As consumers shift their priorities towards sustainability and a more circular way of operating, there has never been a more relevant time for luxury companies to consider the opportunities in the pre-owned luxury space.
Indeed, this year has seen more action on sustainability than ever before, with Kering recently announcing its commitment to becoming carbon neutral across its supply chain and LVMH taking a minority stake in Stella McCartney to name a few events. One need only look at the impact that Swedish teenage environmentalist Greta Thunberg has made in just over a year to understand the importance of why sustainability as a value matters to a new generation of consumers.
At the same time, consumers of luxury products are growing. More customers than ever, particularly in emerging markets, are arriving to the luxury market and more often than not are buying their first designer product from a pre-owned channel because they haven’t got enough disposable income and secondly, because it allows them to trade up to a product/brand that they cannot otherwise afford.
The rise of online channels like The RealReal, Vestiaire Collective and Fashionphile are testament to the success of pre-owned. In April, Neiman Marcus purchased a minority stake in Fashionphile, meanwhile The Real Real raised $300 million in its initial public offering in June, and Vestiaire Collective recently completed a €40 million euro of financing to expand into Asia and the Middle East. Also, second-hand hard luxury platforms like Watchfinder and Chronext are flourishing.
The RealReal. Photo: Courtesy.
With pre-owned, you are able to give new life to things that otherwise would be dismissed. Previously, the luxury industry would have viewed the pre-owned market as a threat to its existing offering. That instead of customers buying a new product, they would buy a second hand one resulting in the cannibalisation of its sales.
But the reality is that, in many cases, a consumer does not make the choice between a new and pre-owned product, but usually makes a trade-up in the pre-owned sector. For instance, if I had 400 pounds to spend on a bag, I could buy a new bag from an accessible luxury brand like Michael Kors, or I could buy a second-hand Louis Vuitton bag or Gucci bag.
This is more or less the trade-off that consumers make. Generally speaking, it is unusual that the customer who can afford a second hand Louis Vuitton bag could make the benchmark of a new Louis Vuitton bag.
Buying pre-owned luxury has become more acceptable. Previously, consumers who were perhaps reluctant to buy second hand goods, are now starting to see the benefits of exchanging these goods, resulting in them having more disposable income to spend on whatever they choose. Many luxury consumers use pre-owned sites to find limited editions, or product drops which are no longer available in stores.
Taking all these points into account, is pre-owned a threat or opportunity for the luxury market?
I believe it’s a huge opportunity. Creating a secondary market for your luxury goods means you are giving your consumers the idea that your products have real intrinsic value. A secondary market means your product is not a simple write-off, but something that has embedded value.
Currently the pre-owned luxury market is estimated to be worth around €22 billion ($24.2 billion), accounting for around 7 percent of the total luxury market and is growing at four times the pace of overall luxury demand, according to report by Altagamma/Bain for the Fondazione Altagamma that was published in January.
The study also found that online accounted for a quarter of the sales of pre-owned luxury products, with hard luxury items like watches and jewellery making up the biggest category in pre-owned.
In addition, the most sophisticated luxury consumers (those with an annual spend of around €40,000 ($44,000) in personal and experiential luxury), online represented the main channel for purchase of luxury goods, a study by Altagamma/The Boston Consulting Group found. Around 37 percent of the consumers buy them only online and 43 percent both online and offline.
Another chance for luxury brands to take advantage of the opportunity in pre-owned, is to use the secondary market as a way of attracting new customers.
This can be clearly seen in the recent actions of luxury watch brands like Vacheron Constantin, which became of the first watchmakers to test the use of blockchain technology on a small collection of its pre-owned watches as a way of providing authentication to its customers. Fellow watchmaker Audemars Piguet recently confirmed it was also experimenting with the technology and that wants to start selling directly pre-owned watches.
This can also be seen with Dior, which has brought back one of its classic handbags: The Saddlebag. Sales of pre-owned Saddle significantly rose following the re-introduction.
The RealReal x Burberry. Photo: Courtesy.
The industry is already beginning to take action. On Monday, British luxury goods company Burberry announced it had signed a deal with re-commerce site The RealReal to encourage its customers in the United States to sell their used Burberry items online. Those who do put their pre-owned goods up for sale during the upcoming holiday season would be invited for a personal shopping session as well as tea at one of its stores.
Interest in pre-owned luxury is such that even the Kardashian clan are making a move into the market, announcing their latest venture the Kardashian Kloset, an e-commerce site that will initially only sell items like clothing, shoes and handbags belonging to Kris Jenner, Kim Kardashian West and Kylie Jenner. Clothing from the rest of the sisters Khloe, Kourtney and Kendall will follow later on.
All in all, I believe the benefits of pre-owned luxury outweighs the perceived risk. The development of second hand luxury market will be more and more relevant especially for younger generations that, at the moment, have got less disposable income, and are more environmentally conscious, so they believe more in the circular economy and are more digitally savvy. With digital as the main channel to sell and buy pre-owned, the opportunities that lie in wait for luxury companies are ripe for picking.
Vestiaire Collective campaign. Photo: Courtesy