It is now easier than ever to get your hands on a used Louis Vuitton tote or Gucci belt bag for cheap. However, the rise of the online resale market in luxury goods need not have executives of high-end fashion houses shaking in their Christian Louboutin boots.
In fact, it is a model that could actually help an industry that thrives on scarcity and exclusivity, especially if designers use the emerging channel to their advantage.
One reason is that the growth of the luxury resale market, popularized by such sites as the RealReal Inc, Poshmark and Vestiaire Collective, is poised to outstrip that of the broader market.
The Boston Consulting Group and Altagamma estimate that it will expand by an average of 12 percent per year through 2021, compared with about 3 percent for the primary luxury market.
While prices on the resale market tend to be lower than retail, they are not so much lower that they appeal to a totally different customer.
Jamie Merriman, an analyst at Bernstein, found that the median price of a Louis Vuitton bag on The RealReal was US$1,025. That is a deal, compared with the median US$3,000 price her analysis found for new Louis Vuitton purses.
However, that still leaves the brand in a vastly different tier than, say, Coach or Michael Kors, whose new bags might cost US$300 to US$400. It is near enough that it might tempt some shoppers to trade up, but that is only a worry for accessible luxury brands.
In some cases, the prices fetched on the secondhand market might only add to a label’s mystique and cachet. Rare Hermes Birkin bags can sell on sites such as RealReal for higher prices than new ones do.
Perhaps more important, though, is the way that secondhand sites can change the calculus of buying a new luxury piece in the first place.
Say you are considering a classic Balenciaga City bag for about US$2,000. Is it worth the investment? A scroll around RealReal shows that you might be able to resell it for about US$600. That could be exactly the kind of assurance a first-time millennial or Generation Z luxury buyer needs to take the plunge on a pricey accessory.
None of this is to say that the luxury powerhouses should not get into the burgeoning resale market themselves. Some already are.
At APC, a French fashion house, customers can apply to trade in their worn jeans.
If accepted, they can buy a new pair at half price. The old jeans are then resold, but not before they have been washed, repaired and marked with the initials of the former owners.
Another option would be to acquire secondhand platforms, as Cie Financiere Richemont SA did with Watchfinder last year.
However, this could create challenges, particularly when it comes to authenticating other brands’ products. That is why cooperation between luxury brands and resale sites looks like the more likely and logical approach.
Burberry Group PLC has begun a partnership with RealReal in which US customers who consign its goods can get a personal shopping session and tea at one of its boutiques.
In Europe, Vestiaire Collective has a tie-up with French contemporary brands, including Sandro and Maje, owned by SMCP SA, under which customers selling these retailers’ products are rewarded with a 10 euro (US$11) voucher to spend on their new collections.
Such relationships allow the brands to engage with shoppers who are participating in the secondhand market.
They also allow these companies to market themselves as champions of sustainability and recycling.
Luxury adviser Mario Ortelli of Ortelli & Co said cooperation between fashion houses and secondhand sites could run even deeper as the market develops.
Brands could play a bigger role in authenticating their products for resellers, for example.
Another idea: Fashion labels could use data from resale sites to inform their merchandising decisions.
So there is good reason for the luxury giants to play nice with the resale sites right now — but they should be clear-eyed about the possibility that industry dynamics might eventually change.
If these start-ups end up struggling to keep counterfeit products off their marketplaces, for instance, that would be a reason for the luxury brands to distance themselves.
However, for now, the big bling empires should not fear their handbags and dresses getting a second life.
Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post. Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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