3-2-1nsight: Luxury Resale Cycle
The next wave of luxury won't look to the future, but resale the past
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As the world opens back up, we’re seeing clothing sales increase significantly. Dresses, SHEIN, and back to school get discussed frequently, but the greatest tide in the apparel and retail world isn’t AI-driven ultrafast fashion, it’s resale. We take time to look at what’s driving this tide, what it means, why it matters, and where it’ll take us. Before you think about launching your Shopify drop ship apparel store, read this first.
ECommerce growth has been a consistent story for the past 18 months. I have covered shifts in consumer spending to more eCommerce on this newsletter many times. Shopify, Amazon, and DTC are brands and terms that I continually mention in this newsletter because they’re so top of mind for so many businesses in the eCommerce space. One name not mentioned enough that should is Etsy. Etsy, the artisan Shopify platform, recently announced that it’d be acquiring Depop, a resale platform, for $1.6B. Depop, a resale platform, $650 million in GMS and $70 million in revenues, will nicely bolster Etsy’s top-line revenue with little cost. Though the brand alignment of Etsy, indie and artisan, fitting very well with Depop’s market position, which has excellent brand awareness and authority with Gen Z consumers. 90% of Depop’s active users are under the age of 26, and it is the 10th most visited site for U.S. Gen Z consumers. Buying Depop lets Etsy strengthen its moat in the artisan and indie space while gaining more influence with Gen Z.
Inside Goat’s plans to merge sneaker resale and retail - Vogue Business
Goat’s founding story revolves around YC alumni trying to pivot out of an original idea about food & dining. During this brainstorm, they discover the insight that everyone in the brainstorm had “fire” sneaker game. That’s when they decided they should transition their startup into a product that facilities sneakers resales. Now a decade later, GOAT’s valued at $3.7B, hit $2 billion in gross merchandise value (GMV) over the past year, and has 30 million members and 600,000 sellers across the world. These members buy and sell authenticated sneakers and clothing as a hobby or side-hustle (even more so during the pandemic). Goat is trying to capitalize on the resale trend that it started by becoming the dominant storefront for luxury fashion, streetwear, and resale for Gen Z and Millenials. With their new round of funding, Goat plans to capitalize on the resale trend they started and become the destination for resale while also using that same credibility to extend over to retail, luxury, and streetwear transactions well.
Luxury Brands Are Embracing Circular Fashion - Harpers Bazar
An adjacent trend fueling the luxury resale trend is the enlightenment that many consumers now have regarding fashion sustainability. Rather than call it luxury resale, fashion houses, and brands circular fashion, driven by consumers’ burgeoning interest in shopping sustainably, further empowering the idea that clothes and accessories should remain in circulation for as long as possible. From this, two marketplaces are the go-to partners for luxury resale, Vestiaire Collective and The RealReal. Both businesses are unicorns (companies valued over $1B). They have established close partnerships with fashion brands like Alexander McQueen and Stella McCartney. Customers can return items to gain credit to either shop on those platforms and redeem at their brand boutiques to make further purchases of present-day collections and products. In return, Vestiaire Collective and The RealReal authentically certify those products and facilitate their resale on their platforms, dividing the roles and responsibilities of the brand and the retailer.
Gen Z and Millenials are driving the luxury resale market.
Status is probably the most significant currency of the Gen Z and Millenial consumers. Yet status for this combined group is the social signaling that one achieves through what they wear. Hence why, things like environmental impact, sustainability, local, artisan, etc., provide that extra value add that this combined group seeks when buying something. We see this with the recent rise and favoritism in platforms like The RealReal, Vestiaire Collective, or Depop. For many brands in the luxury space, the proximity of luxury retail and luxury resale is so fluid. Fashion, built around capsules and drops, often signals an even greater symbol of status when an individual can showcase not just a brand but a piece rooted in a proprietary vintage, as contextualized by the particular designer at that intersection of time. The elevated status given to individuals with the taste to curate such an aesthetic is the greatest signifier of taste, authority, and relevance for the Gen Z and Millenial consumer. This status serving job of luxury has caused a secondhand luxury item to be more valuable than a brand new luxury item continually. While this may have always been the case for the most elite consumers, the internet, ever the superb equalizer, has pushed this habit downstream to the largest consumer group currently shopping.
Fashion brands will need to consider the resale market when creating products.
As the habit of buying secondhand items or resales continues to grow in popularity and relevance, fashion brands will need to account for that prestige. Aiming to go wide and mass may no longer be the best strategy, as it can negatively affect the quality and the reputation that a brand may hold as a resale option. To maintain that luxury, relevance, and status, the most in touch brands will create products with the resale intent on one of these platforms. Luxury brands will stop trying to make them relevant or on-trend for a particular season. Instead, they will focus on creating collectibles and Veblen goods that stay in demand across time and season. Gone are the days of fashion houses and brands create products that are temporarily seen and reviled for a particular moment. Instead, these brands will start to curate every detail about their items, from the mood to the model to the photography to how it might pair with other retro items. The value of status of the item on the resale market dwarfs the original asking price.
For fashion and luxury brands, resale platforms are the best way to reach the Gen Z and Millennial consumer.
As we’ve established that resale products would heighten the status of certain fashion brands by signaling their authority in taste thru its Veblen goods, this recent practice is the future for brands from now on. These same brands must continue to sell goods at a consistent pace and volume to continue doing business. Hence, there is a puzzle, how can a company sell enough volume to continue doing business while also convincing consumers to buy earlier vintages of their products? The solution, for now, would be to partner wisely with specific resale platforms to accomplish both needs.
Brands will continue to optimize across both value and volume strategies. Brands will implement their value strategy by executing capsules and collectibles that can allow the brand to maintain its signal of taste and resale. Consequently, brands will also employ a volume strategy thru innovative collections and outlet curation to drive adequate volume. When they want to signal or differentiate themselves, consumers will find ways to purchase items that are collectibles or from capsules. In contrast, consumers will choose to buy from specific collections or outlets to signal they belong.
Through brand strategy functions, innovative partnerships from fashion and luxury houses with the right resale partner will elevate and differentiate the brand. Partnering with specific resale platforms can strengthen the brand halo that certain collectibles have established for the brand. Likewise, partnering with other resale platforms can improve and heighten the trendiness surrounding a capsule drop. Outsourcing that buying experience to resale platforms for collectibles and capsules allows the brand to build the systems needed to maintain brand continuity by creating collections that reflect the trends and seasonality by exposing its aesthetic and capturing more customer data to build a better relationship. Resale platforms allow luxury and fashion brands to focus and optimize their business through better pricing and intelligent outlet strategies, increasing brand awareness. Executing on that enables the brand to cement its status across the market for future potential Gen Z or millennials to pay the money needed to buy one of their resale products.