Second-Hand Stores, Both Online And Physical, Report Staggering Profits#
For some of China's aspirational luxury buyers -- typically lower-level white collar workers who have been known to subsist on instant noodles to save up for a particular handbag -- the quiet growth of the second-hand luxury market has been something of a godsend. While consignment stores that specialize in high-end second-hand goods have been a fixture in Western markets and Japan for decades, they're still in their infancy in mainland China. (Though they have existed in Hong Kong for somewhat longer.) However, online and physical stores selling second-hand luxury goods are "quietly rising" both in quantity and popularity, with no real limit to their potential.
From a recent Xinmin article (translation by Jing Daily team):
As the domestic Chinese luxury market continues to heat up, the second-hand luxury market is also quietly rising. Following recent research, this reporter found that there are many online stores specializing in second-hand goods, and although their prices are much lower than new boutiques, the profits they're pulling in are really staggering.
In one online store offering second-hand luxury goods, I saw handbags from LV, Gucci, Prada, Chanel and other high-end luxury brands, priced at anywhere from a few thousand to tens of thousands of yuan, yet still 30-70% less than they'd be brand new. As an online store owner, Mr. Ye, told me, setting prices in a second-hand store is rather complicated, as you have to have a pretty comprehensive understanding of an item's rate of depreciation, origin, edition, style, year of production, etc. to make a clear judgment. "Even if two items are from the same brand or style, the price differs depending on product phase and age. But on the whole, the bags I sell in my second-hand store aren't very old at all. I'd say most of them are at least 70% 'new.'"
Even though their prices can sometimes be less than 50% of a new boutique, the profits these stores are seeing are mind-boggling. After a series of interviews, this reporter found that aside from a few limited-edition collections or commemorative editions -- which can sometimes be more expensive than new items -- the price of items in the second-hand market is significantly lower, generally remaining in the less-than-3,000-yuan (US$440) range.
"Take this LV bag for instance. It's over 10,000 yuan (US$1,464) new, but the owner of the [second-hand] store paid 3,000 yuan (US$439) to buy it back, then doubled that to re-sell it for 6,000 yuan (US$878). Between buying it and selling it, he made 3,000 yuan," an individual familiar with the luxury market told this reporter.
However, as always, there are risks involved with the second-hand luxury market, primarily the problem of counterfeiting.
Though it's a lucrative business, risks in the second-hand luxury market shouldn't be underestimated. This reporter has learned that brands like LV, Gucci, and Prada are widely counterfeited in China, and some of these fakes are of such good quality it's difficult to detect. Therefore, when second-hand store owners are buying items for resale they've got to have sharp eyes and impeccable ability to gauge quality, because if they shell out the cash to buy something that customers just won't buy, they'll have to eat the losses.