In the not too distant past, buying secondhand goods was typically seen as reserved for those who couldn’t afford better. However, today’s consumers have flipped that idea on its head. Not only are they more informed and socially conscious, they expect more from their brands, their purchases and themselves.
This mind-set has paved the way for the rise of secondhand as a mainstream market, and luxury products are at the forefront. From online ventures such as the RealReal, 1stdibs and Fashionphile to offerings in major department stores such as Neiman Marcus, Macy’s and Nordstrom, the repurposed-goods market is growing four times faster than that of primary luxury, according to the Luxe Digital website: From $24 billion in 2018, it’s expected to reach $34 billion by 2021.
Of cost and conscience
While estate jewels and resale goods have long been available for purchase, a few major factors have enabled the secondhand market to gain a strong foothold in the luxury sector. The most prominent of these is affordability, as resale gives shoppers access to luxury items at more budget-friendly price points.
“Pre-owned, whether it be through jewelry, handbags or other accessories, is the young shopper’s modern approach to attaining luxury,” notes Liz Allison, chief transformation officer for Neiman Marcus Group. “This means offering luxury products and experiences wherever and whenever the customer needs or wants them.”
In April 2019, the group invested in secondhand luxury site Fashionphile, and currently hosts drop-off points for the e-commerce store’s goods. Consumers who bring in luxury items can choose payment in cash or a gift certificate of equal value to spend in the store.
Pam Danziger, president of market-research firm Unity Marketing, agrees it would be “crazy” for consumers to buy full-price luxury goods when they could get the same thing secondhand at a lower price. “It just really represents an excellent money-saving opportunity, where you can enjoy luxuries but not have to pay the steep price of firsthand purchases.”
Sustainability also plays a large part as millennial and Generation Z shoppers come
into the employment market and increase their buying power.
“There’s no question that this younger generation is really thinking, is much more conscientious and thoughtful when it comes to purchases and sustainability,” Danziger points out.
In that vein, retail chain Nordstrom has introduced the See You Tomorrow resale shop
to give consumers easier access to sustainably-sourced goods.
“We want customers to feel good not only about what they’re buying, but how they’re buying it,” explains Olivia Kim, Nordstrom’s vice president of creative projects. Kim curated the shop, which carries fine jewelry, clothing and accessories from luxury brands.
‘Things nobody else has’
The individuality of secondhand pieces also appeals to younger consumers, who cringe at the thought of wearing what everyone else is wearing. Today, fashion is all about standing out rather than fitting in, and mass-produced jewelry is not as appealing as a one-off piece that’s made its way back to the market after years in someone’s jewelry box.
“Millennial consumers are into things nobody else has,” says Danziger. “That’s a critical point. They can really find something that gives them a feeling of uniqueness and difference, and not the same kind of jewelry pieces that everybody else has, and that’s a great value.”
Consumers are increasingly growing more comfortable with resale concepts, reports Oren Schneider, CEO of secondhand luxury-jewelry sites Circa and Mondiamo.
In fact, many of his sites’ customers will only purchase pre-owned jewelry, he adds. “They tell us they love the idea that they never know what will come in next.”
Another factor pushing secondhand luxury to the mainstream is celebrity endorsement, as with the launch of Kardashian Kloset in October. The e-commerce site, which is part of the Kardashian-Jenner family’s many fashion projects, sells items such as clothing, shoes and handbags that once belonged to the well-known clan’s members.
And while baby boomers aren’t the main purchasing power behind this emerging market, they are certainly contributors. Back in the day, baby boomers were led into the luxury jewelry industry through a small but impactful ad from De Beers claiming a diamond was forever. Post-World War II soldiers bought their significant others jewelry to celebrate being home. As these boomers pass away, their children and grandchildren are funneling the pieces they inherited back into the market.
“The largest transfer of wealth ever to take place in this country is in the midst of happening as baby boomers leave their assets to their children, and jewelry is an important category in this transfer,” says Chris Del Gatto, co-founder of luxury resale site I Do Now I Don’t.
Boom or bust?
Because the massive growth in the resale market is so new, there are many unanswered questions regarding its impact on the firsthand luxury-jewelry industry. Is secondhand a novelty that will hit a glass ceiling sometime soon, or has it carved out a niche that will continue to gain steam? Is it only younger shoppers and those in lower income brackets who will choose to purchase someone else’s previously loved items? How will the growing number of resale devotees affect sales of full-price items?
“I see the entire circular economy and the repurposing of all consumer products continuing to grow,” says Marty Hurwitz, founder and CEO of market research firm MVI Marketing. “I am confident this trend will continue to rise with jewelry. I do not see a bubble happening in my lifetime.”
Schneider concurs, noting a continued rise in US demand and predicting that secondhand will hit its stride as other countries follow the West’s example. “As demand in emerging markets such as China and India grows, the pre-owned market will gain even more momentum.”
But while the younger generation is tomorrow’s shopper, the segment still needs the support of today’s consumers to make headway.
“More mature, truly affluent consumers are just as willing to try the resale and the secondhand market,” says Danziger. “They will often start in on it by consigning items, but then they will discover that they can buy great-quality stuff for a lot less, and they purchase, too.”
Neiman Marcus says more than half of its customers — an intergenerational group — were already participating in the re-commerce market, and that’s what led it to partner with Fashionphile. “Our customers want to participate, and the segment is here to stay,” declares Allison.
Gateway versus competitor
Management consulting firm Bain & Company believes the pre-owned market will provide an avenue for luxury brands to gain new consumers rather than siphoning them away from paying full price for name-brand jewelry.
“Across all personal luxury goods, the secondhand channel is becoming a new touchpoint to acquire younger customers, creating an opportunity to educate them and draw them into the luxury ecosystem,” asserts Claudia D’Arpizio, head of luxury research for Bain.
Still, uncertainties over the secondhand market are giving luxury brands pause.
“Most luxury brands have yet to capitalize on the booming resale market,” reveals Luxe Digital. “Luxury brands have been hesitant to encourage resale for fear of cannibalizing sales of new products and diluting the exclusivity of their brands.”
However, Hurwitz says high-end brands that fail to accept or take part in the resale market will suffer a negative impact.
“The luxury jewelry and diamond industries are in a major transition stage, and the circular economy is just one part of it,” he explains. “As an industry, we need to accept that these changes are occurring and take steps to embrace them and benefit from them. This is contrary to the way our industry has embraced change in the past, and so
it presents significant challenges to a tradition-bound business.”
Italian jewelry brand Pomellato, part of luxury retail group Kering, understands the need for high-end jewelers to take an active role in the secondhand market. In February, the company announced it had formed a three-month partnership with Paris-based luxury reseller Vestiaire Collective. Customers who sell pre-owned Pomellato pieces on the platform will receive a 10% voucher toward their next purchase from the brand’s new collection.
The diamond effect
Although the secondhand luxury-jewelry market is having little impact on the diamond industry today, could its current rate of growth lead to a long-term ripple effect on diamond buying? After all, if pre-owned dents new jewelry sales, demand for rough diamonds could potentially drop.
Ronnie VanderLinden, president of the Diamond Manufacturers and Importers Association of America (DMIA), doesn’t see resale having that far a reach. “The secondhand market has always been there, and it’s not had an effect on diamonds,” he observes. “People are just more aware
of it now.”
He also suggests that business between the resale market and the diamond industry provides a “healthy back and forth” that will continue in the future.
Danziger does believe diamonds are under threat, but feels the danger comes more from lab-grown stones than from secondhand goods. Meanwhile, the Diamond Producers Association (DPA) actually sees pre-owned luxury fueling diamond sales.
“The secondhand market reinforces the value proposition of luxury goods,” explains DPA managing director Kristina Buckley Kayel. “For consumers making a diamond purchase, knowing there is inherent value in the diamond they are purchasing and that opportunities exist to potentially sell it down the road is important to their buying decision.”
Diamonds have historically appreciated in price over the past few decades, according to Kayel, making them an asset the purchaser can enjoy without an erosion of value over time. “For this reason, diamonds have a very unique position within the secondhand market.”
Testing the waters
Pomellato isn’t the only luxury brand giving secondhand a try. Fashion label Burberry has partnered with The RealReal, while luxury group Richemont — owner of watchmakers IWC Schaffhausen and Piaget, among other labels — acquired UK online watch-resale platform Watchfinder in 2018.
However, many others, like Chanel, are notoriously against the notion, claiming that
the resale market not only undercuts its brand name, but also opens the door to counterfeiting. “Only Chanel itself can know what is genuine Chanel,” the brand declared in a 2018 lawsuit it filed against The RealReal for allegedly selling counterfeit handbags.
How important is luxury retailer participation in the secondhand market? Danziger says the ones that choose not to join the growing pre-owned boom are likely to get left behind. “This could potentially be a big game-changer for the jewelry industry and the jewelry retail market, so it’s something that people really need to be paying attention to, and seeing how they can get in on it, before they fall victim to it.”
Image: ShutterstockArticle from the Rapaport Magazine - March 2020. To subscribe click here.