The luxury market’s icy relationship with the secondary market has started to thaw, as high-end brands aspire to attract a younger, more digital customer — and to play a more intentional a role in the thriving resale market.
Today, luxury jewelry and timepiece e-tailer TrueFacet becomes the first in its category to sell pre-owned pieces with an official endorsement from high-end brands — they include watch and jewelry companies Raymond Weil, Frederique Constant and Roberto Coin. TrueFacet will sell pieces provided by the brands that have been returned, pre-owned, discontinued or “case-worn,” said company president Andrew Block, who spent 20 years at Tourneau before moving to True Facet in 2017. This means luxury brands will have an active role in sales of both previously worn pieces and what might have formerly been sold in the “grey market,” which refers to the unofficial sale of goods (often at a discount).
TrueFacet’s new category is called “Brand-certified Pre-owned,” and comes with a new manufacturer’s warranty after inspection, refurbishment and authentication. Company CEO and co-founder Tirath Kamdar likens it to the automotive industry, in which brands like BMW and Mercedes regained control of their sales experience by bringing pre-owned cars in-house.
An unregulated secondary market often results in the sale of counterfeits, Block said. “Partnering with an approved marketplace like TrueFacet will elevate brand equity and give them the availability to promote to a younger audience. If you were to ask [luxury watch brands] about their strategic goals, No. 1 is digital and No. 2 is bringing in a younger customer, and this accomplishes both.” (TrueFacet’s average customer age is 30.)
This is a small but significant shift in how luxury brands have traditionally viewed the resale market, which has been blamed for eroding the aura of exclusivity that is essential to luxury.
In its 2018 earnings report, Richemont (which owns Cartier and Piaget) reported buying back about $560 million in unsold inventory from multi-brand retailers in the past two years, ostensibly to retain the brand’s value and exclusivity by keeping it off the grey market; some of that merchandise was destroyed.
In 2017, LVMH’s Jean-Claude Biver said that lowering prices and breaking “the illusion of prestige” means a “slow death” for luxury goods, and that the grey market is the “industry’s cancer.”
Burberry reportedly destroyed $65 million worth of unsold products in the past five years, as do other luxury houses, including Louis Vuitton. Meanwhile, both Burberry and Louis Vuitton are among the top luxury sellers on resale marketplaces thredUP and Poshmark.
In July, thredUp wrote an open letter to Burberry, inviting the brand to send unsold product to thredUp, with proceeds going to an environmental charity. “We respect the desire to protect your brand image, but discounting your product shouldn’t be scarier than setting it on fire,” the letter said.
“Our intention was to start a conversation,” said thredUP brand director Erin Wallace. ThredUP’s letter received “tens of thousands” of likes on Instagram in response.
“Resale has gone from fringe to mainstream in recent years. As more luxury retailers respond to shifting customer desires, they are also learning that secondhand is not a threat; it’s an opportunity,” Wallace said. According to thredUP’s 2018 Resale Report, 13 percent of thredUP’s most active thrifters are millionaires — meaning they likely have the means and desire to invest in luxury from a variety of sources.
A 2016 report from Bain & Company found that accessories were the most popular purchase in personal luxury goods, and that as sales in the off-price channels have continued growing by double digits, luxury brands have become more disciplined and strategic in how they handle off-price sales. Bain estimated that in 2017, discounted sales comprised 37 percent of the personal luxury goods market.
In the era of Rent the Runway, pre-worn pieces that rotate in and out of one’s closet is no longer a foreign concept. Poshmark, for example, just added luxury as a separate new channel, and The RealReal has partnered with Stella McCartney to encourage customers to consign Stella McCartney pieces in exchange for $100 to shop for new items from the brand. Elevated Layers is a startup that lends unsold designer inventory to emerging influencers so that they tag their brands; early participants include Givenchy and Helmut Lang.
“Designers are starting to realize that consignment players are helping extend the reach and covet-ability of their brands. An item with a strong resale value can strengthen the brand as a whole,” said The RealReal chief merchant Rati Levesque.
Levesque said shoppers make purchases knowing they will eventually consign them, and that more brands will eventually become more open to this as the value of resale becomes more clear. “Consumers won’t stop buying product in the primary market,” she said.
Secondary marketplaces can help introduce younger shoppers to luxury brands, which can benefit from social media shoutouts, and they are more tailored to a faster fashion cycle than the “hand-me-down” character of heritage timepieces. It also makes sense for new resale shoppers to start with accessories like watches, jewelry and handbags, which are often as lucrative the second time around as they are the first, and are easier to sell online.
Still, online re-sellers are likely to face considerable resistance to winning over a seal of approval from the likes of Cartier or Rolex. Rolex, for example, is not even sold online, yet it is a top brand bought by millennial men on The RealReal. Patek Phillipe finally joined Instagram in March.
“A lot of these brands pretend to be on social media, but their target audience is the same people who were their customer 20 years ago,” said Block, of TrueFacet. “They need to maintain relevance, but without new blood in the market, the category won’t be relevant. One of the things we have talked to brands a lot about in my career is that watches can no longer be sold as these magnificent items of artistry, craftsmanship and tech. Now they are definitions of your personality and define you as a person, and make a statement about you — those are the stories that should be told by watch brands.”
His ultimate wishlist is for brands like Rolex and Cartier to be active in the secondary market. “It would be so beneficial on a consumer level. [Those brands] are active on the auction level, and that’s great for a select few, but for mass consumer, those [brands] would be a real plus.”