Bain & Company estimates that the market for pre-owned luxury reached $2.69 billion (17.3 billion yuan) in sales in 2020.
Wealthy Chinese consumers are cleaning their closets of designer accessories and luxury items to embrace happier, more productive, and organized lives.
Many millennials and Gen Zers are embracing a minimalist lifestyle in which they follow Marie Kondo’s decluttering principles.
China’s perception of pre-owned luxury is changing. But despite significant growth, the market is still a fraction of the highly profitable luxury sector. Bain & Company estimates that the pre-loved luxury industry reached $2.69 billion (17.3 billion yuan) in sales in 2020, compared with $53.71 billion (346 billion yuan) in sales of new luxury products over the same period.
There is a long way to go until secondhand luxury takes over China and becomes a mainstream phenomenon similar to the one seen in Japan. In the Land of the Rising Sun, sales of pre-owned luxury goods represent 28 percent of the overall luxury market, compared to just 5 percent in China, according to a joint report by China’s University of International Business and Economics and Isheyipai. Yet, smart retailers and premium brands operating in China are already making the most of their circumstances by raising “tens of millions of US dollars” in Series C financing, like GoShare2, or are partnering with tech giants like Alibaba when entering China.
According to an Alizila press release, the Japanese vintage and pre-owned luxury shopping site Brand Off has partnered with Alibaba’s cross-border marketplace Tmall Global to expand its footprint in China. “China is like a goldmine,” said Yuya Yamauchi, chairman & CEO of Brand Off.
Yamauchi’s assessment is accurate. As the second-largest retail market worldwide, China entered 2020 with a $5.8 trillion opportunity. Moreover, Chinese consumers have become an important engine of global consumption, and their passion for luxury has boosted consumer spending.
But globally, young, progressive, and socially-driven demographics are rebelling against forms of blatant consumerism. They lament the emotional disconnect between individuals and refuse to spend their lives simply accumulating things. Moreover, many millennials and Gen Zers are embracing a minimalist lifestyle, following Marie Kondo’s decluttering principles. And in the post-COVID-19 era, this social movement has become a phenomenon in China. Wealthy Chinese consumers are ridding their closets of designers accessories and luxury items to embrace happier, more productive, and more organized lives.
“For Japanese secondhand luxury goods retailers, all of the clothes, bags, and jewelry languishing in consumer closets across China represent an opportunity that is becoming too great to ignore,” said Christine Chou, a content writer for Alizila.
Before the global pandemic, retail stores like Brand Off have pioneered methods for acquiring and retaining Chinese consumers. But today, they are looking at China as a two-sided market. Changing consumer behavior has pushed re-commence platforms to adopt the new normal, where the moneyed class is no longer exclusively the buyer but also the seller.
According to CNBC, the pandemic was a trigger that pushed “even more people to consider the future of their closets.” ThredUp’s 2020 Resale Report estimates that 50 percent of people are cleaning out their closets — more than before the pandemic.
“We’ve seen a strong uptick in supply, with many people spending more time at home staring at their full closets and looking to earn some extra cash,” said Anthony Marino, president of ThredUp, on CNBC.
Perceptive resale platforms like Brand Off have adopted best practices to reach the Chinese moneyed class faster than their global competitors. Instead of lamenting the missed opportunities that came with border closures, Brand Off used its deep understanding of the Chinese consumer to expand into China.
The Japanese luxury resale player revamped its relationship with Chinese consumers by establishing a foothold in their own country. And it boosted brand awareness through live-streaming sessions during 6.18.
Brand Off’s exceptional live content featuring the company’s own sales associates boosted the brand’s popularity and helped the Japanese player understand consumer purchase motivations.
We estimate that throughout 2021, additional resale platforms will go all-in on China, trying to get access to a critical market, rich in opportunities, but where consumption habits and patterns are becoming increasingly Westernized.