The complicated relationship between luxury brands and resale sites

This is a story from Glossy, Digiday Media’s new publication devoted to how technology is changing the fashion and luxury industries.

There’s a tension that exists between luxury brands and the startups that specialize in the resale of secondhand items. While these companies are profiting off of consumers by reselling items, a practice luxury brands oftentimes frown upon, they’re providing valuable insights about the luxury market.

“We work with retailers. But the first year we started, they would say, ‘We hate you, go away.’ Now they say, ‘We have to work with you, we just don’t know how yet,”said Julie Wainwright, CEO of luxury online consignment shop The RealReal, during Recode’s Code/Commerce event during Shoptalk. 

The resale companies argue they’re helping luxury brands. They provide safe and legal options for secondhand goods while foiling counterfeiters and even sending shoppers back to retail stores. Every item on The RealReal and luxury secondhand marketplace Vestiaire Collective is authenticated and approved by a staffer before it can be sold through the sites. Online consignment store Tradesy’s digital authentication algorithm has a 99.7 percent accuracy, according to the company’s claims.

The resale market also acts as a point of entry-level access for young customers who can’t yet shop full price luxury, said Sébastien Fabre, CEO of Vestiaire Colelctive.

Despite the their belief that they’re helping, not hurting brands, not all luxury fashion houses see the consignment companies as allies.

“Brands might not like us because maybe they’re not at all comfortable with their products being sold online,” said Wainwright. “Or, they think that customers should keep their items forever, and they’re not meant to be traded around.” Wainwright said that one brand “that begins with a C” particularly hated The RealReal, but declined to specify the name. However, in the past, Chanel has made moves to protect its brand from counterfeits and resellers, most recently in 2015 when it realigned its global pricing format.

Resale startups like Tradesy, Vestiaire Collective and TheRealReal, as well as fellow competitors like ThredUP, have become hot companies for venture backers. TheRealReal has raised a total of $123 million, Vestiaire, a total of $70 million, and Tradesy, $75 million total. In 2015, eBay launched eBay Valet, a luxury arm meant to compete with online resale startups.

Another purported bonus for luxury brands is that the resale market keeps buyers and sellers in the cycle. When an item is sold, the seller will take the money made in the transaction and put it toward a new handbag or pair of shoes, said Fabre.

Tracy DiNunzio, CEO of Tradesy, has noticed a similar pattern: “The resale market leads to customers making more purchases at retail. When a customer knows she can resell her item, she’s going to be willing to pay a little more for it.”

Whether luxury brands like it or not, these sites also serve as windows into what brands are performing well, or not, with luxury consumers.

“It’s a window. There’s an ability to see where the desire is,” said CEO Sébastien Fabre.

DiNunzio said that Tradesy can gauge the lasting value of brands and items. Classic designer bags, for instance, retain 70 to 90 percent of their original value in the resale market, while trendier items, like overalls or bell bottoms, are more likely to retain only 20 percent. Hermès’ Birkin Bags, for example, sell for up to six figures through Privé Porter, a company that sells secondhand bags, sometimes through Instagram.

To share its insights, The RealReal publishes an annual report that provides an overview of the brands that rose and fell in favor, and revenue, over the past year. In 2015, the company’s “State of Luxury Resale” report pointed to a few key takeaways. Chanel, Céline, Hermès, Cartier, Louis Vuitton and Prada were on top, with items from those brands selling quickly and often. At Vestiaire, Fabre said there are “plenty of anecdotes,” but pointed out that French designer Isabel Marant’s label is big with U.S. consumers. On Vestiaire, 90 percent of Isabel Marant resale items are sold to buyers in the U.S.

Both The RealReal and Vestiaire Collective witnessed the resurgence of Gucci as it was happening. The luxury fashion house is hot again after the appointment of creative director Alessandro Michele in January 2015. In TheRealReal’s report, the brand saw a revenue increase of 60 percent after he took over. Parent company Kering reported that in the fourth quarter of 2015, Gucci’s sales climbed by 16 percent.

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“Two years ago, we couldn’t sell Gucci, simply because their former designer wasn’t that good,” said Wainwright. “Now, the brand is back on top — and it doesn’t even matter that we don’t have that many items from [Michele] in stock.”

On Vestiaire Collective, Gucci became a top five brand within five months under Michele.

“When a designer is good, it doesn’t just impact the product, but also the resale market,” said Fabre.

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