The rise and fall of the second-hand luxury market
Written by Kezia Pribadi | Read in Indonesian
If you have noticed more and more people selling and flaunting their second-hand luxury finds on social media, it is not just the algorithm tricking you. Indeed, the market for second-hand luxury goods is booming.
The second-hand luxury goods market has grown by a whopping 65% between 2017 and 2021. In fact, it has grown five times faster than new luxury sales over the same period (Bain & Co). It has since been expected to grow at around 15% annually over the next five years, which is double the rate of the primary market.
Due to the aftermath of the global financial crisis, a surge in luxury resales has given rise to second-hand luxury re-commerce sites, such as Vestiaire Collective and TheRealReal. Both of which offer authentication services and better quality images than what consumers may get from their counterparts. Vestiaire Collective, in at least nine rounds of fundraising, has raised private equity investment of over $650 million and was valued at $1.7 billion in 2021. On the other hand, The RealReal has raised $290 million over six funding rounds, and eventually going public in 2019, upping their raise to $300 million.
ThredUP, being one of the largest fashion resale sites, has made it its mission to pull in the younger generation of customers to buy second-hand goods first. Over the last decade, their continuous work in implementing software and logistics whilst building the marketplace has reaped financial benefits. Now, their accumulated revenue has reached $251.8 million.
Popular second-hand clothing applications are also widely available for everyone to shop from. Some of them are Poshmark, Depop, Grailed and Vinted. These applications allow users to create a profile where they can sell their own items. The items they sell must come with details on the size, condition and brand (if known). They also allow users to decide on the price of the items. Interestingly, buyers and users are also allowed to negotiate the price.
Established in 2015, Tinkerlust is an online marketplace platform that sells preloved fashion items in Indonesia. Many second-hand shoppers have purchased items from Tinkerlust, owing to its guaranteed quality and affordable price. Samira Shihab, CEO of Tinkerlust, remains confident in building a business that is not only profitable, but also has positive environmental impacts in terms of fashion waste reduction.
Another popular second-hand marketplace is HuntStreet. Members are given a secure and trusted platform to buy and sell their luxury items locally. Sellers are able to use their website to sell their items to the growing community of second-hand fashion hunters. As for the buyers, they have a selection of over 100,000 contemporary and luxury items listed to date that are well priced, curated and quality controlled by HuntStreet’s team of specialists.
Meanwhile in Europe, Primark’s flagship store now offers a second-hand designer clothing section known as WornWell. Under a collaboration with The Vintage Wholesale Company, the store now sells a variety of items from brands such as YSL and Burberry for mere £20. These items are sourced globally and are selected for their quality and pedigree; the items are from the 70s, 80s and 90s.
Second-hand items can often be purchased for a fraction of the retail price. Consumers may be more willing to buy luxury items that are still within their budgets a.k.a. “affordable luxury” items.
Premature as it may be, brands have already found their way to monetise the second-hand fashion market. Oscar de la Renta sells pre-owned and reconditioned items under the label Encore by Oscar de la Renta. Meanwhile, Gucci–under the label Vault–taps into a more experimental zone in which they sell various vintage Gucci products, collaborations and metaverse projects. Alexander McQueen offers to repurchase items in exchange for store credits and then resells the items on Vestiaire Collective.
However, we shall remember that resale items are still under the umbrella of inconspicuous selling within the general brand experience. This is partly because the opinion is still split on whether second-hand luxury appeals to the existing luxury consumers–the primary target market–or if it attracts new aspiring buyers instead.
It seems that all across the board, there is a fear that the second-hand luxury market may be driving customers away from purchasing first-hand items. Though, this observation seems to be baseless. A survey by Boston Consulting Group (BCG) found that 71% of buyers of pre-owned items are inclined to buy products from brands they could not afford new. Thus, it is actually expanding the market for high-end brands and opens doors for first-time buyers.
Consumers of second-hand goods are especially interested in pre-loved items from brands such as Hermès, Louis Vuitton, Chanel and Gucci. Research has shown that second-hand goods sold at a discount actually widen the market for luxury goods and provide a more affordable entry point to luxury brands. As a result, we see that second-hand market sales actually support the sales of brand new goods.
BCG also found that second-hand markets can actually drive sales of new luxury goods, as consumers often use the money they have saved up from selling used items to purchase new products. As a result, the engagement with the resale market allows buyers to be more inclined to invest in a single luxury item.
Furthermore, resale also offers brands an opportunity to flaunt their sustainability credentials; we are looking at a market that has become so aware of the negative impacts fashion has on the environment. As the market has grown to become increasingly mindful and eco-conscious, brands and re-commerce sites can start initiatives in what is known as a “circularity project”.
In the past, Burberry was publicly dragged when they admitted to having burned their excess inventory, which then fueled a conversation on the luxury goods industry’s questionable environmental credentials. As a follow-up, the brand fully halted their production of anything that involves fur and became a first-mover in the resale market, announcing a partnership with The RealReal. With the partnership in place, consumers can purchase verified Burberry items on The RealReal and may enjoy a personal shopping experience.
But the virtues of resale are muddied when scarcity comes into play. Hermès’ Kellys or Louis Vuitton bags are often sold in the second-hand market for more than their original retail prices. The Louis Vuitton x Supreme Keepall Bandouliere 45 travel bag, with a retail price of $3,750, is now sold on Farfetch’s pre-owned category for $20,579. Evidently, for these luxury brands, the second-hand market comes with risks and rewards.
Counterfeiting is still an issue, too. This has been a threat for buyers for a while. Take, for example, the case of trademark infringement and counterfeiting lawsuit filed by Chanel, accusing The RealReal of selling counterfeit bags, claiming that the platform’s “authentication experts” are not trustworthy.
Brands thrive on being special and scarce. This strategy is used as a means to induce the illusion of exclusivity that boosts the value of their products. So, what happens when resale sites unveil that these goods are actually less valuable and more pervasive than what consumers may have thought? On the bright side, the resale market is here to stay, and the growth of consumers shopping second-hand holds great promise for brands and the future of the second-hand luxury market.
