"For smart luxury brands to grow more, they must penetrate into the daily lives of younger consumers." Author | Spine name edit | Source: Thred Up The penetration rate of U.S. e-commerce continues to increase in 2021. According to Statista statistics, e-commerce penetration increased to 13% from 11.4% at the outbreak of the 2020Q1 outbreak. Among them, there is a type of e-commerce that has outstanding performance, which is the second-hand e-commerce trading platform. According to public data, the size of the second-hand trading market will be about $36 billion in 2021 and will grow to $77 billion in the next five years. ThredUp reported record Q3 2021 revenue of $63 million, up 35% year-over-year. The RealReal reported total revenue of $119 million in the third quarter, up 53% year-over-year. At first glance, The RealReal and ThredUp invariably attribute the good results of Q3 to overcoming the supply chain and labor shortages that were previously dragged down by the epidemic. But if we extend the timeline further, behind this, the consumption trend is also showing dew.
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Two major second-hand e-commerce platforms handed over eye-catching report cards
Founded in March 2011, The RealReal landed on nasdaq in 2019 with a market capitalization of $2.39 billion on its first day of listing, making it 8 years to become the world's "first stock of second-hand luxury e-commerce". On this second-hand e-commerce platform, shippers can send items they don't want to The RealReal, which will have a dedicated team to verify these items and then post them to the platform for sale. Depending on the brand appeal and the condition of the item, the price of the item varies, and the shipper can get up to 85% of the final sale price.
Image source: Fashionista On this platform, consignment products are also dominated by second-hand high-end handbags, clothing, jewelry and watches. Throughout the process, The RealReal offers a standardized, free door-to-door pick-up, appraisal and delivery service. In its first year of existence, The RealReal's sales reached $10 million and has maintained its growth momentum. According to the 2019 listing prospectus, its revenue in 2018 was US$207 million, up significantly from US$134 million in 2017. Like other startups, The RealReal has a lot of money to back it up. Prior to the listing, The RealReal raised $288 million in financing.
Image source: FashionistaThe RealReal was initially positioned not as a pan-category second-hand platform, but only focused on luxury brands such as Gucci and Chanel. The RealReal also pays special attention to professional identification, and a large part of its workforce is dedicated to identification, and even many are top gemologists, watchmakers, luxury identification experts, etc. Company founder Julie Wainwright has said that the trusted team of experts behind second-hand luxury goods is the key to The RealReal's standout. Today, The RealReal has hundreds of thousands of items in stock, and 98% of its inventory will be sold out within 120 days. Another second-hand e-commerce company, ThreeUP, was founded three years before The RealReal and was founded in 2009.
Image source: Fashion Network Unlike The RealReal, ThredUP's early entry point did not deliberately emphasize luxury, but hoped to become a platform for parents to deal with their babies' idle clothes, and the company gradually cut into the second-hand luxury business after its establishment and growth. Similar to The RealReal, considering the pain points of second-hand clothing and after-sales service, ThredUP does not use the C2C model used by the second-hand platform, and also takes the C2B2C (consignment) model, the specific operation process is: the user registers on the website to obtain the free cleaning service provided by the platform, the second-hand clothing is packaged into a platform unified bag and taken away by ThreeUP, and the clothes can only be sold after being qualified by TheredUP inspection. If a seller applies for a RedUp credit card account, they will receive payment immediately.
Image source: Forbes In August 2019, ThredUP announced the completion of a $175 million Series F funding round. In March 2021, ThredUp went public, and its prospectus showed that its profit in 2020 was as high as $128 million, and the company's market capitalization on the date of listing was $1.27 billion. At present, ThredUP has launched international shipping services in more than 50 countries around the world, opening up the global sales process. The RealReal's 2021 Luxury Resale Report counts the platform's more than 23 million members and sales of more than 19 million items, introducing the recent situation of the luxury resale market and the impact of the epidemic on luxury consumption. The report notes that the luxury resale market is experiencing record growth, with the number of new members of The RealReal increasing by 6 million over the past year, and more and more consumers entering the resale market to buy and sell in the past year: in the first quarter of 2021, 45% of new consignors on The RealReal website joined the platform as sellers for the first time; in addition, consumers' shopping purposes on The RealReal were also more explicit, with 43% of buyers saying "Sustainability" is a key factor in driving their shopping at The RealReal, with 40% of buyers saying they see The RealReal as an alternative to fast fashion. With the breakout of The RealReal and ThredUp, one group underwent a 180-degree change in attitude.
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Luxury brands have taken the initiative to embrace second-hand e-commerce
"Our popularity in the luxury circle is this: Chanel and Hermès still want us to go out of business; sandwiched in the middle is LVMH, who finds us interesting. We had a harmonious dialogue and worked together. They don't necessarily want to put in the work with us, but they don't necessarily 'bang' on that door. In the early years of the company's founding, Wainwright, the founder of The RealReal, described the attitude of luxury brands towards them. Now, this wait-and-see attitude with a little disgust is no longer significant, and smart brands have chosen to embrace more. For example, in 2018, following Stella McCartney, British luxury brand Burberry chose to partner with The RealReal, and users who sold or bought second-hand Burberry products on the platform will be invited to Burberry's offline stores in the United States to enjoy afternoon tea and select new products. This is clearly a full endorsement by luxury dealers for the second-hand resale market. The RealReal data also shows that resale demand for Burberry from platform users increased 64% year-over-year, and searches for Burberry on the site grew the fastest among millennial and Gen Z customers. "The second-hand market is a new opportunity for luxury brands," not surprisingly, said Lorenzo, the successor of luxury brand Prada, in 2021.
Image credit: Indeed In fact, traditional luxury goods dealers really should not regard friends as enemies. The resale market does not pose a threat to luxury brands themselves, and sometimes even new growth points: the latest annual report of the Italian Federation of High-End Goods Producers shows that global luxury sales have reached 330 billion euros, of which 7% of sales come from the second-hand market, and in the short term this proportion will continue to increase in 2021. A large number of surveys show that globally, the growth rate of second-hand luxury goods transactions has exceeded the growth rate of new luxury goods. Moreover, the mainstream users who are active in the second-hand market now happen to be the must-compete group of major luxury goods manufacturers - Generation Z. The proportion and growth rate of young second-hand buyers in the second-hand market should not be underestimated. ThredUp once surveyed that Gen Z shoppers are more likely to bargain than people of other age groups, and 80% of young people surveyed said that there is no sense of inferiority when buying second-hand luxury goods. Rati Sahi Levesque, president of The RealReal, analyzed: "The repetition of travel restrictions is having a significant impact on consumer shopping behavior, with savvy shoppers focusing on luxury investments, with Gen Z and millennials experiencing the most significant growth in this area." The luxury resale market has great potential, and smart luxury brands must penetrate the daily lives of these young consumers if they want to achieve greater growth. In a word, in the post-epidemic era, Gen Z shoppers (or even more than this group) have a downward desire to consume, but the concept of consumption is upgrading: the concept of second-hand is closer to the positive aspects of environmental protection, personality expression, effective investment and retro tide, rather than just because of shyness. Looking at the global market, the more people who can afford to buy luxury goods, the more idle second-hand and want to buy second-hand, as long as there is the right platform, this demand will explode. So, what if we look at China?
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China's second-hand luxury market is leaderless
Also taking the epidemic as a watershed, domestic e-commerce has entered a competitive stage of incremental slowdown and stock revitalization. The untapped space of second-hand luxury goods is attracting more and more attention. China's second-hand luxury consumption accounts for about 8% of the global market, and its performance has historically been inferior to that of first-hand luxury goods consumption. Compared with Western countries and Japan (30%), China's second-hand luxury goods market share is lower (5%). At the same time, second-hand trading is getting hotter. Data from the MobData Research Institute shows that in 2018, China's second-hand idle annual transaction volume was 742 billion, 964.6 billion in 2019, and rose to 1254 billion in 2020, the market size has reached trillion yuan, and the growth rate is obvious. As a link in the chain reaction, the reaction is in terms of financing, in 2021, China's second-hand luxury e-commerce companies also show the momentum of catching up with each other, and there are still some star institutions in the list of investors. In May 2021, the second-hand luxury goods trading platform only completed tens of millions of dollars in Series C financing, led by Mingyu Capital. Only two is a C2B2C second-hand luxury trading platform that connects buyers and sellers, launched in 2016.
Image source: 36kr In June, Feiyu received a $30 million Series B financing, jointly led by a US dollar fund and N5Capital, and joined by old shareholders such as Legend Capital, Matrix Partners China, and Chenhui Venture Capital. Founded in 2016, the company started from niche luxury live broadcasting, cut into the second-hand luxury track in 2018, and in 2019, Feiyu took off with Taobao live broadcasting, which was the first second-hand luxury goods trading platform to efficiently open business scenes with live broadcasting. In September, Explosive Luxury announced that it would complete the A+ round of financing of 100 million yuan on May 10 this year, which was led by Fenghou Capital and followed by the old shareholder GSR Chuang. This platform focuses on AI technology-driven second-hand luxury goods trading, through the AI valuation data model and offline physical warehousing to achieve a one-stop transaction service model, with standardized services to innovate the second-hand idle luxury goods trading experience. Many investors who bet on second-hand luxury e-commerce said that domestic second-hand luxury goods are in the period of dividend development, the head enterprises have not yet emerged, and second-hand luxury vertical e-commerce will inevitably appear unicorns. Looking around, the popularity of idle fish and turning on the second-hand platform of all categories has been able to prove that the second-hand idle market has reached the eve of the outbreak, but in the second-hand luxury goods transaction, there is indeed no bright leader. And there was even a scandal: this year, Siku, which was once considered to be the "first share of China's second-hand luxury e-commerce", was exposed to frequent defaults. Many users reported that after placing an order and paying in the temple library, they could not receive the goods for a long time. Some consignors also said that after the goods were sold, they could not receive payment, and they could not get an effective response after communicating with the platform and customer service many times.
Image source: Jing Daily As mentioned above, compared with the global market, the conversion rate of New Chinese luxury goods and second-hand transactions is very low, only 5%, if in the next few years, China's second-hand luxury goods platform can better meet the huge market demand, at that time, Asia may appear in Japan, China's two major second-hand luxury markets, imagination space is huge. Interaction at the end of the article: Are you optimistic about China's second-hand luxury goods market? Comment area and share it with us ~ References: 1. ThredUp, RealReal stocks rally after secondhand retailers narrow their Q3 losses,2.The RealReal Announces Third Quarter 2021 Results, therealreal.com3.INVESTOR PRESENTATION Third Quarter 2021, thredup.com4.The Rise of Second-hand: Exploring the Opportunities of Re-commerce，bmilab.com