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Resellers Are Courting Shoppers Away From Brands. Can They Work Together Instead?

The resale market is growing 21 times faster than the fashion industry overall. Below, BoF outlines the ways luxury labels and resellers can make money together.
Outside the Chanel show | Source: Shutterstock
By
  • Cathaleen Chen

NEW YORK, United States — Like any fashion enthusiast with an eye for luxury, Lauren Mazzei rarely shops retail. But rather than waiting for sales and discounts, the 27-year-old part-time blogger scours resale sites like Rebag, Fashionphile and The RealReal for designer labels.

Her latest purchase? A black Prada Saffiano cross-body bag from Rebag, where “almost every bag has similar quality as retail” but hundreds of dollars cheaper, she said. A Prada Saffiano bag runs anywhere between $800 to $1,200 on Rebag, but costs upwards of $2,500 in stores like Neiman Marcus and Barneys. And when she gets sick of a certain item, she sells it through The RealReal. She even has a monthly recurring appointment at one of the company’s NYC stores to consign unwanted products.

Mazzei, who works in the digital IT department at Tiffany & Co., is among the millions of consumers embracing the emerging resale market, many of whom are millennials that have yet to reach their spending prime. Their preference for online second-hand shopping is why resale is growing 21 times faster than retail at large, and why companies like The RealReal are reaching billion-dollar valuations: The vintage luxury marketplace platform filed for an initial public offering last month, with plans of raising up to $285 million at a valuation of $1.6 billion. Meanwhile, multi-brand retailers are taking note: Neiman Marcus Group bought a minority stake in Fashionphile in April, citing access to customers like Mazzei as a primary reason for the purchase.

Luxury labels have remained tepid toward resale, if not full-out aggressive, as Chanel has demonstrated through its lawsuit against The RealReal, in which the storied French house claimed that only they — and not any reseller — could guarantee the authenticity of a Chanel handbag.

If I'm a fashion brand right now and see that the resale clothing market is growing at a rate that's 21 times faster than the overall fashion industry, I'd be thinking to myself, 'How do I get a piece of this?

But Chanel could be in the minority with its hardline stance against resellers, according to industry insiders, as brands come to terms with market opportunities provided by resale, which reached a global market size of $24 billion last year. This means that among resellers, the biggest players are all competing for partnerships with these brands, boasting proprietary data on consumer behaviour as well as a way for brands to build loyalty. Labels could follow in the footsteps of Neiman Marcus and invest in a resale platform in order to gain access to its customer data, or of Farfetch, which partnered with a startup to create a pilot program that allows customers to trade in their worn designer bags for store credit.

“If I’m a fashion brand right now and see that the resale clothing market is growing at a rate that’s 21 times faster than the overall fashion industry, I’d be thinking to myself, ‘How do I get a piece of this?’” said retail consultant Doug Stephens.

What exactly will that look like? Below, BoF outlines the ways in which brands like Gucci and Prada can work directly with resellers and resale platform providers to woo consumers together.

Resale as a means to fuel repeat purchasing

In 2017, Stella McCartney became the first major brand to promote resale by incentivising store credit. Working with The RealReal, the designer encouraged shoppers to sell their worn Stella McCartney garments on the platform and receive $100 in store credit to shop in Stella McCartney stores or online.

“Early on Stella recognised that the secondary market helps introduce new customers to her brand, extend the life of her goods, keep them out of landfills and put into the hands of new owners,” said Allison Sommer, director of strategic initiatives at The RealReal, in an emailed statement to BoF.

While Stella McCartney remains the only label engaging in this sort of setup, resale service providers like Yerdle are hoping that they can convince brands to skip the resale platform altogether and pursue their own direct resale services online.

Yerdle provides a backend system for brands to offer resale services at their own websites and stores. It handles the IT, logistics and all other operations for a brand to accept gently worn items, offer sellers store credit and list the items online. Yerdle currently works companies including Eileen Fisher, Patagonia and menswear brand Taylor Stitch, and will unveil partnerships with more contemporary fashion brands this year, according to CEO Andy Ruben. Eileen Fisher has sold more than 1 million used items on its site since taking back clothing in 2009, while Patagonia now expects its resale segment to account for a double-digit percentage of its overall sales by 2023.

The white-labelling of these services is critical for brands, Ruben said, because it’s a way for them to exert full control over customer engagement.

“You can’t just hand that customer over to a different retailer,” he told BoF. “To introduce a platform that’s not you just doesn’t make sense … it’s like 10 years ago when e-commerce was beginning to be a big deal and brands like [now-shuttered] Toy’R’Us said, ‘Oh, we can just work with Amazon.’”

Yerdle uses a revenue sharing agreement with partners for resale items sold and charges a one-time setup fee.

Rebag is developing its own version of a white-label platform for brands to take in used product for store credit. Instead of listing the worn item on the brand's website as Yerdle does, Rebag would give shoppers cash upfront and resell the product on its own platform. Under this setup, brands won't have to pay to buy the worn products — Rebag will.

If you make this process widely and conveniently available, we can guarantee that conversion will increase at first-hand stores.

“We think Rebag can power that resale operation on the supply side for brands,” CEO Charles Gorra said. “Rebag will assist the shopper through selling that product on the spot, and the customer gets store credit.”

“If anything we should be paid [by the brand] because we are de facto reducing the price tag of new items by being able to finance part of that through the resale process,” Gorra explained. “If you make this process widely and conveniently available, we can guarantee that conversion will increase at first-hand stores.”

Resale as a means for customer acquisition

Under a white-label partnership with a resale platform, brands will also be able to attract new customers — customers such as Mazzei and her friends, who currently use resale to experiment with a multitude of styles and brands, but may develop loyalty to labels as they gain purchasing power.

“I think as you get older you find a brand that you like and stick with it,” Mazzei said. “Like right now, I’m very apt to pick Gucci. Maybe the older I get, the more I’d go with Gucci than a trendier brand.”

Resellers argue, though, that their own stellar services — the type not generally available through traditional secondhand stores — have attributed to this emotional attachment, and that further engagement with their customers can lead to an even higher affinity with certain brands.

Vestiaire Collective hopes that its social commerce platform will be a big draw for brands, which could engage with Vestiaire users through its mobile app. Under a potential partnership, a brand could create content and share its story with Vestiaire users the same way they interact with social media posts.

Chief Executive Max Bittner calls this the “gamification” of luxury resale shopping — something that enables Vestiaire to compete with Instagram for customer engagement and in turn, offer the same levels of engagement to potential brand partners.

By establishing a relationship with an up-and-coming customer early on, resellers are already creating bonds on behalf of brands, they say.

“And when they’re ready to upgrade to the first-hand product, there’s a [bigger] opportunity that brands are missing out on,” said Gorra. They’re missing out on a whole sector of customers, he argues, and resale can be the vehicle that drives first-time luxury retail sales to the brand.

According to Gorra, a partnership with a luxury brand could mean that Rebag makes regular referrals to that brand after a customer has purchased its products via the resale platform. For instance, if a customer has purchased multiple Louis Vuitton handbags from Rebag.com, the company could reach out to her through email or the Rebag app to alert her of events and promotions at her local Louis Vuitton store.

“[For] customers who bought a product from us in a certain region, we could do a pop-up event where our brand representatives would be present,” he said. “We could even do a pop-up event together at our locations or theirs.”

For companies wary of cannibalisation of sales, preliminary data from Yerdle shows that across its clients, there has been a net increase in new customers after providing resale on their websites. “This is the gateway customer. It surprises me why a brand wouldn’t try to get them in their stores,” Gorra said.

Data exchange

Perhaps resellers’ most appealing asset they can offer to brands is access to customer data. Long-time resellers like Fashionphile not only keep data on how customers like to shop, but also what products oversell the quickest and retain the highest value. Fashionphile, for instance, uses such data to constantly evolve its pricing algorithm.

While a brand like Chanel may have its own historical archives of stock keeping units or SKUs, a prolific resale site can cross reference SKUs among a multitude of brands.

The resale value of a luxury product is a very true proxy to the underlying value of the brand.

“We use computer learning to identify and [assess] every single bag and every single style,” Fashionphile founder Sarah Davis said.

For luxury brands, this sort of data can be invaluable for marketing future styles and formulating “drops” that are more conducive to maintaining high resale value.

"The resale value of a luxury product is a very true proxy to the underlying value of the brand — and brands are extremely interested in these data points, but they have no visibility of what happens when their products leave their retail floors," said Gorra.

Vestiaire Collective’s Bittner said his company’s global data is something that other resellers can’t offer. Vestiaire operates in 50 countries worldwide in Asia, Europe and the US. With its latest funding round, the company plans on launching in additional markets including the Middle East and South America.

Conversely, brands can offer resellers authentication guarantees — a component that’s at the heart of Chanel’s lawsuit against The RealReal, in which the luxury French house claims that only the brand itself can promise a Chanel bag’s authenticity.

Brands and resellers can work together to combat the burgeoning counterfeit industry, a market that was worth over $450 billion in 2017, according to the Organisation for Economic Co-operation and Development. Labels selling their own certified pre-owned goods would be a solution, said Stephens.

“With certified pre-owned, you could authenticate your products and trample down the counterfeits and also get a huge chunk of what’s already a robust resale market,” he said. “If Mercedes-Benz could do it, why can’t Gucci do it as well?”

Strategic acquisitions

While some luxury brands will likely develop resale platforms of their own, others have an opportunity to consider M&A options in the space, as Neiman Marcus has done with Fashionphile.

Seth Weisser, co-founder of What Goes Around Comes Around, hopes that a Kering or LVMH would consider his vintage chain a useful strategic acquisition, pointing to the former’s 2018 acquisition of sneaker reseller Stadium Goods.

If Mercedes-Benz could do it, why can't Gucci do it as well?

“There are a lot of ways that relationship can benefit both companies and validate the space,” he told BoF, adding that the company has long worked with multi-brand retailers such as Shopbop and Dillards to provide vintage inventory.

“We’re at a tipping point in the resale ecosystem. It's just now becoming mainstream," said Rebag's Gorra. "Ten years from now, we’ll all be laughing about how strange it was when resale was small."

Editor's note: This article was revised 24 June, 2019. A previous version stated that shoppers who sell their worn Stella McCartney garments on The RealReal would receive $100 in store credit to shop in The RealReal stores or online. This is inaccurate. Shoppers would receive $100 in store credit to shop in Stella McCarney stores or online. 

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