick-and-mortar presence and aren’t heavily saturated across different markets, they said.

“A time will come when DTC brands will have to mature in order to scale,” Edited market analyst Kayla Marci said. An effective way to do this is by using the resources of a more established business, she said, pointing to Nordstrom as an example.

The department store has “emerged as a sort of launching pad for these buzzy DTCs to scale,” Marci said, with brands like Glossier, Allbirds, Reformation and Everlane all running temporary pop ups to test the waters in a brick-and-mortar setting, and Rent the Runway forging a newly expanded tie-up.

“All are still credible brands that have evolved their original strategy successfully in order to grow,” she added.

While DTCs must evolve in order to reach their full potential, they also need to hold firm to the values and attributes that brought them success and consumer trust.

Determining the ingredients of a brand’s “special sauce” involves digging into the data, according to Edited analysts. Discovering the qualities that have earned these brands their intrigue can help them optimize their wholesale strategies by targeting specific new markets that offer the product and pricing opportunities best suited to their businesses.

“Looking to tap into a new market or trade through a new platform is a challenging task with many factors to consider,” Marci said.

Edited’s new Retail Decision platform offers brands a breakdown of new markets in real time, “eliminating any guesswork and giving them full visibility of who is competing in this space, what products are on offer, what is and isn’t performing and the core price points being operated in.”

Brands must arm themselves with this information if they’re looking to maintain their integrity and voice while sustaining growth. And if DTCs play their cards right, they can avoid ceding share to online power players like Amazon in an effort to reach more consumers.

The defining benefit of a DTC strategy is the ability to control one’s brand image, Marci said. “For brands opting to sell on Amazon, a curated product mix and brand identity is something they will have to forego,” she said.

“While Amazon may beat out other sites for its vast reach, diverse audience and delivery speed, it’s more of an ideal platform for already established businesses to scale their brand instead of for startups to gain credibility or evolve a brand identity,” Marci added.

For relatively young companies with everything to prove, seeking out more symbiotic and flexible relationships with retail partners could be a more fruitful path forward.

Edited’s Retail Decision tool allows brands to monitor their performance on these third-party sites, as well as compare their metrics with those of a competing brand or product, lending full visibility into wholesale relationships.

“The businesses that are going to thrive are the ones that can leverage the strategies that resonate best with their consumer, be it DTC or wholesale, and combine the best of both in order to innovate and surprise,” Marci said.

Editor’s Note: This story was reported by FN sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.

Using data from 1,200 companies from across the globe, monetization platform 2Checkout took stock of retailers’ priorities, challenges and plans for the coming year when it comes to implementing retail technologies to grow and scale their businesses.

Customer experience will continue to be a significant area of focus, according to 43% of retail respondents, who said they would be allocating resources to ensure that shoppers enjoy seamless service. Nearly one-third (32%) of retailers said they would be putting their tech spend for the year in building brand awareness, while 31% identified quality analytics as most important.

Efforts like mobile optimization and improving the shopping cart also ranked highly with nearly half of retailers (48%). Mobile shopping has grown exponentially in recent seasons, with 64% of all transactions during Black Friday week this year taking place on smartphones.

For two-fifths of retailers (40%), choosing the correct technology for their businesses remains their biggest challenge. With technology’s increasing integration into the shopping process, as well as heightened consumer expectations for a streamlined experience, 14% more retailers cited choice as a challenge this year compared to 2018.

Online commerce businesses are also deeply aware of the importance of bringing the right kinds of eyes to their sites. Generating targeted traffic emerged as a priority by 22% of respondents, and more than one-third (35%) said that increasing conversion rates would be a major push for 2020.

Brands and retailers across the board are also looking to broaden their reach by finding the right partners (18%) and developing additional sales channels (17%).

To implement all of these tools and strategies, retailers are backing up their plans with real capital. The vast majority (61%) said they were looking to increase their budgets to get the ball rolling on new tech projects. Some 15% said their budgets for next year would remain comparable with 2019, and only 5% said they’d be enacting cuts.

When it comes to allocating those funds, search engine optimization and paid advertising will take the lion’s share. More than half of retailers (57%) said they’d be funneling funds into SEO, while 53% said that they would be writing checks for paid advertising.

Retailers still hold social media in high esteem, though, with 34% saying they’d be pushing spending into apps and platforms where consumers engage with brands.

Many online businesses—from direct-to-consumer startups to established digital retailers—rely heavily on automated email marketing campaigns (70%). More than half (56%) said they would continue to pay for targeted ads on social media, a tried and tested strategy for most merchants in the digital age.

Most retailers already accept major credit cards and integrate with online payment services like PayPal, but optimizing for mobile payment is top of mind for 31% of businesses. Implementing the capabilities to accept credit cards with installment payments was of near equal importance (29%).

All of these strategies help feed into retailers’ plans for growth in 2020—and the vast majority (76%) see themselves expanding into international markets. A little more than one-third (37%) of surveyed businesses said they were focused on growing their businesses domestically.

Popular markets for potential expansion include North America (64%), Western Europe (54%) and Eastern Europe at 45%.

“It is no surprise that customer experience and personalization remain drivers in the upcoming year,” said 2Checkout president and CEO Erich Litch, adding that retailers are responding to the digital commerce market becoming more competitive and sophisticated.

Technological advances can serve to improve the experience for both sellers and buyers, Litch said. Dealing with cross-border commerce compliance and logistics, for example, are areas that “vendors can easily relieve merchants of to a great extent, giving them additional resources to focus on growth and optimization,” he said.

Editor’s Note: This story was reported by FN sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.

On Tuesday, the resale platform announced the debut of Mercari Authenticate, a program that enlists third-party professionals to verify designer bags that cost $300 and up.

For $15, the app’s users can have their premium totes and satchels verified within a 48-hour time frame, and the process doesn’t require shipping the products for inspection. Using in-app photos and other data like serial numbers, authenticators are able to assess and award approved items with a diamond badge, signifying their legitimacy on the platform.

“The surging popularity of resale in the U.S. is bringing a wave of luxury goods to platforms like Mercari, and buyers’ need for trust understandably increases with an item’s price,” Mercari U.S. CEO John Lagerling.

“Until now, though, authentication has been slow and expensive. Mercari Authenticate makes the process much easier, opening it up to novice or occasional sellers,” he added.

As online reselling platforms continue their ascent in popularity, one of the only factors that threatens to stymie growth is consumer concern about authenticity. Popular luxury consignment e-shop The RealReal faced the music on that front last month, when revelations about the company’s less-than-stringent verification processes made headline news.

The missteps make for increased scrutiny, and luxury resale marketplaces are leaning on a combination of AI tools and human eyes to determine whether products put up for sale are real.

Rebag’s Clair program, which launched in November, offers sellers an instant appraisal of their luxury bags using a process of photo and data assessment. The company buys the products from sellers outright after the goods are mailed to its offices for a final inspection by in-house authenticators.

When shelling out for designer duds and accessories, consumers don’t want to feel like they’re gambling. And for sellers simply trying to unload pricey, unwanted bags from their closet, the process can be frustrating, if not fruitless, without some degree of certification.

While Mercari Authenticate has yet to be tried and tested by the platform’s users for effectiveness, Mercari sellers earn 90% of any item’s selling price, where other marketplaces and consignment operations usually offer 60% or less. The company is waiving the $15 authentication fee during the holiday season, according to its website.

Lagerling anticipates that the program will take off, enabling the platform to expand its efforts.

“Mercari Authenticate today is for handbags, and we expect our low fee and quick turnaround will attract more sellers of pre-owned designer handbags,” he said. “Longer term, Mercari has a vision for authentication across more categories, which our sellers are helping us define.”

Editor’s Note: This story was reported by FN sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.

Want more?

How Luxury Brands Could Cash In On the Growing Resale Market

One such solution, Flow — which offers automated services such as multi-currency pricing and international payment options, well-defined taxes and duties, and cost efficient shipping and returns — received a sizable investment this week. Flow said it raised $37 million in a Series B funding round, with participation from New Enterprise Associates, American Express Ventures and Latitude Ventures.

The Oct. 11 document was drafted by the online behemoth in response to the congressional antitrust probe that began to take shape in July and targeted tech titans Google, Facebook and Apple as well.

The Amazon memo stated that the company also pulls data from its first-party sales as well as public sources, Reuters reported, and insisted that Amazon teams aren’t using individual seller data to influence the launching, sourcing or pricing of private-label products. There are about 158,000 Amazon private-label goods sold across the site.

While the company grew to prominence as a selling platform, Amazon is increasingly pouring its energies into its own retail business, offering value-hungry shoppers Amazon-backed versions of consumer favorites. Since Amazon’s investment in its own private labels began, the site’s third-party merchants have incubated anxieties about whether their own data would be used to the e-tailer’s advantage, effectively cutting them out of the equation.

In its response to Congress, Amazon argued that the use of aggregated sales data — both public and private — is standard retail practice. The company also admitted that it asks third-party sellers to lower prices on the platform when it finds them selling goods for less on other websites.

The company denied that its search algorithm prioritizes Amazon private-label brands over products from its sellers. It also denied adjusting search rankings based on whether merchants had purchased ads or enrolled in the company’s powerful logistics program.

In September, however, a Wall Street Journal report pointed to the existence of an internally controversial algorithm, which insiders admitted gave more profitable items prominent placement in search rankings. These products show up ahead of the best-selling and most relevant results in searches, the unnamed sources said.

The committee’s final report on the Amazon antitrust probe is expected in the “first part” of next year.

Editor’s Note: This story was reported by FN sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.

In the wake of the direct-to-consumer revolution, digitally native brands have banded together to offer deals to consumers, well ahead of the post-Thanksgiving shopping rush.

The first “DTC Friday” launched Nov. 15 at DTCFriday.com, featuring brands ranging from Greats footwear to Care/Of vitamins. Organized by the DTX Company, a direct-to-consumer-boosting incubator helmed by former AOL CEO Tim Armstrong, the holiday seeks to provide a convenient platform for consumers to discover a range of independently operated specialty brands.

“There’s a very interesting element of discovery,” said Ben Hordell, a partner at DXAgency, a marketing and advertising firm that specializes in consumer products. While part of the appeal of DTC brands is that they are so individualistic, having a centralized website helps consumers find deals on not only their favorite brands, but new ones they may not have known about before, he said.

“What we used to do as shoppers was go to the mall, and we had those cornerstone department stores. As you walked from department store to department store, you would discover new shops in between,” he explained.

Likening the DTC Friday site to an online mall, Hordell said that consumers might feel more compelled to try out new, niche brands based on their association with the holiday’s other — more established — participants.

DTC Friday’s 120 inaugural brands include Buffy bedding, Dagne Dover bags, Lunya sleepwear, Draper James apparel, Material cookware, MaxBone pet accessories, Rhone athletic wear, Rockets of Awesome children’s clothing and more. Deals range in value, from free shipping to 10% to 50% off orders.

Despite the enticing offerings, DTC Friday has hit the retail market with more of a whisper than a bang. The effort has drummed up little press, and many of the participating brands have not advertised their involvement. They could be hedging their bets, Hordell said, in an effort to gauge whether a discount holiday really makes sense for the DTC space.

“Because this is the first iteration, brands will have to assess after the fact whether they experienced a noticeable bump in sales, or whether they had more email sign-ups, or whether there was more general curiosity from consumers,” he explained. “Those data points will fuel the case studies that allow this to be set up even better next year.”

Editor’s Note: This story was reported by FN sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.

But the meteoric rise of both of these companies has slowed in recent months following some substantial hiccups.

A planned system upgrade derailed Rent the Runway’s operations in September, resulting in missed shipments and hundreds of unhappy tweets that rebounded across the web.

Over the past week, The RealReal has come under fire following revelations that the luxury resale platform’s supposedly stringent authentication processes are not run by the trained experts, as previously promised. Instead, a report by CNBC suggested that employees without proper credentials or training have been responsible for verifying the legitimacy of the site’s rare and pricey products.

The results of these stumbles could be devastating for both companies, which have capitalized on the idea of consumer trust as much as the products and services they offer.

According to Jason Stoffer — a partner with Maveron LLC, a venture capital firm that works with retail brands like Allbirds, Everlane and Zulily — The RealReal’s authentication issues could be overblown, though it’s hard to be sure whether pervasive process issues or simply a few bad orders have colored consumer perception.

“You’re never always right. Sotheby’s and Christie’s get it wrong sometimes. But you can certainly get close,” he said of today’s luxury authentication standards. “There are operational ways to mitigate this, and it’s important to understand the frequency at which these issues are occurring,” he added. Artificial intelligence tools as well as employee training could all but rectify the issue, but for now, The RealReal must focus on gaining consumers’ confidence back.

Rent the Runway suffered similar dings to its reputation, and those could prove costly in the long term, Stoffer said.

“The challenge with any shift in software is that it’s inherently risky, so you need to be extremely cautious and be able to deliver on a customer promise even if things go wrong. Clearly, they fell down on that,” he said.

Despite the setbacks both have faced in recent months, Stoffer believes resale and rental models are the way of the future for young consumers who seek value and products that benefit the environment. “These are two macro trends that are certainly here to stay, across luxury and down into the mass market as well,” he said.

“Where the rubber hits the road is in whether the underlying unit economics of a particular business are sustainable,” he added. “Look at the cash burn and lack of profitability of a Rent the Runway compared with a Stitch Fix,” he asserted, explaining that the latter has been “cash-flow positive for a very long time,” while Rent the Runway is far from profitable.

After a decade in business and a $1 billion valuation earlier this year, one might look at Rent the Runway and ask, “Is that truly sustainable?” Stoffer posed.

In the wake of the company’s latest PR disaster, Stoffer said Rent the Runway’s most valuable asset is its consumer base, and that’s taken a hit. “It’s a brand that had a lot of customer love, but this is a debit, not a credit. It’s something that can be restored, but it’s going to take time and the rebuilding of trust.”

And as the economy faces a potential downturn, investors are going to be more shrewd than ever when it comes to throwing money at the next “unicorn” startup that comes their way.

“Flash back two years and people valued growth above all things,” Stoffer explained. “But in our segment of the market, when companies are going out to solicit funding, what we’re seeing is that the question has switched to ‘Do the underlying unit economics of a single order work?’ ”

Investors are becoming more bullish in asking about the profitability of each individual sale, he said, and what it will take for a brand to earn back the money it takes to acquire just one customer.

Stoffer pointed to lackluster (or failed) IPOs like Postmates and WeWork, citing them as examples of companies that are “being dinged because the market is not tolerant of big cash burns” without a clear path forward.

“Our belief is that when a macro downturn hits, these businesses that don’t show a clear path to profitability, or that continue to show large operating losses, are going to be punished,” he said.

Editor’s Note: This story was reported by FN sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.