In recent years the second-hand sector has exploded. It now represents a market of 36 billion dollars, and in 5 years, it will have more than doubled. For a long time, the world of Luxury turned away from this channel, but today, it is becoming clear that all Fashion players are concerned about the purchase of vintage products.
The second-hand boom
For decades, thrift stores have been the go-to places to buy second-hand clothes at a lower cost. But recently, the second-hand market has seen its importance grow and the opportunities have multiplied. With the explosion of e-commerce, many digital players have specialized in the resale of vintage products or clothing, such as The RealReal in the United States, or Vestiaire Collective and Vinted in Europe. These companies are today major players in the sector. Vestiaire Collective is valued at more than one billion euros (with the entry in 2021 of the luxury group Kering as a 5% shareholder) and is part of the still very exclusive club of French unicorns*, while Vinted (another unicorn but this time Lithuanian) raised 250 million euros in funds in 2021 to finance its development in new markets.
In 2019, the IFM (Economic Observatory) study carried out among 1,250 people reveals that 39% of French people have bought pre-loved clothing or fashion accessory. While the first argument justifying this type of consumption is economic (75% of respondents), the second is ecological/ethical (45%). Today, buying second-hand products is no longer taboo. Stéphanie Crespin (CEO of Reflaunt) explains it very well: “the consumer has changed his purchasing behavior, he no longer buys an item to keep it all his life (...), he wants change and is more interested in using as long-term possession”. This awareness is particularly strong among Millennials** and Generation Z***. In the United States, almost half of them say they refuse to buy products from brands with unsustainable or ethical practices.
*Unicorn: a start-up valued at at least one billion dollars.
**Millennials: people born between 1981 and 1995
***Generation Z: people born between 1996 and 2012
LinkedIn : @StephanieCrespin
Reflaunt CEO (www.reflaunt.com)
Reflaunt offers brands several services to develop their second hand: from concierge services to the creation of a "pier-to-pier" branded marketplace, to the distribution of parts on a network of partner marketplaces.
Clients: Balenciaga, Ba&sh, H&M…
Luxury and second hand: a marriage of love or mariage of convenience?
The second hand, far from being a lower quality offer, is a real opportunity for the luxury sector. Indeed, the luxury second-hand market is booming. The international consulting and strategy firm Bain & Company claims in a recent report that this market grew by 65% between 2017 and 2021 while the “classic” luxury market only grew by 12%. In 2020, the vintage luxury market represented 28 billion euros. The second hand, beyond making the luxury industry and fashion, in general, more virtuous, has a significant economic impact.
Some brands have understood that it was time to invest in the market. Take the example of Gucci, which launched a concept store and a digital platform (Gucci Vault) partly dedicated to the brand's vintage pieces. Some have even been customized by Alessandro Michele, creative director at Gucci, in a spirit that blends the past with the present. All stock sold out within hours of opening.
The democratization of the purchase of pre-loved items attracts new customers, who discover products and brands. 70% of second-hand buyers buy their first luxury item vintage (Boston Consulting Group study) while 10% of second-hand customers become first-hand customers. There is therefore a real challenge of knowing and acquiring new customers. Especially since the luxury clientele is not loyal: there are 70% of new clients each year.
The secondhand does not risk “cannibalizing” the existing luxury market but extending it, just as it extends the life cycle of the product. Stéphanie Crespin believes that this argument of cannibalization is even “has-been” because brands and retailers have realized “that they cannot go against their customers. Now the consumer is buying second-hand, whether they like it or not.”
Bruno Vanhove (sales director at Disruptual) confirms: “This is real consumer demand. When Steve Jobs created the iPhone, he created a new use that conquered the market. In the case of second-hand goods, this phenomenon is driven by consumers.” Time is running out for brands that have yet to seize the second-hand opportunity. Bain & Company estimates that by 2027, the resale of vintage products will represent up to 20% of the revenue of luxury brands.
LinkedIn : @BrunoVanhove
Sales Director of Disruptual (https://disruptual.com)
Disruptual offers a white-label product that develops Marketplaces for second-hand products from brands and retailers.
Clients: La Redoute, Cyrillus, Orchestra
What economic models?
The resale of second-hand luxury goods is therefore not a pipe dream but a reality, a trend that will continue to grow in the coming years. Bruno Vanhove believes that in the medium term, the second-hand offer will be an offer on its own. The solutions available to integrate this offer of vintage pieces into its Business Model are numerous: create a branded marketplace or a space on its e-commerce site dedicated to clothes already worn (Aigle and its Second Souffle program for example), to marketplaces specializing in the resale of vintage products (Stella McCartney launched a partnership with The RealReal in 2018), setting up concierge services to collect customers' clothes in-store or at home, etc.
Good to know : The AGEC law
Beyond the economic and societal aspects, the regulations* in force also require brands to think about the future of their products. In France, it is now forbidden to throw away unsold items. Luxury brands will have to quickly find a solution to the remaining stocks and offer them a new life.
*Law n°2020-105 of February 10, 2020 relating to the fight against waste and the circular economy, decree n°2020-1724 of December 28, 2020 relating to the ban on the disposal of unsold non-food items and various provisions fight against waste.
Source (French) : https://www.service-public.fr/associations/actualites/A15362
According to Stéphanie Crespin, there will not be a “winner takes all, that is to say, a second-hand model that will take precedence”. According to her, the positioning of the brand will influence the sales solution chosen. The market will fragment, and as with e-commerce a few years ago, specialized players with detailed expertise will continue to emerge. Each brand will be able to find the model that suits its values and positioning.
The development of a second-hand offer by brands must be thought out and built following their business model and their cross or omnichannel strategies. Several elements must be taken into account.
Is the sale only made online?
What sales and distribution model should be applied?
Is a mixed offer of item already worn, inventory items, or products returned by customers because faulty is possible?
Should other players be offered to join the second-hand adventure and launch a common strategy?
What strategy to adopt in the face of resales between individuals?
How can brands create a relationship with their new customers?
So there are many questions. What is certain is that brands must take back (at least in part) control of the sale of their second-hand products and internalize it so as not to leave the market to third parties who would create a relationship with customers. . This is an expectation of luxury consumers: 70% of them would like brands to sell their vintage pieces directly (BCG). Bruno Vanhove cites among the many interests of the second hand for brands: the fact of creating an additional service, of generating traffic in stores or on the website, of having a new means of acquiring and retaining customers, but also an increase in the average basket...
The risk of Fakes
But brands should be aware of the issue of fakes second hand items. How can you be sure that the product sold online or in a store is not counterfeit? How to protect the customer from such a situation? This question also arises for brands during customer returns where the time to verify the authenticity of the product can be long. Digital certification solutions for the authenticity of products exist. They are also popular with luxury consumers: 74% of them want vintage luxury products to be certified when they are resold by a player other than the brand (BCG). Trust-Place goes beyond this offer by offering a simple and easy-to-use solution: digital certificates of ownership, also called NFT passports, which meet this need for verification at any time of both the authenticity and the product ownership. This certificate is transferable during the second-hand resale of the product, which reassures the new owner of the quality of the part he has purchased.
STAY TUNED for our next Counterfeit Focus, coming online soon!
Points to remember:
- 28 billion dollars: this is the weight of the luxury second-hand market in 2020,
- The luxury second-hand market increased by 65% between 2017 and 2021,
- This market is driven by consumers,
- The solutions for integrating the second hand into the business model of brands are multiple (concierge service, brand marketplace, second-hand specialist marketplace, etc.) and can be aligned with the values and positioning they carry,
- Second-hand does not mitigate the risks of counterfeiting, Trust-Place supports brands with its digital certificate of ownership to put an end to this difficulty.
Special thanks to Stéphanie Crespin and Bruno Vanhove.