If you’re in the reselling business, you’d be happy to know that the resale market is estimated to be worth $41 billion by 2020. Secondhand business is even expected to be bigger than fast fashion in 10 years. The shift from traditional ownership to buying pre-owned goods isn’t surprising, especially in today’s consumer-driven landscape. Consumers thought that traditional retailers were too ‘slow’, so they turned to fast fashion and ultra-fast fashion to satisfy their growing need for instant gratification. But soon, the speed caused major sustainability issues. For example, reports have shown that almost 92 million tonnes of waste were produced in 2015 alone. Surely, the number has grown since. Consumers, especially the Gen Zs, started looking for ethical options - and one of it was the resale market. Purchasing or renting pre-owned items not only meets the need for newness, but it also extends the lifecycle of the products. This may be good news for consumers, but the same can’t be said for brands and retailers. In fact, there's a particular market that can no longer afford to ignore resellers - luxury players.
Understanding The Luxury Resale Market
For starters, the secondhand business is expected to outgrow luxury fashion, which is why some luxury companies are doing as much as they can to maintain prominence. To control marketing and visual merchandising of their products, luxury parent companies Kering and Richemont acquired resale businesses. Stella Mccartney, on the other hand, formed a partnership with The RealReal and reminded everyone to “make well, buy well and resell”. Consignment online-based retailers and platforms such as Vestiaire Collective, the RealReal and Poshmark have carved out a niche in supplying used luxury fashion at a lower price. The RealReal even reported $400 million in gross merchandise value in 2016, proving pre-owned products have a place within the luxury market. Recent price hikes are also driving young consumers to buy elsewhere, preferably with discounts. The cost of Chanel’s bags, for example, rises an average of 15% annually. Consumers of resale websites believed that the new business model has affected their purchasing behaviour, with most opting to buy fashion items that have a higher resale value, rather than short-lived trendy pieces. All in all, the shift in attitudes towards ownership provides consumers with the ability to change their wardrobe frequently - without having to break the bank.
A Spotlight On Bags
Luxury bags are reported to have the most resale value, as experts suggested that investing in a Hermes Birkin is more valuable than gold. In fact, the largest product category carried by ‘re-commerce’ websites is bags. 30.8% of Reebonz’s product assortment, for example, was dedicated to bags. At the same time, the Singapore-based resale website saw a sell-out rate of 78.3% for the same category.
Although outerwear appeared to have a higher sell-out rate than bags, it’s important to note that the product count was significantly lower. In fact, according to the Omnilytics’ Dashboard, Reebonz saw a 16% increase for the second half of 2018 - indicating a demand for more luxury bags.
Brands like Celine, Louis Vuitton and Chanel dominated the best-sellers list. The Celine Nano Luggage (pictured in the middle) was the product of Creative Director Phoebe Philo, a trademarked-bag that saw high success. In fact, there was a demand for her designs after her departure. Out of the 154 luggage bags (with a median price of USD 2,959), almost 80% sold out.
The Challenges Ahead
While the prospect is bright, there are still many challenges in this business model. One of it is authentication, as the entire business model functions on trust. The RealReal and Grailed have been guilty of allowing fakes to pass through the cracks. The resale market currently remains unpoliced with no real laws enforced, especially when it comes to stolen goods. The primary solution, for the moment, is investing in more experts and manpower into quality control. Trying to scale this business is also an uphill battle as maintaining a steady stock may be difficult as the market grows. With that said, the resale market is still worth paying attention to. As attitudes towards ownership continue to evolve and shift, the momentum of the resale market will certainly continue to rise.