Luxury Brands Take Second Look at Secondhand Sales

If you can’t beat ‘em, join ‘em.

That’s the retail response that a growing list of luxury apparel brands and designers are taking as a surge of resale or reCommerce initiatives gets underway at an important but challenging time for the industry.

In the past week alone, Gucci, Burberry and Balenciaga have reportedly entered the secondhand apparel space, as a tough economy has seen fashion-forward consumers looking for more affordable options than full price.

“Gucci retakes the #1 spot, while must-have bags and celebrity clout are driving Dior and Balenciaga up the charts,” designer resale platform The RealReal’s Luxury Resale Annual Report declared last month, noting that a 24% increase in demand for Gucci branded items over the past year had ousted Louis Vuitton from the top spot.

“It’s no surprise to see Christian Dior and Balenciaga are our most notable list shifters this year,” The RealReal Senior Director of Women’s and Fine Jewelry Sasha Skoda said. “Both brands have two common themes: the resurgence of their iconic bags and celebrity appeal.”

But rather than have third-party platforms manage and profit from surging demand for resale, both Gucci and Balenciaga have moved forward with their own reCommerce offerings as a service to keep those transactions in-house.

“The pandemic caused widespread financial instability. This financial adversity, however, did not cause consumers to stop shopping but rather to seek financial flexibility to accommodate their existing spending habits,” Pedro Bennasar, head of payment for luxury resale site Vestiaire Collective, told PYMNTS in an April interview.

To be sure, like so many trends accelerated by pandemic patterns, luxury resale is a bit of tightrope walk for brands keen on preserving premium pricing and authenticity while conceding the luxury resale platforms can’t be ignored as a force in the industry, which is bringing about new partnerships.

PYMNTS’ Karen Webster foretold this heating up of luxury resale early in 2022 as it became clear that inflation, not COVID, would be the big story of this year and likely next.

“Luxury brands have historically traded on exclusivity and limited accessibility – that was before secondhand marketplaces gave anyone with an extra $486 the chance to buy a luxury item and snap a picture wearing or holding it on Instagram,” Webster wrote.

“The smart luxury retailers will set aside their disdain for the democratizing of their luxury brand and use it as an entry point to build the next generation of brand loyalists — on their terms,” she correctly forecast nine months ago.

See also: 10 Things Will Define the Digital Transformation in 2022

That prediction is becoming reality as more luxury brands are now leaning into resale rather than looking down their noses at it or fearing its downstream effects on new item sales.

On Sept. 24 The Wall Street Journal reported that sales of luxury items rose 65% last year compared to 2017, versus a 12% rise in new luxury sales, per Bain & Co research which “forecasts that over the next five years, secondhand luxury sales will increase annually at around 15%, double the expected rate of new sales.”

Seeking to capitalize on their own aftermarket opportunities, “Tech platforms such as The RealReal Inc. and Vestiaire have emerged in recent years as popular online marketplaces for used luxury products. Kering joined with RealReal in 2020 to start selling used Gucci products online, and last year took a roughly 5% stake in Vestiaire,” WSJ added.

Embracing the Budget Fashionista

On Monday (Sept. 26), news surfaced that Balenciaga is teaming with resale platform Reflaunt to take an active role in the resale of its preowned fashions, and a cut as well.

Business Of Fashion reported that “Balenciaga’s tie-up with Reflaunt (in which chief executive Cédric Charbit is an investor) will offer customers a full-service resale experience. Products can be scheduled for pick up online or dropped off at participating Balenciaga stores, where they are sent for authentication and pricing before they are photographed and listed on a network of global marketplaces.”

That was part of Webster’s prediction for where resale will eventually go, saying in her early 2022 column that “Today’s reCommerce marketplaces will, over time, become more like discount sites than luxury resale as the high-quality goods move to these designer-owned and branded marketplaces. Payments providers will compete for the consumers and luxury brands as they court and cultivate the next generation of luxury buyers with brand affinity.”

See also: What Does RealReal CEO’s Departure Say About the Future of reCommerce?

Kering Group, owner of Balenciaga, Gucci, Bottega Veneta, Alexander McQueen and Brioni, among other brands, is embracing the resale trend for the most part in the Reflaunt pact, as are labels including Burberry Group and Stella McCartney, per the WSJ coverage.

Mastercard SpendingPulse data released in September indicates timing is good for affordable luxury, noting, “Following nearly two years of loungewear and athleisure, consumers may be adding revamped wardrobes to their wish lists as social events and platforms have many dressing to impress. Apparel (+4.6% YOY/ +25.3% YO3Y) and Luxury (+4.4% YOY/ +29.6% YO3Y) are expected to be hot holiday gift sectors, sending consumers into the new year in style.”

See also: How Vestiaire Collective Uses BNPL to Make High-End Fashion Accessible to All

Not all fashion brands are thrilled with the reCommerce boom. The WSJ story notes, “For big luxury brands, the trend threatens to cannibalize sales of new products or weigh on pricing power, executives say. Luxury-industry standard bearers like Hermès International, LVMH Moët Hennessy Louis Vuitton SE and Chanel have said they aren’t interested in reselling their wares.”

For all PYMNTS retail coverage, subscribe to the daily Retail Newsletter.