Shoppers are increasingly turning to secondhand websites to sell barely-used designer clothes and handbags. Big brands aren’t happy about it.
As much as luxury companies would love to stamp out the secondhand trade in their products, it’s an impossible task. All the better for fashionistas and investors, who can both benefit from this booming business.
Shoppers have splashed out $1.3 trillion on new luxury handbags, clothes, watches and jewels over the past four years alone. At least some of that stuff will find its way onto secondhand websites. While in the past, unworn luxury goods would gather dust at the back of consumers’ wardrobes, the rise of online luxury resellers like The RealReal and Vestiaire Collective has made it easy for millions of people to sell their designer goods for cash.
Secondhand luxury products worth 45 billion euros, or $49.3 billion at current exchange rates, were sold worldwide in 2023, based on Bain & Company estimates. The resale market has roughly doubled in size in four years and is now equivalent to 12% of the value of the market for new personal luxury goods.
That is big enough for designers to sit up and take notice. Brands have legitimate worries that fakes may be passed off as the real thing on secondhand websites, some of which don’t have stringent authentication checks. But they also dislike how easy it has become for consumers to see which goods keep their value and which ones don’t. “I think brands are watching their resale value very closely,” says Sasha Skoda, The RealReal’s senior director of merchandising. “They are curious to figure out how they can get more data around it.”
For a handful of luxury companies, resale values are flattering as buyers pay up to avoid waiting lists. On average, used Hermès handbags are 25% more expensive than new ones, and scarce designs get an even higher premium. A basic Birkin 25 bag, which costs roughly $10,000 to buy new in one of Hermès’ U.S. boutiques, will set shoppers back $24,000 or more from major resale dealers like Privé Porter. Similarly, used watches made by Rolex and Patek Philippe sell at average premiums of 20% and 39%, respectively, based on data from WatchCharts.
But most labels show wear and tear at resale. Handbags made by Louis Vuitton lose 40% of their value on average when they are resold, according to data from The RealReal. Christian Dior’s bags almost halve in value.
Some investors are buying detailed data from the likes of WatchCharts to get cues about which stocks to purchase or avoid. For example, although Rolex, Patek Philippe and Audemars Piguet are all privately owned businesses, strong resale values are usually a good omen for Watches of Switzerland. The U.K.-listed luxury watch retailer gets 60% of its revenue from sales of the three coveted brands.
Resale data also provides early clues about whether or not brand makeovers are working. The secondhand value of goods from Italian luxury label Salvatore Ferragamo, which is in the middle of a revamp, has jumped on The RealReal over the past year. In contrast, Burberry’s average resale value has fallen 17%. This isn’t a good sign for the brand, which in late 2022 hired new creative director Daniel Lee to improve lackluster sales.
The top brands of Paris-listed luxury group Kering also look weak. It owns Gucci, Balenciaga and Bottega Veneta, whose used values have slipped 10%, 14% and 23% respectively over the past year.