Secondary economy: why resale is crucial for luxury brands?
Main concerns, benefits for brands, available strategies ..
From the archives: article initially published on Linkedin in January 2024
Two months ago, I wrote about the Gen Z obsession with archival fashion, connecting it to the luxury brand shift towards older and wealthier customers, the influence of TikTok, nostalgia, the high demand for certain brands, economic factors, their eco-conscious choices, and resale market trends. Today, I want to emphasize why resale is crucial for luxury brands.
According to Bain, the secondhand luxury market reached $49.3 billion in 2023, doubling in size in four years, and now equivalent to 12% of the market value for new luxury goods.
These past years, we have seen more and more luxury players such as Alexander McQueen, Balenciaga, Burberry, Mulberry, Rolex, Stella McCartney, and Valentino, launching their circular fashion programs promoting resale, either independently or through partnerships with third-party resale or recommerce platforms.
However, not all luxury brands have been supportive of resale. Chanel has filed lawsuits against The RealReal and the vintage consignment company What Goes Around Comes Around, alleging that these companies have harmed the brand's reputation and allure, and have accused them of selling counterfeit goods.
What are the main concerns of luxury brands regarding resale?
Resale seems to still be a tough subject in the luxury industry, whose concerns are mainly about authenticity issues and transparency in terms of value retention.
Brands are worried that counterfeits might be sold as real items on secondhand websites
Especially those that don't have strict checks for authenticity. This is a significant concern as it can affect a brand's reputation and the perceived value of their products.TikTok recently reportedly teamed up with LVMH to work on a plan to limit the amount of fake products sold on their app and has established a partnership with Entrupy, a scalable AI-powered solution for product authentication.
Brands are also concerned about how the resale market makes it obvious which goods retain their value and which do not.
This transparency can influence consumer perceptions and future purchasing decisions, as consumers can easily see which products are a good investment.
What benefits do brands gain from engaging in the secondary economy?
Sustainability and brand image
By supporting the resale of their products, brands can position themselves as environmentally responsible and sustainable. This is increasingly important to today's consumers who are concerned about the environmental impact of their purchases.
Customer loyalty and engagement
Providing resale options can enhance customer loyalty. Customers are more likely to purchase a new item if they know they can resell it through a trusted platform in the future. This creates a lifecycle for the product that keeps the customer engaged with the brand.
Control over brand integrity
By participating in the resale market, brands can better ensure the authenticity of their products being resold. This helps maintain the brand's reputation and reduces the risk of counterfeit goods damaging the brand's image.
New Customer Acquisition
Resale platforms can introduce luxury brands to a broader audience, including younger consumers or those with lower income who might not be able to afford new luxury items. Once these customers own a piece from a luxury brand, they may aspire to purchase new items in the future.
Revenue opportunities
Some brands may find direct revenue opportunities in the resale market, either by operating their own platforms or by partnering with existing resale sites.
Reducing overproduction and waste
By promoting a circular economy where products are reused and recycled, brands can reduce overproduction and waste, aligning with global efforts to create more sustainable consumer practices.
Enhancing brand value
Products that maintain or increase in value over time can enhance the overall perception of the brand as a valuable and worthwhile investment.
Market insights
Resale platforms can provide valuable data on customer preferences and market trends. Brands can use this information for their future designs, production, and marketing strategies.
What strategies are available for luxury brands to engage in the secondhand sales market?
Certified buyback / pre-owned programs
Brands like Valentino, Mulberry, Rolex, Carhartt, Canada Goose have implemented their own certified buyback/ pre-owned initiatives. In these programs, they buy back their products from customers, often refurbishing them for resale as certified pre-owned items. This approach helps maintain product quality and brand integrity.
Resale marketplace partnership
Brands like Burberry and Alexander McQueen partner with specific resale platforms such as Vestiaire Collective or The RealReal to facilitate customer resale of their products, often including incentives and focusing on sustainability. With Kering acquiring a 5% stake in Vestiaire Collective in 2021, we can anticipate seeing more collaborative initiatives between Vestiaire Collective and various Kering brands in the near future.
Recommerce partnerships
Brands like Balenciaga partner with recommerce services like Reflaunt, which integrate resale services into existing retail models and facilitate the resale of their products across multiple platforms, thereby expanding market reach and product exposure. To make the process more user-friendly, sellers can either drop off their items at designated stores or opt for a pick-up service. Upon the resale of their items, sellers receive compensation, either in cash or as a voucher. Reflaunt's insights are very interesting: consumers are willing to pay a premium ranging from 6% to 30% more for pre-owned items when these items are purchased directly from the brands themselves. Additionally, 85% of recommerce customers are new to the brand, and 41% of customers shop resale to find unique, no longer available products.
Branded peer-to-peer marketplaces with new revenue opportunities
In the luxury sector, peer-to-peer marketplaces have not been a venture undertaken by major brands, largely due to concerns about authenticity and the additional complexity and management challenges they present.Outdoor brand Patagonia and indie brand ET Tigre stand out among the rare examples of brands that have boldly created a peer-to-peer platform for the sale of pre-owned items. Thanks to platforms like Solaire using blockchain technology, a significant evolution is expected in the near future allowing brands to capture the secondary economy. Blockchain, integrated with NFC chips or QR codes, ensures product authentication. Solaire facilitates peer-to-peer authenticated resale without requiring any participation from brands, giving them the full benefits of the secondary economy without any heavy lifting. This model not only fosters a brand-specific community but also enables brands to earn a commission fee on each resale transaction, creating a new revenue stream.
In summary, the luxury resale market, now more than ever, presents an undeniable opportunity for luxury brands to expand their reach, reinforce sustainability, and innovate in their business models. As the industry evolves with technologies like blockchain, brands are uniquely positioned to redefine their relationships with consumers and tap into new revenue streams. Embracing the secondary economy isn't just a trend—it's a strategic move towards a more sustainable and customer-centric future in luxury fashion.
My name is Aurelia Ammour. I’m a strategy consultant and youth culture trailblazer (I'm not an agency). I built a next-gen sneaker brand, SHOES 53045, from scratch as its CEO and CMO for 4 years. I was behind the scenes of many major strategic transformation and growth projects for notable names like LVMH, Kering, PUIG, Celine, and Loewe, collaborating closely with C-Suites. I’ve also worked as a VC. Today, I help create and develop visionary & iconic brands, products, and experiences that connect with Gen Z and are relevant in today’s culture across Fashion, Luxury, CPG, and Retail sectors.