The luxury resale market has become the new way to purchase fashion items and easy ways to get money due to the ease of access to accessories, and the prospects of increasing their value over time. In this video, Carola Long, fashion editor of Financial Times, shows us how interest in buying and selling second-hand luxury goods has increased.
In 2021, the luxury resale market reached an estimated value of 37 billion dollars, and with the background of 2020, during the pandemic, the purchase and sale of luxury Pre-Loved reached a growth of 65% compared to the purchase of new items, which was only 12%.
As a result of this growth, large stores such as London’s Selfridges started selling second-hand items rather than new accessories from fashion houses. Similarly, the largest resale platform, The RealReal, reported gains of $468 million in 2021, representing a 56% increase in its profits compared to those obtained in 2020.
On the other hand, the competition of The RealReal, Vestiaire Collective, obtained a value of 1.7 million dollars in 2021 . The company, located in Paris, opened a new collection, distribution, and authentication center in the United Kingdom in January 2022. Regarding the growth of the resale company, Carola Long spoke with the CEO of Vestiaire Collective, Maximilian Bittner.
Bittner explains that the arrival of the pandemic is responsible for the increase in their operations, mainly because of the amount of time people spent at home and decided to buy online or resell items from their closet. Bittner adds that apart from the pandemic, the global warming crisis has led people to further analyze the products they buy, and by buying second-hand accessories, they contribute to the saving of resources and materials.
But, with the lifting of COVID-19 restrictions, and the return of shoppers to stores, what is holding up the luxury resale market? A survey of second-hand luxury buyers found that there are three outstanding points about buying activity in the resale market:
- Sustainability
- Access to iconic and hard-to-find items
- Money saving
Of the three factors mentioned above, access to iconic and hard-to-find articles was 41% in the survey, followed by 40% in sustainability and 36% in saving money. This means that buyers of second-hand luxury items value being able to obtain accessories of limited editions, in a sustainable way and saving as much money as possible. This is something that only the resale market can offer them, and for this reason it has achieved considerable growth as opposed to the traditional market.
This shows that luxury resale can create a sustainable cycle, but there will not always be the possibility of saving money. Carola Long met Claudia Ricco, director and founder of Rewind Vintage Affairs, who demonstrated why second-hand luxury goods can represent good long-term investment assets.
Claudia had a Birkin Himalaya bag from Hermès, one of the most valuable luxury accessories in the world, which can range from 200,000 pounds (€230,000) to 180,000 pounds (€213,000) in the resale market. In a completely new condition, the estimated value of this bag is 55,000 pounds (65,000€) which shows that by reselling a luxury accessory as prestigious as this, you can get twice or even four times its original value.
However, there are other luxury accessory options that can be found at considerably economic prices in the resale market, this is due to the increase in store prices of new items from large brands, which during the year 2021 increased greatly.
After the rise of the luxury resale market, many fashion houses decided to create second-hand online sales platforms, but some have not accessed this option, mainly due to fear of the degradation of their status, fame and recognition, as well as possible losses in their profit margin.
Claudia Ricco explains that the luxury resale market is still a taboo for big fashion brands, and for this reason they do not seek to diversify their sales with this growing option, with the exception of Gucci, which proposes the sale of second-hand items to its customers.
The big fashion houses will have to rethink their sales strategies if they want to remain relevant in the luxury and exclusivity industry. The Industry Fashion website suggests that Millennial and Generation Z buyers will consolidate nearly half of the luxury resale market by 2025.
Param Rai, director and co-owner of Bagista explains that more and more customers prefer to buy pre-loved or vintage items rather than completely new ones. Carola Long adds that this does not mean that the purchase of second-hand accessories is simple or risk-free. For example, despite its gains, The RealReal reported a loss of $236 million in operating costs.
In addition to this, there is the threat of acquiring a counterfeit through the second-hand market. Param Rai mentions that every week some customers try to sell counterfeits to Bagista. The counterfeit industry is quite large and is valued at billions of pounds, so Bagista’s team is trained to identify counterfeit bags, to avoid possible scams and damage to buyers.
To make the task of authentication easier, Bagista has a system called Entropy, which combines artificial intelligence technologies with a scanner that detects microscopic errors in a forgery. It is used by linking the rear camera of the user’s mobile phone to a large database of images of hundreds of thousands of authentic accessories. By comparing the key features of the accessories with the image samples in the database, you can determine which accessory is fake and which is not.
This tool and other new digital technologies offer confidence to the luxury goods resale market. And despite the recent decline in values on some of the most important platforms, there is a belief that second-hand luxury will become increasingly relevant, as long as industry and consumers focus on sustainability and resource savings.