Is It Too Late for Japanese Luxury Resale in China?

    Although accounting for a relatively small sliver of total luxury sales, China’s high-end resale market is on the rise.
    Japan’s Reclo has taken multiple shots at the China market, yet failed to gain a dominant market share. Photo: Courtesy of Reclo
      Published   in Finance

    Key Takeaways:#

    • Although China’s luxury resale market accounts for just 5 percent of total luxury sales in 2020, it is a fast-growing segment.
    • More millennial and Gen Z consumers in China are putting a premium on reducing their carbon footprint and collecting archive pieces, driving demand for secondhand luxury goods.
    • Although Japan is one of the world’s most sophisticated luxury resale markets, Japanese e-commerce platforms have struggled to gain a foothold in China.

    Although accounting for a relatively small sliver of total luxury sales, China’s high-end resale market is on the rise. Last year, China’s secondhand luxury market reached $2.69 billion in sales, roughly 5 percent of the total for luxury, but growing interest among younger millennial and Gen Z consumers indicates that it is poised to go from strength to strength. As Jing Daily recently noted, young Chinese consumers have prioritized buying secondhand out of a commitment to sustainability and reducing their carbon footprint, collecting hard-to-find archive pieces by top designers and brands, and mixing and matching pieces that others might not be able to easily get their hands on.

    This is a marked departure from the Chinese market of just a decade ago, when luxury resale was largely centered around handbags (mostly at physical outlets like Milan Station) and secondhand luxury apparel and footwear was a hard sell. The past three years have seen something of an investment gold rush in domestic luxury resale platforms. In 2019, Plum raised $20 million in its Series B+ round, while Ponhu, which operates an e-commerce platform, four self-operated brick-and-mortar stores, and 50 franchised outlets nationwide, raised nearly $25 million in Series B funding in spring 2020.

    Around the same time, livestreaming-oriented competitor Feiyu raised $20 million in its Series A round, and “millions” more this past March. According to a company release, Feiyu has a million end-users and “hundreds'' of sellers, with monthly turnover of RMB 100 million ($15.6 million) and a sell-through rate of 80 percent. Most recently, in May 2021, domestic luxury resale startup GoShare2 announced that it had secured “tens of millions of U.S. dollars'' in Series C financing.

    China’s nascent luxury resale market is becoming a crowded and contentious place, as established platforms such as Secoo (which sells both pre-owned and new products) and Youshe Yipai battle it out with younger startups and major tech players such as Douyin (whose users are increasingly leveraging to sell their pre-owned items) for market share. Meanwhile, international platforms like The RealReal, Vestiaire Collective, and the freshly acquired Depop are also looking to China as part of their global efforts.

    Amid this backdrop, Japan’s established resale platforms are trying to make a renewed push into China. Recently, Mercari — which bills itself as Japan's largest community-powered marketplace — announced that it will begin cross-border sales to China through a partnership with Taobao and the Alibaba-owned resale platform Idle Fish (Xianyu). But Japanese marketplace might find that the low-hanging fruit in China’s resale market is long gone. Reclo, another resale platform, made two much-publicized pushes into China in 2016 and 2019 that ultimately failed to gain enduring traction.

    Although Japan’s trained luxury authenticators are in high demand, the question is what Japanese platforms can bring to the table that cashed-up domestic competitors cannot. Japan’s luxury resale market is, after all, one of the world’s most sophisticated, having developed during the country’s economic boom years of the 1970s and 1980s, giving it a leg up in sourcing, Chinese players have much greater content-commerce prowess and market knowledge.

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