Consumers are starting to wake up to the destructive effects of excessive shopping habits and shifting their mindset regarding the concept of buying luxury.
In particular, the stigma previously associated with renting or buying pre-owned goods is becoming less and less prevalent, giving the opportunity to a host of new retailers, who are embracing circularity over the traditional wholesale model, to thrive.
Two of the biggest players in the second-hand luxury space are Vestiaire Collective and The Real Real, who have been leveraging the ever-growing momentum around sustainable consumption with carefully curated edits from big name brands and trendy social media campaigns.
The result has been the accumulation of a dedicated audience of high-end shoppers — and rapid-fire business growth.
Vestiaire has logged annual sales growth averaging 70 percent, and its inventory includes up to 900,000 luxury items — many of which are little worn and as good as new. It also received $62 million in funding from the likes of Balderton Capital, Eurazeo and Condé Nast International last year to fuel its expansion ambitions in the U.S. and Asia
"Consumers are becoming more eco-conscious and gravitating toward companies and practices that share their values," asserted Rati Levesque, chief merchant of consignment site The RealReal, which said it saved 65 million driving miles in energy and greenhouse gasses since its inception in 2011.
The growing prominence of the resale model – it has reached 20 billion euros to date and it’s set to grow a further 7 to 10 percent by 2020, outpacing the 3 to 4 percent growth of the overall luxury goods market, according to a report by Berenberg Bank – has also led to a number of bigger shifts, influencing luxury retail as a whole.
Consumers no longer see a luxury item as a forever purchase but as an investment, aware that they will be able to sell it in the future and at times even make a profit.
“Customers are making purchases now, knowing that they can make a large portion of the original cost back. They want to know the resale value before they make a purchase, so we provide recommendations based on our data. Those decisions are sustaining the marketplace," explained Levesque.
Designers, who have traditionally shied away from the second-hand market, are also opening up to the concept, striking deals with the likes of The Real Real and Vestiaire and putting more resources into shifting existing stock and selling direct-to-consumer, where they can retain control of the quantities they produce and limit waste.
Stella McCartney has been a pioneer in the area, as one of the first to partner with The Real Real and sell old-season stock on the platform.
What About Established Retail Players?
Brick-and-mortar stores are trying to hold onto their clientele via retail theater and in-store experiences, while online players are more attentive to stocking sustainable brands, featuring sustainable edits on their sites and providing relevant content to promote the issue.
However, few are taking more drastic steps toward change and are bound to lose market shares to this new crop of retailers, doing business in a more sustainable way.
Moda Operandi is one of the more established names, rethinking its strategy in order to respond to the changes in market dynamics. Having always operated a wholesale model alongside a trunk show model, it’s now looking to put more focus on its trunk shows, which allow customers to pre-order items straight off the catwalk and receive them once produced, approximately four to six months after an order is placed.
This type of on-demand manufacturing ensures that less unwanted stock, and therefore less waste, is being produced. It also gives Moda access to powerful data about consumer demand and what sells best from a runway range.
“There’s constant pressure for exclusives amongst retailers, but it has made the production cycle way too fast, especially for the young designers. Trunk shows are exclusive in their nature, but you are working with what the designers already have. We can all agree that the world doesn’t need more stuff, we just need to get the product right,” said the retailer’s fashion director Lisa Aiken.
New Business Models
Farfetch is another retailer looking at new ways to make a profit outside the traditional seasonal model. Earlier this week, it launched a new site dubbed Farfetch Second Life, which will allow customers to sell second-hand bags in exchange for Farfetch credit.
“Luxury fashion is increasingly aligned with sustainable fashion and the pre-owned luxury market is growing rapidly. It’s likely to double in size to reach $51 billion over the next five years, so we wanted to test the market with this new program. Resale is an area of increasing interest for our customers,” said Giorgio Belloli, Farfetch’s chief commercial and sustainability officer.
“It’s becoming more and more clear to brands that they have little to gain from wholesale and as consumers are starting to put more emphasis on sustainability, retailers need to think outside the box about new ways of doing business that is less wasteful and resonates with the modern-day consumer,” said Thomas James, retail analyst at the consultancy firm Retail Remedy.
Cover image credit: The Real Real/Facebook