The booming second-hand market as a partner of RealReal and Gucci
The luxury brand Gucci has announced a partnership with the online consignment store The RealReal to meet the demand for second-hand luxury goods. The partnership involves The RealReal adding a designated portal on its website for products supplied by Gucci itself, in addition to Gucci products shipped by customers of The RealReal. This decision signals the fashion industry’s adherence to the growing demand for second-hand luxury. It also demonstrates the industry’s adaptation to more environmentally friendly practices.
Young buyers are fueling the trend
Young buyers have fueled the demand for luxury resale products. This unusual partnership shows how luxury brands have had to reinvent themselves to keep pace with new market opportunities. Other luxury brands such as Stella McCartney and Burberry have already partnered with The RealReal. In 2019, Burberry created a program to encourage customers to consign Burberry items to The RealReal. He gave them a personal shopping experience and a snack in some physical stores.
In The RealReal’s latest partnership with Italian fashion house Gucci, the two companies pledged to donate a portion of the profits from second-hand sales to the One Tree Planted environmental association which supports reforestation. They also highlighted how luxury consignment helps reduce environmental damage by reusing rather than throwing away the old fashion.
Gucci and its proprietary luxury brands
Gucci’s parent company, Kering, owns a number of luxury fashion and jewelry brands such as Alexander McQueen, Balenciaga and Saint Laurent. It follows a pattern similar to that of its main rival in the global luxury market, LVMH. French luxury conglomerate LVMH owns high-end fashion brands such as Dior and Fendi, it also owns popular alcohol brands like Dom Pérignon.
The online luxury consignment company has faced its fair share of disputes with luxury retailers. Chanel has been trapped in a trademark lawsuit with The RealReal for allegedly selling counterfeit products on its site. The allegations include the use of the Chanel label to trick customers into believing it is affiliated with Chanel. The lawsuit is still ongoing, with some of Chanel’s claims being dismissed and others going forward.
The RealReal, an online flea market
The RealReal, based in San Francisco, was founded in 2011 by Julie Wainwright. Prior to her role as Founder and CEO of The RealReal, Wainwright gained experience as a young tech entrepreneur. She ran online video startup Reel.com in 1997. Hollywood Video bought her soon after in a deal valued at $ 100 million. In 1998, she became CEO of Pets.com, today a defining case study of the dot.com bubble. In the meantime before launching The RealReal in 2011, she was involved with many other internet startups.
Wainwright’s inspiration for the idea behind The RealReal came from watching her friend quickly spend money in the consignment section of a store. The company quickly took off, shipping its first orders just a few months after its inception. Since then, The RealReal has received numerous venture capital funding. It went public in the summer of 2019 (NASDAQ: REAL). The company currently has a valuation of well over $ 1 billion.
Competition in the second-hand market
RealReal faces competition from online fashion resale companies such as Poshmark and Tradesy. Poshmark has filed an S-1 registration statement with the Securities and Exchange Commission (SEC) to initiate the IPO process. Tradesy, who is popular among millennial women, has seen an increase in the number of first-time salespeople. The company attributes the increase to time spent at home cleaning closets. Persistent economic uncertainty has also increased the appeal of second-hand fashion.
Contrary to popular belief, according to many analysts, the second-hand market is actually helping the main market for brand-new luxury goods. It can serve as an entry point for luxury buyers. It can also demonstrate to more established customers the potential resale value of their high-end, full-price purchases.
Amazon Online Contest
Beyond the sophisticated high end of the fashion market, the $ 2.4 trillion fashion industry has had to adapt to the growth of online players. Amazon Fashion, which includes the Prime Wardrobe program that allows people to try on clothes before they buy them, has become a formidable force. According to estimates from Wells Fargo and Morgan Stanley, Amazon is the number one clothing retailer in the United States with sales of $ 30 billion. The company has also aggressively expanded its private label offerings, developing around 100 of its own fashion brands. Amazon recently launched Luxury Stores, a shopping service focused on high-end fashion and beauty brands. The feature will only be available to Amazon Prime members who receive an invite. It will allow brands to create a ‘store within a store’, leveraging Amazon’s large customer base while providing luxury brands with a platform to display novelty items.
RealReal bounced back from the pandemic
At the start of the pandemic, activity on The RealReal declined. But activity has since regained sustained growth and the future prospects are promising. Many analysts predict that the used luxury market will be more resilient to the pandemic than the entire luxury market. The Boston Consulting Group (BCG) estimates that the second-hand market will grow 15-20% per year over the next five years. That rate would be significantly higher than the single-digit growth figures before COVID.