Week 1

 


The 3 main challenges posed by the growth of second-hand resale websites: a real threat to the luxury goods industry?


Vestiaire Collective, Grailed, Depop, Farfetch, ... fans of luxury goods, it's very likely that you've passed through these platforms to buy your next obsession. The growth of second-hand resale platforms raises many questions in the luxury goods sector. This phenomenon is highlighted in the popular Netflix series Emily in Paris, where the protagonist discovers the reality of the second-hand market, in this case Vestiaire collective. It is no coincidence that luxury brands are beginning to take interest in this subject: the growing prominence of these platforms presents major challenges for the industry. Why has this trend gained momentum in the luxury world? The answer lies in several factors, such as shifting consumer mindsets, their quest for sustainability and exclusivity, and the democratization of luxury through the purchase of second-hand items. These platforms can meet the status needs traditionally associated with luxury for an increasingly broad audience, but does this greater accessibility dilute the exclusivity that defines the luxury experience? The rapid growth of these platforms poses three key challenges for the industry, but is it worth the risk?


In luxury fashion, authenticity is crucial for consumers seeking to assert their social status. On second-hand platforms hosting thousands of sellers worldwide, guaranteeing the authenticity of every product becomes a major challenge. As a result, counterfeit items are sometimes sold as genuine and may even be mistakenly authenticated by the platform.

Luxury-focused platforms like Grailed strive to maintain high standards by partnering with third-party authentication services. Despite these efforts, counterfeits still slip through daily. One method scammers use is the “bait and switch” technique, where they upload authentic pictures to create convincing listings that easily pass authentication tests. Once a buyer is found, they send a counterfeit item instead of the genuine one. Since most buyers aren't experts, many will never realize the deception, complicating the platform’s ability to combat this issue.

This lack of authentication control can significantly damage luxury brands' reputations, as the presence of fake items dilutes brand value and exclusivity, directly impacting consumer trust. Luxury's allure depends on quality and authenticity; undermining these values diminishes brand desirability, even for first-hand products.

For luxury-focused platforms, ensuring authenticity is not just a service—it's essential for consumer confidence. The constant battle with counterfeiters suggests that luxury brands could provide direct support or partnerships to enhance authentication or even launch their own second-hand markets, as Rolex did with its 'Certified Pre-owned Programm' to ensure quality and maintain brand integrity. By doing so, brands could protect their image and transform authentication into a value-added service, benefiting both primary and secondary markets.


Among the critical problems in the luxury second-hand market is that of condition uncertainty; generally, buyers find it difficult to ascertain the quality and authenticity concerns about pre-owned items. Although, in the general view, luxury goods are treasured for their craftsmanship, exclusivity, and longevity, once a luxury product reaches the resale market, its condition is no longer considered predictable. Other factors to consider that could totally affect resale value include wear and tear, previous repairs, or improper care. When these factors are taken into consideration, it is very difficult for buyers to make the right assumptions if they get their money's worth. This may create distrust between the buyer and seller and decrease the customer's willingness to invest in high-priced secondhand items. In her article, Katarina Stolz lists the key drivers of second-hand purchases in the luxury sector, highlighting the fact that a positive experience increases purchase intention (Hypothesis 4). Platforms must invest in rigorous authentication processes, transparent grading systems, and clear descriptions to mitigate this risk and maintain customer confidence. Platforms often allow you to rate their products on a scale of 3-4 states (used, brand new, …), or a score from 1 to 10, but this is very much a matter of individual perception. 


And with this new trend adoption, luxury companies may receive backlash from their own customers who were the first to pay fortunes on a product only to discover it being accessed for cheaper prices through resale. These authentic luxury customers feel threatened by the second-hand market as it undermines the exclusivity of luxury goods. Luxury goods are perceived as rare gems and the more people having access to rare gems the more their values diminish. As the brand becomes more ‘’accessible’’, it takes away the sense of elitism and pride for owning unique, one of a kind pieces. Luxury brands’ reputation is at stake with the existence of a thriving second-hand market as it lowers the standard of the brand and its credibility of making new, flawless products.


What’s more, the emergence of the second-hand market to a large extent takes the pricing power from luxury brands. The premium of luxury products, especially limited-edition luxury products, in the second-hand market is getting more and more crazy. Take Hermès as an example, the second-hand price of Hermès Kelly 25 is significantly higher than the price of new products, and the premium is about twice as much on the second-hand luxury platform, such as Fashionphile and The Real Real. In this case, it easily broke the anti-law “Raise Your Prices”. Compared to the second-hand luxury market, the prices of luxury brands who used to rely on exclusive releases and scarcity to maintain high pricing becomes reasonable, even “cost-effective”. For luxury brands, it is tricky to balance their original pricing strategies with the competitive prices on the second-hand market. Some, such as Gucci and Burberry, begin to offer their certified second-hand products to regain some control over customer journeys, but the challenge still remains.



Second-hand resale is a controversial issue, especially in the luxury segment. In front of this great trend, fashion houses and prestige brands are caught in the middle by a serious dilemma: on the one side, it's an enemy to their image and exclusivity, while on the other side, it may open new prospects. These apparent drawbacks to the luxury industry may conceal hidden opportunities. Authentication, for example, can actually become a new business for the brands, tightening consumer loyalty and confidence. The emphasis on sustainability and the circular economy is attracting customers who are increasingly concerned about the environmental impact of their purchases (today 15% of global fashion consumers are concerned and it could increase to 50% in the next few years), thus aligning brand values with those of modern consumers. Besides, resale allows us to speak to a new, younger, and often more engaged audience that could be tomorrow's customers. Over time, such benefits can largely outweigh the perceived risks, making second-hand resale a strategic asset for the luxury sector.. In conclusion, resale sites have been around for several years, but the major luxury groups continue to enjoy strong growth. Indeed, predictors predict that the luxury goods market will more than double between 2020 and 2030, with a growth rate of between 5% and 7% each year.



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