Why luxury brands are embracing the resale revolution

The fashion industry’s move towards a more sustainable position, economic challenges from the pandemic and a new-found positive public sentiment towards second hand goods all seem to conspire to pose a new threat to mainstream retail. However luxury brands are finally realising there is a business opportunity in embracing these trends and, in the past where they have resisted and policed the resale of their goods, they are now welcoming it.

The luxury resale movement is experiencing record growth – online luxury consignment store, The RealReal reported six million new members in the past year, with 45% of its new "consignors" in the first quarter of 2021 consigning for the first time, according to its 2021 luxury resale report.

Fanny Moizant, president and co-founder of Vestiaire Collective, a high-end thrift platform described the resale trend as "a similar phenomenon to e-commerce in the 1990s", which was also "underestimated initially", in the annual trends briefing, the WIRED World in 2022.

“Today, those companies that have embraced e-commerce fully are thriving. Those that did not are struggling or have already disappeared,” she said. Despite its projected growth, most luxury brands have remained on the side lines of the resale market "by fear of cannibalising sales of new products or diluting the exclusivity of their brands".

In 2018, Chanel filed against The RealReal for trademark infringement and counterfeiting, false advertising, and unfair competition. The lawsuit is still ongoing, with the French luxury brand putting a strict limit on the number of bags that consumers in certain markets can buy over a one-year period, while The RealReal has since partnered with Burberry, Stella McCartney and more recently, Gucci in 2020. The San Francisco-based platform also executed a successful IPO in June 2019.

In February of this year, Vestiaire Collective introduced its “Brand Approved” buyback program with Alexander McQueen. The initiative works by Alexander McQueen boutiques offering store credit for the brand’s current collection in exchange for past-season pieces, which are in turn inspected and resold online.

Jean-Paul Gaultier will be renting out its extensive archive

In October, French fashion house Jean-Paul Gaultier announced it will soon be renting out its extensive archive for customers to borrow, while its revamped website features a resale category, where it will sell vintage pieces. Valentino too has entered luxury resale with its “Valentino Vintage” initiative, encouraging vintage Valentino items to be submitted to a selection of stores around the world in exchange for store credit to spend in the Italian brand's boutiques.

The recent changes signal the luxury fashion industry’s adaptation to more environmentally sustainable concepts. Estimated to be worth around €28 billion in 2021, the luxury second hand market is growing four times faster than the primary luxury market, at 12% per year versus 3%, the Statista Research Department reported.

The resale sector itself has adapted to growing consumer demand and digitisation of retail. With the rise of e-commerce, mobile shopping, and most recently smart technologies, sophisticated players in the space including Vestiaire Collective, StockX and Depop have emerged, positioning themselves as conscious alternatives to fast fashion while tapping into affluent consumers’ changing attitudes towards sustainability and second hand ownership of luxury items.

A global report by Thredup, with analysis by market research firm GlobalData, shows that the resale market is growing at a rate 11 times faster than traditional retail and should be worth €77 billion by 2025, compared to fast fashion’s predicted worth of €40 billion.

Felipe Fiallo, men's footwear designer at Salvatore Ferragamo, said heritage luxury brands, like the Italian luxury goods company, are still weighing the impact of the trend that's reshaping luxury retail despite its obvious demand.

"Luxury brands are living in a transitory time to capture the attention of younger, wealthier generations with a desire for greater sustainability while maintaining its stance in the traditional and conservative market," said Fiallo.

"We are seeing plenty of restructuring in fashion houses and changes in marketing strategies but the aim towards a sustainable and circular economy still comes from local consumption of resources and generations of artisans. Limited edition capsule collections remain popular because of its exclusivity, and the same exclusivity seems to be driving the second hand market for new or nearly new exclusive items."

Senior marketing expert in the fashion and luxury industry, Susanna Nicoletti, believes that the recent trend is merely a public relations move for high-end fashion brands to garner greater awareness from its target audience and the media.

“We should first understand the difference between expensive fashion brands and luxury brands. The pre-owned market has always existed for brands including Hermes, Patek Philippe and Ferrari as the landscape is rich with wealthy collectors,” said Nicoletti, who lectures on fashion and luxury business innovation management in Instituto Marangoni.

“Expensive fashion brands are now joining the resale market simply to surf on the trend while getting positive awareness. Rather than diluting the brand, the risk for these companies comes from creating confusion in the mind of their customers.”

The risk, as Nicoletti pointed out, comes from the conflicting messages sent by luxury brands as they continue to promote exclusive drops while encouraging its consumers to support the circular economy.

“Luxury brands are claiming ‘this is the new collection, it’s a capsule collaboration, shop now before it goes sold out’ on one hand and ‘buy second hand pieces from past collection to support the development of a circular economy’ on the other,” she said.

“But the circular economy cannot develop unless it focuses on ‘buy less, buy better and use it for a long time’. How can these two approaches go alongside one another? They cannot and the risk of confusing the ideas in customers is very high.”

Yet consumer data suggests that luxury resale is expected to stick, even without the approval of luxury brands. Despite the pandemic, the RealReal reported a 46% increase in the number of items consigned under its business sellers programme, which helps luxury brands and retailers anonymously list products and fulfil orders on the site.

Alexander McQueen is partnering with Vestiaire Collective in which its parent group Kering has taken a stake

Kering—the luxury conglomerate that owns Gucci, Balenciaga, and Alexander McQueen— has invested in Vestiaire Collective, Europe’s biggest platform for high-end second-hand clothes and handbags, a collaborative move that signals the changing landscape of second hand luxury goods.

Petah Marian, trend forecaster and founder of Future Narrative observed that the future of luxury will ultimately be determined by the next generation of shoppers.

"One of the ongoing predictions I have made for a number of years is that resale will play a larger role in the luxury industry of the future, and if brands don’t get involved, they’ll be disinter-mediated by resale platforms or other players in the space," said Marian.

"Younger generations increasingly see luxury purchases as assets that they will get some kind of return on once they are done with them, a shift away from the more sentimental attachment that older generations might have to physical goods. Similarly, we are looking at younger generations having less purchasing power overall, which means that resale and rental provides a more aspirational consumer access to a brand."

To that end, luxury brands' dip into the resell world still remain at a highly experimental stage. The tension between online consignment stores and luxury brands is a clear sign that the industry is still trying to find an effective format to incorporate the resell market. For existing and new luxury customers, the issue that hinges on preferences and conversations is sustainable luxury.

With Millennials and Generation Z consumers making up 30% of all luxury shoppers and on track to represent 45% by 2025, luxury brands need to find the balance between social luxury and social values if they want to stay relevant.