Evolution of Luxury Goods Market: When Secondary Outgrows Primary
The terminology of the secondary market in the luxury goods industry refers to the sale and purchase of previously used premium and luxury items. The luxury resale universe has always existed for more than a century and was originally born out of ‘increasing consciousness towards more stylish dressing’ and ‘inability to purchase a new luxury product’.
However, over the last two decades the stigma associated with purchasing pre-owned goods has diminished and instead been tremendously favored, such that the secondary luxury market is growing four times faster than the primary luxury market (12 percent per year as compared to 3 percent), already amounting to a current market value of $25 billion, as per BCG
What fueled up this boost?
Undoubtedly the first reason that would be obvious to anyone is affordable prices, but we need to consider that this factor has been ever-present. The so-called ‘vintage’ products sold in the thrift stores were all offered at lower prices, but they lacked certain essential elements.
The game changers are recent online resale platforms which offer sellers a higher and well-deserved resale value for their products; at the same time buyers are assured of the authenticity and ease of purchase. Luxurious outlook of websites, extensive product catalogue and curated category-wise expertise all helped to eradicate the negative aura around buying used products.
The current tide of ‘sustainable consciousness’, especially amongst the younger generations, provided an extra thrust to the trend. Luxury is more about ‘experience’ than ‘ownership’ for affluent millennials and generation Z, hence their preference to buy a used luxury handbag as good as new rather than one at the same price from a fast fashion brand allows them to reduce the negative environmental impacts while keeping the wardrobe fresh and rotational.
Furthermore, the secondary market has proved to be a treasure chest for buyers with a keen eye for rare and limited-edition items no longer available in the primary market.
A boon or bane for the luxury brands?
At first sight, luxury brands were hesitant to flow with the current. Resale market looked like a threat to them for maintaining the exclusivity and trustworthiness associated with their image and dismantling the sale structure of new products, but its growing interdependence and influence on the primary market is enough for luxury brands to appraise the associated benefits, such as-
Increased sales: Secondary offers a perfect platform to access aspirational luxury consumers who can be future loyal first-hand buyers. Concurrently, second hand sellers, who are also their current customers are more likely to invest in more frequent and expensive purchases as a result of better returns from the sold products.
Sustainable brand positioning: Luxury sector has always been criticized for its enormous carbon footprints. By getting involved in a circular luxury economy and increasing the lifespan of their products luxury brands can augment brand values amongst the new environmentally aware customers.
Market Assessment: Brands can gain access to various trends of the market by analyzing the products and categories with most sales and highest resale value which will affect the purchasing preferences of the current and future consumers.
Control Brand Image: It is always important for luxury brands to control the way their products and ideas are communicated across the various selling points. This can definitely incur a positive or negative effect on the primary market sales.
How Data & Data can help?
Even though the resale market has emerged as a powerful force and brings with it many perks for the industry, most of the luxury brands are still following the strict ideologies of brand and distribution control and hence have no command over the way their products are handled after the first sale. Some luxury brands have gauged the opportunity and have started to collaborate with the major online retailers. But will that be enough?
By incorporating the use of Artificial Intelligence brands can effectively monitor their products in second-hand market by:-
>> Keeping an eye on the prices and popularity of certain items and product categories to get a better idea of the lifetime worth of their products.
>> Understanding market trends by observing consumer preferences, for example secondhand sellers are more likely to purchase fresh products that have higher resale value to reduce their ‘cost of ownership’
>> Avoiding counterfeit product distribution by assisting the ability of online luxury resellers to properly authenticate luxury goods hence create a brand image that revolves around trust and transparency.
>> Create a consolidated plan for the future releases based on the cumulative insights from the collected data
Overall it will further strengthen the customer relationship of luxury brands be it current or future customers. Given the fact that it will be increasingly impossible in the future to overlook the effects of the secondary luxury market, to gain a better understanding of its mechanics will surely help in turning this tide to the best advantage of luxury brands.