Second-hand Fashion is Worth Billions
The market for second-hand luxury fashion is growing 4 times faster than the primary luxury market selling new products. Currently, the luxury resale market is worth £18.5 billion ($24 billion).
Milan Station
Milan Station launched in China in 2007 selling pre-owned luxury handbags. The brand became so successful that it was floated on the Hong Kong Stock Exchange in 2011. Unfortunately, in 2016, Milan Station reported an 80% decrease in revenue. In 2018, losses for the company amounted to HK$80 million. However, in 2019, Milan Stores was able to halve its losses by closing unprofitable stores, mainly in Mainland China.
The RealReal
The RealReal launched in the United States in 2011 as a luxury e-commerce site selling pre-owned clothing, accessories and homeware from designer brands including Gucci, Rolex, Fendi, Cartier and Saint Laurent.
Public and Profitable
In June 2019, The RealReal went public on the New York Stock Exchange. Its revenue for that year was £777 million ($1,008 million) while gross profit was an impressive £156 million ($203 million) on net revenue of £245 ($318 million).
The RealReal Getting Serious
The RealReal has a strong online presence and operates 5 stores in major US cities, including 2 in New York. The company also seems determined to extend its reach in the world of luxury fashion by aligning with authorised retailers wishing to offload their surplus merchandise. Kering, the fashion conglomerate that owns Gucci, Balenciaga, Saint Laurent, and Bottega Veneta and others, revealed that it is actively collaborating with The RealReal. Hence the new Gucci sunglasses and unworn Bottega Veneta dresses that are available at therealreal.com – without their tags, of course. TK Maxx is the biggest player receiving excess inventory, with a gigantic 2019 turnover of $42 billion compared to Kering’s $20 billion.
Enter COVID-19
The wide-reaching and devasting impact of the coronavirus pandemic has also put luxury brands on the spot. As unsold goods continue to stockpile and become obsolete, will this merchandise find a home with off-price retailers and resale entities? And while The RealReal is leading the pack, other well-known and much smaller players such as Vestiaire Collective, ThredUp and Depop also stand to gain.
Farfetch
Global luxury fashion platform, Farfetch, also has a pre-owned section on its website. The second-hand pieces are available to buy online from designers including Chanel, Dior, Gucci and Louis Vuitton. With luxury brands looking to recoup some of their spend on stock, the e-commerce giant may benefit significantly from selling off-price wares. As yet, Net-A-Porter has not entered this market.
What Are They Waiting For?
It seems strange that most luxury brands are yet to tap into the potentially lucrative market of second-hand and off-price fashion. Swallowing a bit of pride would surely help to boost revenue and brand image of these struggling labels. With very few major luxury brands offering second-hand collections, could there be an opportunity for them to capitalise on the resale market? There has never been a more appropriate time to explore new avenues for the retail of luxury fashion. What are they waiting for?
