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Retail is facing long-term inflationary pressures. Addressing these will require business model innovation including brand-enhancing resale channels.
Brands should be cautious in touting the sustainability benefits of resale programs where the economics are solely based on awarding gift cards. These programs are misaligned with brands moving to more circular models.
“As inflation rises, fast fashion proves more tempting” was Glossy’s headline for an insight article this past week. It highlights a new Shein competitor, the Chinese ultra-fast fashion company Pinduoduo, which allows customers to buy thousands of dirt-cheap styles released every week. It’s already been downloaded more than 400,000 times.
I like that this article points out economic incentives that drive our choices. We are living in inflationary times and I would expect these will continue given the significant geopolitical, resource, and limits of global production. This backdrop along with less disposable income for the middle class will favor resale as well as fast fashion. We have seen again and again these economic wins out over social stigmas, even around climate change. The growth of resale will favor premium products and fast fashion will (sadly) continue to grow. It will therefore be the middle of the market that faces the greatest headwind.
GAP is a poster child for pressure which can be seen in Retail Touchpoints headline, “Athleta Moves Further into Resale, Off-Price.” These are actually two announcements in one headline including Athleta’s expansion of a resale program with ThredUP and partnership with Simon’s Outlet business to bring outlet shopping online.
Athleta is expanding the Clean Out program with ThredUP to now include a preloved section on the Athleta website. While I have concerns about the long-term impact of these moves on the Athleta brand, I expect both of these programs will generate near-term traffic and they are certainly another proof point for customers to expect brands to buy back and sell pre-owned items.
Balenciaga also announced an expansion of their co-branded Reflaunt trade-in program. There is no commerce element to the program which makes it appear less risky for a brand to see this as simply a traffic driver with sustainability bonafide. However, as resale becomes a more significant portion of luxury, flooding eBay with thousands of Balenciaga items priced for the lowest bidder is not a fantastic outcome for an incredible brand.
In addition to longer-term brand equity concerns, there is sustainability consideration for this model. Balenciaga is touting the program as part of the house’s broader sustainability mission. A program based on brands only making money when customers use gift cards on new items does not incentivize a new circular business model. While these programs can keep items in use longer, the incentives are ultimately misaligned with brand sustainability business goals.
Finally, Retail Brew published a piece on Aura’s Blockchain Consortium, a nonprofit organization that operates a private blockchain and creates “digital twins”—virtual representations of a physical good—for luxury brands. As stated in the article, I am bullish on the need for luxury brands to up their technology game in preventing counterfeits. These solutions should use digital cryptography and will benefit from incorporating elements of the physical item. While there are certainly ways to do this using blockchain technology, we see other solutions as more practical in the near term. It will be exciting to see this industry take shape and will be essential for luxury brands to participate.
Athleta Moves Further Into Resale, Off Price
Athleta has teamed up with ThredUP and Shop Premium Outlets to pilot a new resale program called Always Athleta. This will be a learning opportunity for Athleta to attract new customers and understand consumer purchasing behavior better by allowing a select group of customers to shop a pre-loved section that will have products up to 90% off.
Luxury Brands like Balenciaga and Valentino Jump on the Resale Fashion Bandwagon
With the luxury resale market is expected to reach $51 billion in 2026. Five luxury brands are killing the resale game; Gucci, Valentino, Burberry, and Alexander McQueen. Balenciaga has partnered with Reflaunt to introduce Balenciaga Re-Sell and Valentino has Valentino Vintage. Gucci launched Gucci Vault, an online concept store with ‘virtual shelves’ holding pre-owned Gucci. Burberry joined forces with The RealReal and introduced the ReBurberry Fabric program. Lastly, Vestiaire Collective launched its Brand Approved program a buy-back initiative with Alexander McQueen.
Secondhand start-up Gently raises two million dollars in funding
The future looks bright when you have raised two million in funding and have created the “Amazon for secondhand purchases.” Gently, allows users to shop from multiple resale platforms in one place and enables shoppers to search, filter, and get alerts from recommerce sites. Gently has 10,000 daily users and is aiming to expand to one million shoppers by 2024.
Weekend Briefing: As inflation rises, fast fashion proves more tempting
The wealthy may not care that handbag prices are increasing exponentially but the more conscious spenders are paying close attention and brands outside of the high end of luxury will need to find a way to prove their value to cash-strapped customers. Even with the ethical and environmental concerns fast fashion still has a great appeal to many. A new Shein competitor, a Chinese fast fashion company, Pinduoduo came out with an app for the U.S. demographic and it’s already been downloaded more than 400,000 times.
Luxury resale on the blockchain may be closer than you think
Is blockchain the future of luxury and Web3? LVMH, Prada, and Cartier formed the Aura Blockchain Consortium, a nonprofit organization that operates a private blockchain and creates virtual representations of a physical good for luxury brands. The idea behind the blockchain is that it is a digital certificate of ownership that can be transferred and help build trust between buyers and brands.
BRC publishes guidelines on secondhand and pre-loved items
The British Retail Consortium’s (BRC) goal is to limit items going to landfill by keeping them in circulation longer. With that thought in mind, BRC created a report with input and feedback from retailers, resale platforms, industry exports, and charity retailers dedicated to secondhand and pre-loved items to help the industry work towards a circular economy.
Balenciaga Presses Go On Resale Following Successful Pilot
Luxury brands want to have more ownership of secondhand sales so what do they do? They partner with a resale platform, and after much success, Balenciaga has formally launched a partnership with the resale platform Reflaunt. Reflaunt’s technology allows customers to sell their pre-owned Balenciaga in exchange for store credit. Reflaunt white label resale has been adopted by brands and retailers including Net-a-Porter, Ganni, and Axel Arigato.
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