Luxury brands that refuse to embrace the growing resale market may be missing out on a valuable opportunity, according to a recent report from McKinsey. The global luxury resale market is estimated to be worth between $25 billion and $30 billion, with projected annual growth rates of 10% to 15% over the next decade. Recognizing this potential, some luxury brands have already entered the resale market, such as Gucci’s partnership with The RealReal and Richemont’s acquisition of Watchfinder.
However, there are still luxury brands that remain cautious due to concerns about brand identity and potential impact on margins. McKinsey’s report challenges these concerns, stating that luxury brands can enter the resale market strategically without eroding margins or cannibalizing sales. The report emphasizes that brands choosing not to participate may be missing out on a significant opportunity. In fact, McKinsey’s research shows that consumers’ perceptions of luxury brands can positively shift when brands venture into resale, even for customers who only buy new products. Most new-product buyers surveyed by McKinsey agreed that their perception of a luxury brand would either be positive or unchanged if the brand entered the resale market, as long as the customer experience remained consistent.
The report also highlights the importance of understanding specific national markets when engaging with resale. While consumers in France and the United States responded positively to luxury brands moving into pre-owned goods, Japanese consumers had a negative reaction to the idea. Currently, the European Union and the U.S. are the largest markets for pre-owned luxury, with China accounting for approximately 10% of the global market.
To effectively engage with the resale market, luxury brands need to understand the motivations driving consumers to shop for pre-owned products. McKinsey’s research revealed that customers buy second-hand luxury products to access difficult-to-find items, for sustainability reasons, or as a financial choice. Additionally, three-quarters of pre-owned luxury buyers also act as resellers, with motivations ranging from clearing closet space to supporting sustainability or acquiring funds for more premium products.
The study suggests that luxury brands could tailor their resale strategies to specific client segments, making the market more efficient for collectors or streamlining the trade-in process for customers looking to sell previous season’s items. By participating in the luxury resale market, brands have the opportunity to expand their offerings, appeal to loyal customer segments, embrace digital innovation, and reinforce their sustainability efforts.
McKinsey’s report is based on consumer research conducted in North America, the European Union, and Asia over the past three months. It provides valuable insights for luxury brands considering entering the resale market, urging them not to overlook the potential benefits and opportunities it offers in terms of revenue generation, brand loyalty, and customer perceptions.
Useful links:
1. McKinsey Report: The Alchemy of Pink – Luxury Fashion Resale
2. Reuters: Second-hand luxury market set to grow with $150 million in investments
