Why Gucci Is Getting Into Resale - SolidRumor.com

Why Gucci Is Getting Into Resale

 Why Gucci Is Getting Into Resale

LONDON, United Kingdom — Gucci’s hot new thing is second hand.

The luxury Italian label is launching an online shop with consignment site The RealReal, joining a handful of high-end players in a space luxury has historically avoided.

The move comes as the wider second hand market is quickly gaining ground. Levi’s is also launching its own resale site this week, looking to cash in on its widespread popularity among second hand shoppers. Companies including COS, Zalando and Selfridges have all launched resale businesses of their own since August. American peer-to-peer marketplace Poshmark has plans to go public, while rival ThredUp is also reportedly gearing up for an IPO early next year. The second hand apparel market is expected to nearly double in size between 2019 and 2023 to reach $51 billion, despite declining this year, according to market research firm GlobalData.

The boom reflects broader market trends, as fashion looks to tap into new digital business models and reach a younger generation. The shift has been accelerated by the pandemic, which has put pressure on the industry to find new ways to reach consumers in an economic downturn, while amplifying interest in marketing touchpoints like sustainability that are well-served by resale.

Levi’s had been looking into the practicalities of launching its own resale operations for some time, but the pandemic “accelerated” the project, said Chief Marketing Officer Jen Sey, pointing to the lockdown-induced surge in online shopping, increased interest in sustainability and the importance of Gen-Z, who have embraced second hand as a consumer class.

But the shift is especially pronounced among luxury players, who have been slow to warm — and at times actively hostile — to the resale model. Many feared that encouraging customers to shop used would hurt sales of new products and tarnish their brand. Chanel even filed a lawsuit against The RealReal in 2018, accusing the site of selling counterfeits, a claim The RealReal vigorously denied. The case is still ongoing.

Now, the tides are turning. Gucci is a major new entrant for The RealReal, which has also partnered with Burberry and Stella McCartney. The new partnership will run until the end of the year and feature a curated range of pre-worn products supplied by The RealReal consignors and Gucci itself.

The old stigma of second hand has vanished.

Behind the scenes, since the coronavirus hit, The RealReal said it’s seen a 46 percent increase in the number of items consigned under its business sellers programme, which helps luxury brands and retailers anonymously list products and fulfil orders on the site. In the second quarter of this year, these vendors made up 9 percent of The RealReal’s gross merchandise value (the total value of goods sold on the site) up from 6 percent the previous quarter.

Luxury brands are realising that “the second hand market is actually not detrimental to the primary market,” said Guia Ricci, a Milan-based principal at Boston Consulting Group. “Actually, the majority of consumers engage in the second hand market to then fulfil a new first hand product… It’s not a cannibalisation of their own market.”

Old Clothes, New Customers

In fact, partnering with resellers allows luxury brands to tap into a whole new customer base — typically younger, and looking to buy at an entry-level price point — in the same way small-ticket items like cosmetics and card-holders have done for years. Brands “can use second hand luxury as a recruiting machine,” said Ricci.

Searches for brands including Gucci, Louis Vuitton and Chanel on The RealReal have steadily increased this year. Interest in Gucci increased 19 percent in the first half of 2020, compared to the same period last year.

Entering resale can also be a strong mode of customer retention by offering enticing incentives for consumers to continue to engage with the brand. For instance, when Burberry partnered with The RealReal last year, it offered an exclusive personal shopping trip to US consignors. Stella McCartney offers consignors of its brand $100 towards their next purchase. “Going forward, second hand will be one of the many levers that luxury brands will have to improve on the loyalty side of [things],” said Ricci.

That rationale applies to lower price points too. Levi’s is hoping to engage Gen-Z consumers with its resale store, where prices range from $30 to $100. “Young people aren’t buying $250 used Levis,” said Sey. “They’re looking for these gems that are reasonably priced.”

Tried and Tested

The resale sector itself has also become more sophisticated. Thanks to growing consumer demand and slick digitisation, “the old stigma of second hand has vanished,” said Achim Berg, global leader of McKinsey’s apparel, fashion, and luxury group. Large players in the space such as Vestiaire Collective, StockX and Depop have developed and scaled the business model, and provide the infrastructure for brands to test the waters through short-term partnerships that have the potential to be extended, as both Stella McCartney and Burberry have done with The RealReal.

When luxury brands partner with [a] platform, it’s more of a marketing thing.

Levi’s is partnering with logistics and re-commerce start-up Trove to handle all backend operations, from processing inventory and fulfilling deliveries to photographing product for the site. The rollout is intended to be careful and iterative. “This is a pilot,” said Sey of Levi’s SecondHand. “We think that the demand is there and we think this is how a lot of young people prefer to shop… [this] is to get an understanding of that level of demand, and also to work out the kinks in how it’s executed before scaling.”

Companies aren’t necessarily expecting to drive huge margins from these experiments either. “It provides interesting data,” said Berg. “How long do people keep certain products? When do they sell them off? What [is] the market price for vintage goods? What is hot? What’s not?” That’s particularly valuable at a time when companies are grappling to understand what to do with large volumes of unsold inventory in an uncertain market.

From Tarnished Brand to Marketing Gold

Resale is also an easy way for companies to tap into growing consumer interest in sustainability: keeping clothes in circulation for longer is one way to reduce the huge volumes of waste generated by the industry — and make money doing it.

It’s an element Gucci and The RealReal are emphasising heavily in their partnership. For every customer who buys an item from Gucci’s resale shop on The RealReal, the companies will plant a tree in areas affected by climate change, such as California and The Amazon. They’ll do the same for every US-based consignor of the brand. The RealReal also amplifies the impact of its model by offering consumers a calculation of the carbon emissions and water usage saved by buying second hand instead of new. To date, the company says the resale of Gucci clothing on its site has saved 230.1 metric tons of carbon and 10.4 million litres of water.

To be sure, critics argue that to really drive more sustainable outcomes, consumption in the primary market will also have to come down, but brands are leaning wholeheartedly into the narrative.

“When luxury brands partner with [a] platform, it’s more of a marketing thing,” said Ricci. It’s “a way of engaging customers and fulfilling that desire for a more sustainable model.”

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