Luxury retailers risk losing out by not embracing the growing resale market

Luxury retailers risk losing out by not embracing the growing resale market, according to a report by McKinsey.

The report found that exploring the rapidly growing industry opens a new revenue stream for luxury retailers while also having a positive effect on brand loyalty and desirability for consumers.

The global luxury resale sector is currently worth between an estimated $25 billion to $30 billion, with experts predicting an increase in growth of around 10-15 per cent as a result of new consumer attitudes, over the next 10 years.

Brands such as Gucci have ventured into the space, partnering with TheRealReal to recycle and upcycle its products.

Swiss brand Richemont has also recently acquired UK-based marketplace Watchfinder.

Despite a number of brands dipping their toes into the sector, many remain unaware of how to cash in on the phenomenon of vintage or second hand clothes.

“Our findings confirm the appeal of the resale trade: done prudently, brand entry should not erode margins, and would result in only limited cannibalization,” the report read.

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“What’s clear is that luxury resale is here to stay, and those brands that choose not to participate risk missing out on a significant opportunity.”

The report highlights the fact that entry into the market can have a positive impact on consumer attitudes towards the brand.

With 54 per cent of new-product buyers surveyed by the firm claiming that as long as customer experience remained consistent, their perceptions concerning the desirability of a luxury brand that had expanded into resale would be positive or, at least, not change.

“The luxury resale market holds great promise for both customers and brands,” concludes the report.

“For brands, if they choose to participate, it is a way to expand their offerings, appeal to committed client segments, stay abreast of digital innovation, and reinforce their sustainability efforts—if they can find ways to add meaningful value to loyal customers’ experience.”

The report was based on consumer research conducted in North America, the EU and Asia over the last three months.

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