What’s driving China’s secondhand luxury market?

“Last year, our retail performance grew by threefold compared with 2019. We sold more than 10 Hermès bags in one year – the transactions were worth millions of RMB. Our store has since expanded from one to three locations, with a total area of more than 200 square meters and a stock value of more than $1.4 million (10 million RMB),” says Zeng Tao owner of Qianbaohe (千宝河) secondhand store, with 15,000 followers on Douyin. Chinese shoppers are embracing the idea of purchasing and selling luxury handbags on the resale market, especially online. According to iResearch, China’s secondhand luxury market is tipped to grow to $30 billion (217 billion RMB) in 2025 from $8 billion (58 billion RMB) in 2020. Celebrities have boosted the appeal of secondhand luxury goods. Chen Liang, managing director of resale platform DejaWooo, gives the examples of South Korean singer and model Kim HyunA sporting a vintage Coach bag, model-turned-influencer Yi Mengling donning a vintage Dior dress, and K-pop group Blackpink member Jennie’s vintage Chanel items. “Their posts have created sensational effects online, as fans perceive them as genuine endorsements for brands and a testament to their good fashion taste,” she says. Secondhand luxury digitization China’s luxury secondhand market is entering a new era. Last year the conversation centered on community secondhand retail stores opening in residential districts to be close to consumers. Now, these businesses are enlarging their circle of influence to reach consumers nationwide through social media and livestreaming, as well as coming to consumers’ doors upon shoppers request to sell and recycle luxury handbags and other accessories, such as foulards, jewelry, and accessories. Be it a mom going to a resale store to sell her Gucci, Saint Laurent, and Dior handbags in exchange for a Hermès Birkin, a man looking for a gift for his girlfriend from a secondhand reseller, or a reseller going to a wealthy woman’s house to buy a Hermès Constance, entertaining short videos are being produced by luxury resale retailers to engage with consumers online and showcase the various scenarios in which consumers may want to sell, or purchase a preloved handbag. “Douyin or Xiaohongshu, equipped with advanced data algorithms, significantly enhances visibility and accessibility to targeted audiences, serving as a powerful accelerator for the secondhand luxury market,” says Danni Liu, managing director at iBlue Communications Group. “Platform features, including viral videos and interactive sessions and community engagement, enable consumers to engage dynamically with products, thereby expanding accessibility and providing an immediate, immersive shopping experience,” Liu says. Millennials comprise the luxury resale market’s core group. Gen Z and millennials (under 40) together account for more than 80 percent of the total number of secondhand luxury consumers. Among them, consumers aged 26 to 30 and 31 to 35 account for the highest proportions of second hand buyers and sellers, 24 percent and 23 percent, respectively. The 20-25 age group is in third place, accounting for 17 percent. The data highlights Gen Z as a growing consumption force in the secondhand luxury segment. Given the young skew of their consumer bases, many luxury secondhand retailers have set up official accounts on Douyin and Xiaohongshu, where most Gen Z and millennials spend time entertaining themselves. These resellers produce livestream sessions and share daily videos of people purchasing their wares in store, or selling their pre-loved luxury goods to educate consumers. “Livestreaming revolutionizes the traditional consumer funnel, fostering instant trust and accelerating purchase decisions,” Liu adds. “This format allows consumers to believe in the authenticity and value of an item and make purchase decisions within minutes, dramatically faster than conventional sales channels.” DejaWooo’s Liang agrees. “As for livestreaming, all secondhand products are unique, or nonstandard,” she says. “Audiences are drawn to the thrill of potentially losing the opportunity to purchase ‘the only one.’” Repercussions for luxury brands In light of secondhand luxury’s proliferation, the value of heritage brands’ handbags on the secondhand market has become more and more transparent. Chinese consumers are increasingly aware of their investment value. For instance, a Chanel or Hermès bought a few years ago, can now be sold at a higher price than when purchased. Some luxury brands, such as Gucci, are suffering from increased secondhand market transparency. They are seeing their handbags’ value halve or worse. For instance, the Italian maison’s Dionysus bag, which was highly popular in the early days of Alessandro Michele, has dropped in value due to a near-glut on the market. Many secondhand retailers value the small version as little as $621 (4,500 RMB) versus its original price tag of $2,770 (20,000 RMB). “The anticipation of value appreciation over time is fueling the desirability of certain iconic brands and products. But this works both ways, and products that are available in secondhand stores at a significant discount from their official price are more likely to attract bargain hunters away from the official brand stores,” says Jacques Roizen, managing director of Chinese marketing agency Digital Luxury Group. Hence, from a luxury brand point of view, perceived value on the secondhand market can have direct repercussions on reputation and desirability in the eyes of consumers. Businesses must closely monitor this perception of value. Gucci, for example, might need to release a series of new ‘it’ bags to restore its image. “Brands need to devise strategies that embrace these changes, including providing tailored services such as authentication and refurbishment, reworking market dynamics and pricing strategies. This ensures products remain under their control and enhances brand loyalty through improved customer engagement,” says iBlue Communications’ Liu. An example is Cartier, which has launched services for the secondhand market, enhancing its control over the product lifecycle and consumer engagement. How should brands embrace secondhand luxury? Brands should not see the secondhand market as an adverse phenomenon. “Businesses can no longer just observe, or attempt to control this shift. The secondhand market presents a unique means for luxury brands to connect consumers with their heritage and history in an innovative way,” says Liang. On the contrary, brands can encourage customers to trade in or resell their pre-owned items through authorized channels, ensuring that the brand retains control over the quality and authenticity of the products in the secondary market. “This approach allows brands to maintain a relationship with customers beyond the initial purchase, fostering brand loyalty and a sense of exclusivity,” says Liang. Yet, there are several considerations brands must address. From a brand point of view, developing a direct-to-consumer resale e-commerce is a challenge. “Brands are looking at vertical platforms to reclaim and resale their pre-owned products, but they can’t find a platform that provides a clean environment where there’s no product coming from the gray market, or with illegitimate provenance,” says Roizen. “Brands can potentially engage the secondhand market, but it depends on the brand’s identity and broader strategy for engaging consumers,” says Jacob Cooke, co-founder and CEO of WPIC Marketing + Technologies. For instance, the premium outerwear brand Patagonia recognized the robust demand and a booming secondhand market for its vintage sweaters, so it integrated a secondhand marketplace into its website. This allows the brand to profit off secondhand sales, while also reinforcing its commitment to sustainability. “For luxury brands, it might make sense to provide a trusted marketplace for popular vintage models, but not to facilitate the re-sale of more recent models, which might hurt brand value,” adds Cooke.

What’s driving China’s secondhand luxury market?

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Published April 16, 2024

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What’s driving China’s secondhand luxury market?