The stigma against second hand apparel and footwear is quickly becoming a thing of the past: according to a recent report by resale platform ThredUp, the market has grown 21 times faster than first hand fashion retail over the past three years and is expected to grow from 24 billion US dollars to 51 billion US dollars in the next five years, in the United States alone. That means the secondhand market will be 1.5 times bigger than fast fashion by 2028, when previously-owned items are forecasted to account for an average of 13 percent of American closets.
The market is so promising startups working in this space have been receiving significant investments. StockX, an online platform where deadstock and unworn second hand sneakers, watches, handbags and streetwear are treated as stocks, became the latest unicorn (startup valued at 1 billion US dollars) in the fashion industry in June, after securing 110 million US dollars in a series C funding round. Earlier that same month, another fashion resale platform, The RealReal, raised 300 million US dollars in its initial public offering. Competitor ThredUp raised 175 million US dollars in August.
Looking to get a piece of the pie, traditional retailers are dipping their toes in the resale model as well. JC Penney and Macy’s have both partnered up with ThredUp, while H&M has announced an ecommerce trial of second hand sales for its & Other Stories Brand. Neiman Marcus acquired a minority stake in Fashionphile, a resale website for luxury handbags, accessories and jewelry, while Zalando, the European fashion marketplace, opened a pop-up store in Berlin selling used fashion items that were purchased from customers of Zalando Wardrobe. Farfetch, the British company behind the luxury marketplace of the same name, is perhaps one of the most active fashion players expanding to resale. Following the acquisition of sneaker reseller Stadium Goods in 2018, Farfetch launched a resale platform for designer bags in May.
Why is the second hand market growing so fast? Blame Millennials and Generation Z. Affected by the aftermath of the 2008 economic crisis and plagued by student debt, young adults are the “thriftiest” of generations. Additionally, resale offers an extra source of income. “Personal closets transform into a revenue stream and shopping decisions are made by looking at investment potential. Clothes are seen as tradable assets. Platforms such as The RealReal and Vestiaire Collective allow us to know how much those pieces can be worth and therefore can be traded upon season after season”, explains Ana Roncha, Course Leader of the master’s degree in Strategic Fashion Marketing at the London College of Fashion, in an email to FashionUnited.
Also working to the resale market’s advantage is the fact that consumers are becoming increasingly aware of the environmental impact of the fashion industry. A recent report by British NGO Fashion Revolution revealed that one in three European consumers take sustainability into account when shopping for clothes. Although less concerned about environmental issues than their European counterparts, 34 percent of American consumers declared themselves to be concerned with how the clothes they wear affect the environment, according to a recent survey by the Changing Markets Foundation and the Clean Clothes Campaign. “We’re seeing more and more consumers make a conscious choice of moving away from fast fashion. With the above comes an awareness that the lifecycle of our clothes needs to be extended and therefore our purchases need to be based on quality,” says Roncha.
FashionUnited has interviewed some of the most prominent players in fashion resale to get a behind-the-scenes view on the segment. Make sure to drop by our website every Tuesday. We’re starting with Charles Gorra, founder and CEO of Rebag, an online platform for second hand luxury handbags launched in 2014 in the United States, shipping worldwide. Having raised over 50 million US dollars so far, Rebag currently operates seven physical stores across the US: three in New York City, three in Los Angeles and one in Miami. The goal is to expand the retail footprint to 30 locations across the country, including both standalone stores and presence in luxury malls. International expansion is also part of the company’s plans.
What challenges did you face when founding Rebag in 2014?
Four years ago the resale market wasn’t as popular as it is today, so there was definitely a little bit of convincing in the investor side of things. I think the main challenge for us was that we are buyers of inventory. Rebag is not a peer-to-peer marketplace, it’s not a consignment store, we’re actually buying products. We’re taking inventory risk, which for the sellers is very valuable, but from a business perspective is pretty challenging.
What are you most proud of as an entrepreneur?
We’re now with 110 people in this company, and several of our first employees are still with us today, including employees number 1, 2 and 3. For me, that’s very important. I’m very proud of our employee retention rate, and that the people who joined us early on are still around.
You just mentioned that fashion resale wasn’t mainstream five years ago. Since then, the market has grown considerably and is expected to grow even more in the years to come. In your view, what are the factors contributing to this growth?
I think this is the reflection of a much bigger trend that goes far beyond the resale space. Number one factor is the drive towards sustainability. Several years ago, companies used to burn product, now that’s not acceptable anymore. Brands are issuing press releases pledging to never do that again, because there has been so much uproar about it on social media. Everyone is focused on reducing their footprint, especially in the fashion industry, which is one of the greatest contributors of waste in general, so resale is growing because it expands the product life cycle and creates more circularity.
Secondly, I would mention the aftermath of the 2008 crisis. Everyone is looking for a good deal, regardless of how big their wallet is. Resale is an affordable way to access luxury goods. I think the desire to be on trend without spending a lot of money has, to some extent, boosted our market.
Finally, I would mention the trend towards less ownership. Companies like Uber and Airbnb have created new ways to look at ownership, leading consumers -- the younger generations in particular -- to move toward less assets and more experiences. Our parents were collectors, it was about showing off the products you could buy, whereas for the younger generations, it’s about being photographed with a certain product on Instagram but they don’t necessarily need to own it forever. We’ve changed our mindset to short-term ownership.
Can you tell us more about Rebag’s authentication process? How does the company prevent counterfeiting?
This is a huge deal for us, as counterfeits are everywhere. We can give you a quote based on the pictures you send us digitally, but then you have to send us the bag. We only pay you after we review the bag physically because authentication is essentially a human skill. So, over the years, we’ve accumulated a lot of learnings about that, we’ve hired many authenticators to have a very thorough review process.
The resale market is sometimes accused of harming luxury brands’ image of scarcity and exclusivity. Hermès’ Birkin bag, for example, used to be extremely exclusive and now it can easily be purchased at Rebag and other resale platforms. What do you think about that? Will luxury brands need to review their branding strategy as the resale market grows?
You are right that many brands are nervous about the resale market, and I understand their concern, but you have to look at both sides of the equation. We think of ourselves as a financing tool -- by that I mean that people who sell their bags to us are getting paid. What do you think they’ll do with those dollars? Most probably, they’ll use them to upgrade to a new bag. So, in our opinion, having a liquid resale market actually creates more demand for the first hand market.
Luxury bags are very expensive. If you know there is a tool with which you can sell your bag later on, that makes you more inclined to make that purchase. A bag for which you would pay 2,000 dollars ten years ago costs about 4,000 dollars in the resale market now.
Rebag has a service called ‘Rebag Infinity’ in which customers who buy a bag are guaranteed to get at least 70 percent of the purchase price in store credit, if they resell the bag to Rebag within six months. How many of Rebag’s customers make use of it?
We launched Infinity just over 6 months ago. Basically, if you buy a bag for 1,000 dollars today, you can wear it for up to six months, and you’ll get back 700 dollars in Rebag credit. So, you’ll only be spending 300 dollars, which reduces the bar to entry significantly, and you’ll always be on trend. You can buy a bag for the summer and return it in the winter. It’s a quasi-rental model, if you will.
It’s getting a lot of traction. We’re trying to make it the main way to use Rebag, we don’t want it to be just a feature. We can compare it to Rent the Runway. When they first started, they used to do one-off rentals, for weddings or parties. Ten years later, subscriptions form the majority of their business. That’s what we’re trying to achieve with Rebag Infinity. It’s a behavioral change, so it takes a bit of time.
Another change in Rebag’s business strategy is the transition from clicks to bricks. The company has been opening physical stores across the United States amidst the so-called ‘retail apocalypse’. Why?
We were inspired by other digitally-native brands which have made a similar transition, such as Caspers and UntuckIt. As all things startup, we started experimenting, so we did a pop-up in December 2017 in SoHo (NY) which worked extremely well for us. We then expanded to Madison Avenue in April 2018, which went even better. Next thing we know, we’re opening a new store every six to ten weeks.
We noticed that the sale of higher-end bags works really well at physical stores, so we have the Birkin wall, with 30 to 40 Birkin bags per store, amongst other bags, which is pretty unique. Many customers also want to see the higher-ticket items before deciding on their purchase, so the brick and mortar stores allow us to do that for them. The reality is 91 percent of our luxury purchases take place in the US, so that was our way to start connecting with those customers.
Additionally, the stores operate as product intake. Our stores have what we call the “Rebag bar”: you can go to any of our stores, seven days a week, no appointment, so we can have a look at your bag, evaluate its price, authenticate it and buy it. The whole process lasts one hour, so you can sell your luxury bag almost immediately.
You just mentioned most of Rebag’s customers are located in the US, but the website ships internationally. Does Rebag intend to open physical stores in any other countries?
Wherever there is a thriving luxury ecosystem, there is a place for Rebag. Europe, Asia, Middle East, Latin America… I think it all makes sense and it will all happen at some point. It’s very likely you’ll see is in other markets five years from now.
Currently we’re resource-constrained, so to say. We did raise 25 million US dollars earlier this year but we are still in our infancy in terms of fulfilling the US market, so that’s our main focus at the moment.
What are Rebag’s plans for the future, besides opening more stores in the US and expanding internationally?
There are so many plans! We’re currently developing our executive team to help the organization scale: we’ve brought in a lot of senior leaders with a tremendous amount of experience. We’re also working in building our technology, as we’re big believers in technology in the resale space. We’ve developed a lot in terms of IT and software over the years, largely around prices. What’s really difficult in what we do is the pricing science because, again, we’re taking inventory risk and that’s really hard to do at a large scale. So, we’ve developed very powerful data sets internally to enhance our pricing capabilities.
A lot of what we’re working on for later this year and next year is about sharing our knowledge. Over the past five years we’ve developed pretty unique expertise about the resale segment, so we want to share that with the world. You’re going to see a lot more content [on our website], we’ve launched a magazine section recently, not to mention our efforts in terms of library and resources. We really want Rebag to be an authority in all things luxury and resale.
Long term, we’re always looking at category expansion. Right now we want to be experts at what we do, but it’s quite likely that we’ll expand to adjacent categories in the next few years.
Pictures: courtesy of Rebag, Rebag website screenshot, Rebag Facebook