"The Rise Of Second-Hand Shops In China Is A Microcosm Of The Luxury Industry"#
Milan Station is expanding rapidly in mainland China despite dozens of copycats
We've kept a close eye on the emergence of luxury second-hand shops in places like Shanghai and Shenyang, but with high-end consumption booming throughout China, these stores are now proliferating nationwide. Along with hugely popular chains like Milan Station, which was 2,100 times oversubscribed in its Hong Kong IPO this past May, dozens (if not hundreds) of "shanzhai Milan Stations" (山寨米兰站) have sprung up in cities like Chengdu, Dalian and Zhengzhou, as well as Beijing and Shanghai. Though "buyer beware" is very much the mantra at China's second-hand luxury shops -- many of which continue to stock the occasional counterfeit item -- attractive prices and ample inventory make them irresistible for office workers who couldn't otherwise afford authentic luxury goods.
While arguably good for consumers, the rapid spread of second-hand shops throughout China is causing headaches for established chains. Still, this isn't hampering expansion efforts, and indeed the vast and growing market is attracting second-hand retailers from outside of China as well. From Hexun (translation by Jing Daily team):
Search for "Milan Station" on Baidu and you'll find a huge variety of results: "Milan Fashion," "Guangzhou Milan Station," Milanstation...
This has been a pain for Milan Station general manager Yao Xiuhui. As Hong Kong's largest second-hand luxury handbag retailer, Milan Station has successfully built an impressive reputation and market in Hong Kong over the past 10 years, even listing on the city's stock market in 2011. When she decided to take Milan Station to the mainland China market, however, Yao Xiuhui discovered no shortage of "shanzhai Milan Stations." According to Yao, Milan Station has aggressively fought to obtain trademark protection in China and has been in close contact with Baidu about making the company's website easier to find.
The "shanzhai"-ing of Milan Station reflects another phenomenon, though: the second-hand luxury market in China is booming. Now, in addition to China's largest cities like Beijing and Shanghai, second-hand luxury shops are appearing like mushrooms in second- and third-tier cities large and small, including Chengdu, Dalian and Zhengzhou. In Beijing alone, there are several second-hand stores: Milan Station, Beijing Shop (北京店), Runwu Consigment (润物寄卖), Siku Consignment (寺库寄卖), Milan Xuan (米兰轩) and others.
In China's other luxury goods powerhouse, Shanghai, there's Milan Square (米澜坊). Founded in 2004, this second-hand luxury handbag chain currently has seven locations and records annual profit margin of 10 percent or more.
"The market is so muddy in mainland China, with lots of brands battling it out, so the mainland has not yet produced a brand as well-known as Milan Station," said Zhou Ting of the Luxury Research Center at China Foreign Trade University. Ren added that while the potential of China's second-hand luxury market is enormous, it's still in its infancy.
"It's exactly the same as the second-hand luxury market in Japan 10 years ago," Zhou added. "After all of these years, the second-hand luxury market in Japan has become relatively mature, with a complete supply chain that is able to procure plenty of top luxury brands."
One consumer we spoke to, who gave the pseudonym "Vivian," said she noticed second-hand luxury shops "everywhere" in Japan. "I visited one that was a six-story building full of second-hand luxury goods, separated into sections," Vivian said, "and each item included a certificate of authenticity." Vivian added that she saw a second-hand Patek Philippe watch in Japan that was about 2/3 less than it would cost new in mainland China.
Now, some of Japan's established second-hand luxury retailers are eyeing the emerging Chinese luxury market. The nearly 20-year-old Japanese second-hand luxury boutique BRAND OFF is set to open its first mainland China location on Shanghai's Nanjing West Road. In Japan this company has 37 stores.