This week, Gucci launched a partnership with The RealReal, betting that the rewards of engaging with the second-hand market outweigh the risks.
Resale is shaping up to be one of the big winners of the pandemic. Even as wider fashion sales slump significantly, the secondary market is exploding. According to a recent report by ThredUp, online second-hand sales of fashion goods are set to grow 69 percent between 2019 and 2021, as sellers clean out their closets for extra cash, and Covid-wary buyers avoid physical stores and seek bargains online.
In the luxury segment, second-hand sales are heating up, too. Luxury resale is set to grow 15 to 20 percent each year over the next five years, faster than the overall luxury market, which was growing in the low single digits before the pandemic, according to Boston Consulting Group.
Over the last decade, the luxury resale space, once dominated by eBay, has birthed a wave of “eBay meets Net-a-Porter” platforms like Vestiaire Collective and The RealReal, which offer curation, authentication and hassle-free service. Now, major luxury brands — long wary of the secondary market for fear of brand dilution — are paying closer attention to a business model that’s gaining serious traction with Gen-Z and Millennial consumers, who are set to account for more than 60 percent of total luxury spending by 2026, according to BCG, and for whom access trumps ownership and sustainability is a growing concern.
This week, Gucci, whose products have long been bought and sold on the secondary market launched a shop with The RealReal, stocked with a selection of Gucci products sourced from the platform’s consignors, as well as pre-worn press samples supplied by Gucci itself. In recent years, Stella McCartney and Burberry have also launched partnerships with The RealReal, but the Italian megabrand’s reboot has been the last decade’s biggest luxury sector success story. Where Gucci goes, others are likely to follow, suggesting that the industry’s stance on the pre-owned market could be nearing a tipping point.
There is significant consumer interest in second-hand luxury goods, with demand concentrated on a handful of brands — Hermès, Louis Vuitton, Chanel and Gucci — according to Bernstein analyst Luca Solca. And research shows that rather than cannibalising full-price sales, second-hand products sold at a discount widen the market for luxury goods and provide more affordable entry points to high-end brands, thereby serving as a gateway for first-time buyers.
There is also evidence that secondary market sales may support sales of new goods as consumers come to see the ultimate cost of a product as its sticker price minus its eventual resale value, booting perceived affordability, said Solca.
This signals a significant revenue opportunity that luxury labels cannot ignore, especially as Covid-19 depresses sales, which could sink by 35 percent this year, according to Bain. And yet, for carefully cultivated luxury brands, the second-hand market comes with risk as well as reward.
The presence of counterfeit goods on resale sites has long been a key concern. In a closely watched trademark infringement and counterfeiting lawsuit, French luxury leader Chanel has accused The RealReal of selling counterfeit bags, claiming its “authentication experts” cannot be trusted. Last November, The RealReal was embroiled in a major controversy after an investigation by CNBC revealed weaknesses in the platform’s authentication process which led to the sale of counterfeit goods on the site.
But the dispute with Chanel may reflect anxieties that go deeper than fake bags.
Luxury brands trade on being special and scarce. And yet top brands like Gucci and Chanel mass produce goods in large volumes, relying heavily on high prices and branding to generate the perception of exclusivity that gives their products value. What happens when resale sites reveal these goods to be more ubiquitous and less valuable than consumers may have thought?
Gucci appears to be betting that its products will retain value over time, that bringing these products to a wider audience is something its brand can withstand and that, ultimately, the rewards of engaging more directly with the secondary market outweigh the risks.
Clearly, partnering with The RealReal will allow Gucci to play a more active role in managing its brand on a major resale site. But most importantly, it will give the label the opportunity to more closely study the interplay between second-hand shoppers and its products to inform a much bigger decision: should Gucci build resale into its own business model? And if so, how?
Luxury fashion’s megabrands could benefit enormously from bringing resale in-house, much as luxury automobile makers have launched certified pre-owned programs, bringing greater trust and order to the secondary market while taking a more significant slice of second-hand sales.