The consumer sustainability trend – combined with the affordability that resale provides – has seen luxury resale become big business – US$36 billion by 2021, according to management consulting firm BCG, and 9 per cent of the total personal luxury goods market.
Department store Nordstrom’s See You Tomorrow resale store launch on January 31 is the latest in a spate of physical store openings for luxury resale: the physical store expression of what started online.
Tapping into a global market
Initially the luxury resale market was dominated by a fragmentation of independent physical consignment boutiques. Then the rise of social media, e-commerce, mobile apps and personalised digital platforms opened up the market by providing large, organised inventories tapping into a global network of sellers. This brought brands like Gucci, Hermès and Chanel to a new set of consumers.
Early online entrants included France-based Vestiaire Collective, established in 2009 (now operating in a dozen countries and in Australia since 2018); TheRealReal, established in 2011; and Poshmark, also established 2011.
It has since become something of a crowded market. A January 2020 Harper’s Bazaar UK article lists what it considers the top luxury and designer resale sites. Included along with the above are HEWI (Hardly Ever Worn It) London, Videdressing, Designer Exchange, Edit Second Hand, Bagista and Rewind Vintage.
A 2019 blog on multimerch.com lists no fewer than 96 fashion resale sites, the luxury and designer listings which include what are by now some of the usual suspects plus Depop, Mosh Posh, Rebelle, Tradesy, Bag Borrow or Steal, Carnet de Mode, Collector Square, Couture USA and Australian operator Blue Spinach. Additional Australian operators include Luxe.It.Fwd, Revoir, Modsie and Hock Your Frocks.
Commissions are widely varied, ranging from 10 to 60 per cent of the sell price, as are payment terms, with some of the faster ones being within two days of receipt of goods from the seller. Some operators provide a “white glove” concierge or VIP service where they go to the seller’s residence, assess and authenticate the goods on the spot and provide an estimate.
According to a BCG/Vestiaire study, digital platforms currently account for 25 per cent of second-hand luxury sales globally. Given how much Generation Z and millennials love experiential environments, and how quickly they are embracing secondhand goods (at 2.5 times the rate of everybody else, according to Thredup), a raft of luxury resale physical stores have launched in the past two years. Some are the online players moving into the
physical space themselves, and some combine the smarts of the online tech resale players with the retail experience of established physical chains.
Going their own way, TheRealReal opened its first permanent store in New York in 2017, as well as pop-ups in San Francisco and Las Vegas. It now includes physical locations in Los Angeles and a second in New York.
The US’s Rebag has a network of nine stores across New York, California and Miami. “Rebag bars” in-store allow for instant product authentication and valuation, 60-minute payments to sellers, and the Rebag Infinity program provides 70 per cent store credit for every previously purchased bag exchanged for a new Rebag handbag within six months. Rebag’s medium-term plans are to expand to 30 physical stores, both standalone and in malls.
Designer Exchange, established in 2013, claims to be the first to offer instant cash payment and exchange on designer items. It has four stores in the UK and one in Madrid.
Xupes opened its first physical store in London’s Royal Stock Exchange last year. The store spans two floors, with the ground floor devoted to appointments and consultations. It has also opened a retail store in Amsterdam and a pop-up concession in Dutch department store De Bijenkorf’s.
Which brings us to online players leveraging established retailers (and the reverse), a synergistic relationship which sees both the department store and online provider generate more traffic.
Neiman Marcus acquired a minority stake in Fashionphile in mid-2019, not long after Nordstrom inked a partnership with Rent the Runway. In early 2019 Macy’s announced a partnership with Thredup and has gone on to launch a resale shop-in-shop, with plans to pilot in a dozen stores. Thredup also has a similar relationship with retailer Stage Stores, which opened 12 stores in 2018 for a total of 45 stores.
Vestiaire experimented with pop-ups at Selfridges in late 2018 and a pop-up at Paris’s Le Bon Marché in early 2019 before committing to a permanent space in Selfridges, launched in October 2019. The 40sqm space in the store’s third-floor designer studio launched with 200 items including 10 rare vintage pieces from Versace, Paco Rabanne and Maison Margiela. Vestiaire Collective products are labelled as “pre-loved” to differentiate them from Selfridges’ current luxury inventory. Shoppers can also sell through a dedicated resale point in the store, which acts as the physical incarnation of Vestiaire’s Concierge Service.
And now Nordstrom’s See You Tomorrow ranges products previously bought by consumers but now returned or resold to Nordstrom. It appears to be running independent of specific online luxury resale entities.
Who’s buying luxury resale?
While luxury resale is an opportunity for Gen Zs and millennials to enter a luxury brand and upgrade over time, according to Thredup 13 per cent of those buying luxury resale are already millionaires. This is a fact some brands have been slow to recognise, preferring to remain exclusive by focusing on narrowly defined affluent consumers rather than proactively expanding their markets using a “cradle to grave” lens.
According to Vestiaire, while 52 per cent of consumers donate apparel items to charities, only 33 per cent resell and buy second-hand so there is still a job to be done in education and awareness.
Challenges and a likely trajectory
While longer-term players employ professionally trained product authenticators, the potential for fraud and fakes is still reasonably high, particularly on peer-to-peer selling sites. Chanel took TheRealReal to court with claims over selling fakes, despite its in-house authentication process.
Retailers selling resale may result in conflict with a retailer’s traditional suppliers. However, resale may generate traffic in department stores, to the benefit of all brands. And reselling is going mainstream, with the likes of ASOS in the market. A number of players, including Poshmark, are extending into other categories such as home decor and manchester.
The established luxury brands can’t ostrich forever. Momentum has built around resale; a 2019 report from the Business of Fashion and McKinsey State of Fashion indicates that rental and second-hand is one of the top fashion industry trends. Luxury brands are better off maintaining some control over and input into their marketing and retailing by looking at alternative avenues and partnerships than putting their heads in the sand and conceding control altogether. And it may expand their markets further. As the saying goes, “If you can’t beat ’em, join ’em.”
Norrelle has 20 years’ experience in retail, category, channel and customer strategy, planning, research and marketing, working in and with global retailers, manufacturers, research and consulting houses. Contact Norrelle on 0411735190 or email firstname.lastname@example.org