Can Retailers Find Secondhand Success With Luxury (And Other) Items?

The second time is the charm — that holds true for Neiman Marcus, and the hot retail trend the chain is tapping into (again).

Retailers are increasingly turning their sights to resale commerce. The latest evidence for that came this earlier this week from the high-end retail chain. As covered by PYMNTS, Neiman Marcus has acquired a minority stake in Fashionphile, an online company that sells pre-owned designer handbags and other similar products. The move follows a failed relationship, one that ended in 2016, with The RealReal, an online luxury reseller that is mulling an initial public offering for this year.

Resale Factors

That potential IPO speaks to the appeal and growth of resale commerce. A big part of the trend is driven by younger consumers — that is, the interest on the part of millennials in using recycled clothing, and caution on the part of the luxury brands in terms of what they can do online. Indeed, Farfetch, a rival to The RealReal, went public in September of 2018 at the high end of its IPO price range. Farfetch was able to raise $885 million.

Part of the appeal of resale, at least in the particular area in which Neiman Marcus is targeting via its Fashionphile deal, simply comes from the attractiveness of products, and the desire of consumers (including during their early careers) to essentially fake it until they make it, as the saying goes. Those factors were made clear during a recent PYMNTS discussion between Karen Webster and Charles Gorra, CEO and founder of Rebag, a marketplace where consumers can buy and sell their used luxury handbags.

That company is tapping into basic consumer nature when it comes to expensive items such as luxury handbags and the resale market. Consumers tend to have a much harder time parting with items that were expensive to purchase, those with a quality and look that verge on the artistic. Designer handbags, for instance, often live long, if unproductive lives, tucked away in closets following an initial use period — after trends have shifted and newer items have been acquired for that very reason.

Resale Subscription

Rebag buys the inventory from consumers, then resells it to those who want to pick up a gently used, but still in excellent condition Hermes Birkin or double-flap jumbo Chanel bag for well less than the cost of a new one. Gorra told Webster that taking possession of the inventory gives Rebag the ability to deal directly with the buyer, and create a better buying experience.

As well, Rebag recently launched a subscription business model that essentially rents the bag to a buyer for six months, and offers a trade-in for 70 percent of the original purchase price as a store credit to buy the next one. Such an offering underscores the growing appeal of resale commerce for luxury items, and reflects the innovation and experimentation designed to capture more of that market and build long-term relationships with customers.

Of course, the resale (or “pre-used” market is about much more than used luxury items (a product category that even includes luxury watches in this age of keeping time via smartphones). And more growth is coming, according to various estimates, including from players in the space.

Resale Growth

Online consignment hub thredUP is among the main players in this space, and a recent estimate from that company does a decent job of describing this space.

According to the company’s own estimates, the resale market will grow to $41 billion by 2022. Apparel accounts for 49 percent of the resale, followed by media and electronics (20 percent), books (13 percent), homewares and furniture (11 percent) and other (about 8 percent). It also said 44 million U.S. women shopped secondhand in 2017, up from 35 million in 2016. A surge of new thrift shoppers emerged after the last recession that started in 2008, it said; a new recession, as many experts are anticipating, would likely lead to even more online sales of secondhand goods.

As well, if there is any doubt that digital technology is helping resale commerce expand well beyond its thrift-store reputation (nothing against the retail adventure of searching brick-and-mortar thrift stores, of course), there’s this as well: Artificial intelligence (AI) also promises to play a role in online sales of used goods.

That was shown by a recent PYMNTS interview with Alec Oxenford, co-founder of online firm Letgo, which brings sellers who want to unload secondhand items to interested buyers. AI helps with product selection, pricing and other factors — whether online or off, thrifting is like a treasure hunt (a big part of the appeal of the retail process for many consumers), and AI and data can help make those hunts more efficient.

Retail is going through a ton of changes, not the least of which is the ongoing demise of brick-and-mortar merchants. Resale commerce promises to inject some new spirt into retail, both offline and especially online.