A Luxury Problem: Finding the Right Brand to Seize the Resale Opportunity

The question becomes which brand strategy will deliver the most value

According to Bain the market rose to approximately $46 billion in 2022 as sales growth accelerated to 28%, equivalent to 1.3 times the growth rate for new luxury goods. As brands are moving to maximize the opportunity, the question becomes which brand strategy will deliver the most value.

The resale dynamics are changing. As consumer behavior has evolved to not only include an unprecedented willingness to buy resale items but counting resale value as a major factor when purchasing new items, luxury and fashion brands are deepening their involvement from strategic partnerships to acquisitions and in-house initiatives. With brands moving to increase their direct control of the market, new opportunities and responsibilities emerge for their brands.

The re-sale market is currently centered around specialized digital platforms for trading pre-used goods which have around 25-30% market share and are predicted to grow around 20-30% per year according to McKinsey research. Primarily, consumers are looking to these platforms to access hard to find / no longer available products (41%), to make more sustainable purchases (40%) and to save money (36%). Trading is becoming circular with three out of four consumers both buying and selling on the recommence platforms. Furthermore, the entry of brands into resale market generates positive impact on loyalty and desirability among new-product buyers. However, many brands have been facing issues related to the lack of control of authentication, pricing, availability, and distribution, which poses risk to the brand.

Resale brand and business strategies vary. As the market is still maturing, brands have different strategies for seizing the resale opportunity and dealing with risk, ranging from select collaborations and partnerships to white label solutions, outsourcing and acquisitions.  

 Collaborations and partnerships give brands the opportunity to align themselves with a platform, thereby giving it “a seal of approval” and indirectly endorcing its capability to authenticate and price products. Examples include Vestiaire Collective withGucci and Alexandra McQueen and Ralph Lauren and Depop.  As a result, a top tier of re-sale platforms is emerging, the power balance of which will be interesting to follow. However, the store in store strategy is only one option: other brands choose to partner with white label solutions to maintain greater control of distribution, authentication, and pricing. These include Eileen Fisher with Trove and Oscar de La Renta with Archive. At the same time, the trend among more mainstream brands seems to be to keep the entire resale experience in-house as evidenced by Ganni, Lululemon, and Cos to name a few.

Finally at opposing ends of the spectrum, you have Rolex, Richemont and Kering opting for acquisitions, investment, and control while Balenciaga has outsourced the key parts of its resale to Reflaunt which manages authentication, photography, pricing, and listing on its global network of over 25 secondary marketplaces such as Vestiaire Collective, Tradesy, and Rebelle.

Regardless of the chosen strategy, as the market continues to grow, the importance of maintaining control of your brand and creating balance in the brand vs resale platform relationship will be key. As a result, creating the right brand strategy for your brand’s resale offerings is critical.  

Factors influencing brand strategy: As shown in the table below, brands have adopted different brand strategies ranging from core branded to unrelated. It is a telling table that indicates that brands are still figuring out how to maximize the brand opportunity. So how do brands decide on the end-goal?

As with any new offering, brands should consider a range of strategic parameters in developing the brand strategy. At Remarkly, we define these as Control, Strategic Value,Brand Alignment, Brand Fit and Added Value. In essence the analysis considers if a brand is strong enough to successfully promote a new offering, if the offering has something incredible that would add value to the brand, and it identifies any conflict. It also considers the flexibility required from a business strategy perspective.

 Consider GucciVault: Gucci most likely launched the hybrid brand because the uber-selective metaverse offering aligned with its overall brand strategy while presenting something new - technology/future-oriented and sustainable - that the existing brand didn’t have but could benefit from. As a result, it made sense for the company to invest in creating the Gucci Vault brand.

Amongst the brands who chose the in-house strategy, it is interesting to contrast Ganni, which have created two distinct hybrid brands to visually reinforce its stance and commitment to resale and actively adding equity to its core brand, with e.g.,Lululemon which has a much more subdued core brand led approach.  

Finally, Rolex is maintaining an armlengths distance to the Bucherer brand and keeping it unrelated. This enables the company to strengthen two different value propositions while controlling a primarily channel for its resale. Adding resale to its core brand value system is not a strategic priority.    

Finding the right brand to seize the resale opportunity. Despite all the activity, resale is still an emerging market. Currently the trend is moving towards more players, making it more cluttered and difficult to navigate for consumers and brands alike. To take leadership and seize the resale opportunity, the priority for brands should be to define a long-time brand strategy identifying how strong a presence is needed and who the right partners are in a manner that supports overall business and sustainability goals. Remarkly’s automated brand strategy platform is the perfect tool in this context, as it empowers brands to complete the data-driven analysis quickly and consistently using proven methodologies. Both established brands and smaller brands which are trying to identify their role and place in the resale market will benefit from creating a sound approach that combines pilots with strategic long-term insight and planning.

Remarkly is revolutionizing brand strategy with our AI-powered platform. We empower teams to save time and money, collaborate effectively, achieve consistency, and simplify their decision-making process.
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_{Sources:
https://www.vogue.co.uk/fashion/article/reluxe-matches-second-hand-fashion
https://www.mckinsey.com/industries/retail/our-insights/welcome-to-luxury-fashion-resale-discerning-customers-beckon-to-brands
https://www.bain.com/insights/renaissance-in-uncertainty-luxury-builds-on-its-rebound/
https://www.fashiondive.com/news/Gucci-Kering-launch-sustainability-resale-Vestiaire/645428/
https://fashionista.com/2022/02/luxury-brands-clothes-resale-secondhand-market}