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Market Factors Driving the Luxury Resale Boom

By Samantha Dersarkissian
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Market Factors Driving the Luxury Resale Boom

6 MINS READ

According to a 2021 McKinsey Study, “the resale luxury market, already sizeable (estimated at $25–30 billion in 2020), is surging and industry watchers predict an annual growth rate of 10–15 percent over the next decade.” This shift, catapulted by changing consumer behaviors, has bolstered luxury resale into the fastest-growing fashion sector. In the last year, luxury brands like Gucci and Oscar de la Renta have introduced their resale channels with Encore and Gucci Vault. Still, according to the Brand Resale Index, “ luxury remains a wide-open landscape of opportunity.” 

Key Takeaways

  • Customers are driving the trend of luxury resale. They desire sustainable solutions, high-quality products, and the thrill of a treasure hunt. 
  • Luxury resale is expected to accelerate due to inflation, technology advancements, and customer awareness of resale models. 
  • As resale models become a larger part of luxury fashion, resale models will start affecting the price of new items. This will balance the supply and demand but make exclusivity more difficult to achieve. 
  • Customers desperately want the luxury brand experience. Luxury brands must use this moment to create controlled access while protecting their brand through a branded resale program. 

Luxury Resale Fueled by Customer Excitement 

For discerning consumers, luxury brand involvement is an attractive prospect. Customers expect brands to stand behind preloved products to ensure authenticity, bolster their sustainability initiatives, and curate rare and valuable items. This growing business opportunity has led market analysts to predict that resale will comprise a full third of the total luxury market by 2025. 

Buyers and sellers are flocking to online marketplaces with the desire for preloved luxury goods, but 65% of customers would prefer to shop for resale directly from the retailers. Trove is a white-label resale platform that enables brands to stand up trade-in and resale programs for world-class brands. “In addition to the rare, vintage find, customers crave ethereal, romantic experiences brands are renowned for, including an elevated shopping experience, deep product knowledge,  authentication, and fair pricing.” 

Brands have a great deal to gain by owning their resale channel. It’s widely accepted that Gen Z consumers prefer to purchase from sustainability brands. Still, millennials and Baby Boomers are beginning to vote with their wallets, and brands and retailers must become aligned with these consumers. In fact, according to First Insights, over the past two years, consumers across all generations—from Baby Boomers to Gen Z—are now willing to spend more on sustainable products. Aligning with consumers on the desire to shop preloved and meeting sustainability demands is simply better for business.

Learn More About these 14 Brands Pioneering Branded Resale

Rising Prices and Inflation Fuel Customers Shopping Preloved 

Resale sales have surged during the pandemic, and inflation concerns will continue to drive resale revenues. Inflation rates have caused price increases at every stage of a garment’s lifecycle. Prices have increased by nearly 7% since 2020 due to inflation, and 60% of shoppers surveyed by Mintel say they are cutting back on spending and looking for additional discounts. Brands pay more to source and ship raw materials, and customers pay more for finished goods. With more and more Americans concerned about inflation, branded resale is expected to attract even more customers with discounted, pre-loved merchandise.

With so many customers shopping pre-loved, it’s likely many luxury customers are meeting their brand for the first time on an unchecked platform.  This is a missed customer opportunity for luxury brands and, more damaging, can degrade brand equity based on pricing, merchandising, service, and experience.  Trove reports that loyal customers spend twice as much after trading in items, and brands attract 50-65% of new customers with their resale programs. Many new customers have aspired to the luxury brand but have been priced out. According to McKinsey, 35% of resale customers prioritize affordability. Buying pre-owned helps them to save money.

Supply Chain Shortages Continue to be Resale Tailwinds

The pandemic disrupted almost every aspect of the global supply chain. Factories across China, South Korea, and Taiwan shut down or were forced to reduce production. This created a scarcity of everything from electronics to apparel. Today, brands report an inability to keep up with the surge in product demand due to supply chain shortages. 

The economic impact of the pandemic has caused brands to look for more sustainable ways to source product inventory. Luxury resale is a perfect solution. It can withstand supply chain shortages. By sourcing ready-for-wear products from its customers, brands circumvent the entire manufacturing and international shipping process. 

Retailers will also contend with changing rules designed to combat the global climate crisis. The UN Climate Change Conference in Glasgow resulted in the negotiation of the Glasgow Climate Compact. The Compact’s goal is to reduce carbon dioxide emissions by 45%. Additionally, the Compact encourages brands to seek out alternatives to fossil fuels. Resale is an effective way to reduce emissions associated with the production of clothing and accessories.

Uncover How Circular Supply Chains Can Drive Sustainability & Profitability

New Technology Makes it Simple for Luxury Brands to Enter Resale

Advances in technology make it easier for brands to source, price, and manage preloved inventory. Brands enter resale in various ways, from tests to partnerships to Resale-as-a-Channel. Companies like The RealReal and thredUP or peer-to-peer options like Poshmark or Vestiaire, can help fashion brands move inventory. Still, they remove customer data and experience from the brand ecosystem.

Previously, the logistics of sourcing, authenticating, cleaning, and pricing millions of unique brand items into a branded resale ecosystem seemed like an insurmountably complex and expensive task. 

Enter Trove. A white-label technology solution that allows brands to create new revenue streams without compromising new product sales. Brands maintain control of their inventory, preventing customers from having negative experiences due to a lack of quality control. This approach allows luxury brands to build loyal customer relationships while taking advantage of current resale trends.

Experience the White-Label Difference

Trove is helping some of the world’s most beloved brands like Canada Goose, Patagonia, lululemon, and Nordstrom reduce customer acquisition costs and create more sustainable business models. With its proprietary white-label technology, Trove powers resale for brands, taking the guesswork out of inventory management for millions of items in brand catalogs. Read partner stories to find out how brands are benefiting from their partnerships with Trove.