The Future of Luxury Resale Value in the Fashion Industry
Luxury resale value is a critical force moving the industry away from the take-make-waste model and shifting to an authentic, long-term value focus.
By Diana Jungyun Choi
5.8.2021
Throughout modern history, the secondary fashion market has always been a stepping stone into the luxury world for customers who do not have access to the primary fashion market. With the exponential advancement of technology, however, the secondary market no longer exists in the shadow. According to a report by ThredUp, the secondary fashion market projects to grow to almost twice the size of fast fashion by 2029. In recent years, multiple resale online marketplaces have enabled a seamless and shame-free online secondhand shopping experience, highlighting a resale value focused on luxury fashion items. Today, users can quickly consign their branded fashion items within minutes. At the same time, buyers can look for specifics hassle-free through multiple online secondhand retailers that facilitate the complete process from consultation to authentication, shipping, and pricing.
A company that stands at the frontier of this growing market is The RealReal, founded in 2011; the company successfully filed an IPO in May 2019, pricing its shares at $20 above the expected range and marking a market cap of USD 2.39 billion. In addition to the numbers, it is essential to note the economic and cultural impact of the luxury resale value as a disruptive force posed to reshape fashion consumerism and brand validation. Without a doubt, resale value is now an integral part of today’s consumers’ purchase considerations. An April 12, 2020, Eco-age article stated that “fashion resale, particularly luxury consignment platforms, offer a way to acquire well-made items at a reduced price, with quality assurance checks to ensure you are paying the right amount for your item and not a single pound more.” What can help us understand this new market dynamic is drawing a parallel line between The RealReal’s revolutionary business model to the long-standing investment-buying practices of the fine art world.
Reverse Value Phenomenon
Throughout 2020, amidst the Covid-19 pandemic, the secondhand fashion market became a significant platform for consumers who expect economic gain over time from their clothing and accessory purchases, similar to the dynamic collectors expect from the fine art market.
Even though fashion items are physical goods that are functionally worn and typically have depreciated in value over time and use, certain fashion items have proved to accrue higher value over time and use against typical consumable goods. Specifically, the most iconic, limited-edition, or high-profile designer collaborations like the Supreme x Louis Vuitton from Fall 2017 and Gucci x Dapper Dan from 2018, all of which have shown to increase in value over time despite use.
The most significant prerequisite for collecting art and design is an innate desire for the object. While historical, critical, and even social context may enrich the story behind an object and explain its conceptual or physical production, it is the initial connection between viewer and object that sets the tone and dialogue. As the fashion industry began embedding the level of artisanal touch and one-of-a-kindness as appropriate justification to present increased pricing and ultimately elevate their brand value over the years, they immediately transformed the secondhand fashion market to resemble the collector’s community of the fine art market.
With fashion shopping digitalization significantly increasing, money to be saved, and unique individual style suddenly much more of a priority over following a trend, this surge in secondhand shopping makes perfect sense. The increased ease in shopping for items that are guaranteed to maintain value over time at a greater rate than typical fashion items automatically assigns an immediate emotional connection between the consumer and the product. The process of ‘finding the gem’ online is a critical factor to the growth of reverse value in the secondhand fashion market.
Focus on High Quality in Addition to the Name Value
High-quality products from heritage brands tend to maintain their value over multiple resales, shifting from a consumable product category to a form of investment. The quality of goods and the proof of authentication are the characteristics that the secondhand resale market share with the art-buying world. For example, The RealReal sanctions brand value through their brand directory, a list of brand names they are willing to accept for consignment. For customers to re-buy certain products secondhand, they must be convinced of the product condition, quality, and value, which is deeply associated with the brand’s name value.
The authentication system built into the resale process is crucial for generating and maintaining the resale value and convincing customers to return to the process. As such, fashion retailers need to consider resale value right from the start of their business, from design to production, and through the supply chain. In addition, secondhand retailers are increasingly becoming the primary source of brand connections for new customers. This takes the form of curated editorial shops within websites like The RealReal, and is shifting the market dynamics significantly, giving the resale market the power to manage a brand’s reputation. This is similar to the responsibilities international galleries take in protecting high-profile artists’ names and presenting their work to the public across the globe.
Pricing A Fashion Item as a Piece of Artwork
Both high-value resale fashion items and fine artwork buying are hypersensitive to the condition of goods and their name value. As a result, pricing in both markets heavily depends on unpredictable marketplace trends. As more fashion brands have honed the idea of scarcity and have applied the concept to their product strategy, more goods have ended up in the secondary market. Some goods have come to this market as a result of significant over-production and market saturation in the primary marketplace. Multiple ‘drops’ or deliveries of goods and the proliferation of limited-editions and brand collaboration goods have reinforced arbitrary pricing in the secondhand market, focusing on the perceived value, even more so than in the primary market itself.
If the primary market theoretically provides goods based on the market’s supply and demand logic, the secondary market pricing relies on the future value and the idea of an investment focused on scarcity and one-of-a-kindness, similar to the art-buying world. With scarcity as a fixture in the fashion retail sector, fans who cannot buy what they want first-hand are increasingly willing to pay more for it in the secondary market, reinforcing the significance of resale value. For example, The RealReal pricing strategy indicates that some top-selling brands with high resale value often net consignors more than the original cost they paid for the products. In addition, they highlight the rarity and one-of-a-kindness of items as exceptions that could potentially drive up the resale price of the brand over time.
Indeed, the luxury resale model embodied in companies like The RealReal, could disrupt fashion pricing across the industry in both the primary and secondary fashion markets. The most significant implications of the resale value and its growth in the fashion resale market are worthy of discussion, and they can be best understood when compared to the pricing strategy of the fine art auction market. Although there is a wide range of variables that define the value of a resale item, what kind of information can the market serve the buyer in making an educated purchase? How does the secondary market impact a brand’s product strategy for its first-run goods, including its pricing? Is there a way to assign and measure a fashion item’s value based more on its long-term value and less based on trend?
Answers to these questions could potentially change production cycles, contributing to the sustainability efforts. It could also force brands across all echelons of the industry to consider quality and longevity seriously in their product development strategy, shifting the industry away from the take-make-waste model and shifting to an authentic, long-term value focus. Finally, generating and maintaining the resale value might be the key to fueling responsible purchases and infusing circularity, ultimately drawing a parallel line between the fashion resale market to the art auction market.
References
Adhi, P., Magnus, K-H., & Sanger, F. (January, 2020) Futurre of Retail Operations: Winning In a Digital Era. McKinsey. https://www.mckinsey.com/~/media/McKinsey/Industries/Retail/Our%20Insights/Future%20of%20retail%20operations%20Winning%20in%20a%20digital%20era/McK_Retail-Ops-2020_FullIssue-RGB-hyperlinks-011620.pdf
Loeb, W. (May 15, 2019) Resale Fashion Industry is Bigger and More Disruptive Than You Think. Forbes. https://www.forbes.com/sites/walterloeb/2019/05/15/resale-fashion-industry-bigger-and-more-disruptive-than-you-think/?sh=449e01b8609b
Tongo, M-G (April 12, 2020). The Shift to Thrift: How The Global Pandemic Saw Fashion Resale Soar. Eco-age. https://eco-age.com/resources/how-covid-19-pandemic-increased-fashion-resale/