Why Buying Secondhand Luxury Products is a Smart Investment
Is investing in the cards for your future? Does that sound totally dry and really not something you’ve thought about in-depth? Once upon a time (when our parents were young adults and thinking about their first investments) you’d have to go into a bank, talk in great lengths to some generic-looking man and try and remember all the jargon words being tossed around like diversification, bonds, dividends, and volatility. Well, times have changed, in a big way!
Love fashion? Great at scouting out a deal? Then maybe your type of smart investment lies in the resale luxury market.
Diversifying into the luxury resale market right now doesn’t seem any crazier than trying to figure out what the market will do next. [1] With the looming effects of COVID-19, international travel restrictions, and a new US President about to take his seat, the traditional stock market seems like the greater risk right now.
Of course, every time you read one of these blogs or articles talking about the value of high-end fashion pieces, you hear experts time and time again regale the example of the Hermès Birkin Bag. The infamous bag has gone up in value by 500% in the last 35 years — a figure that outpaced the price of gold. [1] If that doesn’t put dollar signs in your eyes, I don’t know what will! Yes, having the ability to fork out over $15,000 on an investment bag is not a reality for most, but have no fear! There are still a lot of smart, introductory pieces that can be more financially accessible and still turn a worthy profit.
Smart Investments: Let’s Get Down to the Numbers!
Even if you have no intention of playing the market, we think it’s really smart to know the ultimate value of any expensive item you purchase. Like a car or a house, designer fashions and accessories have resale values. According to the Knight Frank Luxury Investment Index in 2019, handbags were a far better investment than art. While art had an overall return of 5%, handbags clocked in at a 13% gain. [1]
According to resale marketplace ThredUp’s 2019 Resale Report, the secondhand market for luxury goods will reach $51 billion by 2023, more than double the $24 billion in 2018. [2] And the best news yet? Here at Lux Second Chance, the demand for investment pieces haven't faltered since the pandemic hit. We’ve seen a 25% month-over-month increase in demand for high-value handbags. People are becoming more conscious of how they consume and are gravitating towards classic investment pieces in case they want to consign the piece in the future. We have a lot of vintage handbags coming from our Paris location that has also held particularly strong.
But What Does One Buy?
Yes, all luxury fashion is a treasurer in and of itself, but not all that glitters is gold. Some pieces perform much better than others on the resale market and knowing which ones outperform the competition will get you on your way to making smart investment choices in your luxury buys. Certain brands and styles can resell for nearly as much as (or perhaps more than) you originally paid for it! [4] Timeless investment pieces and vintage classics will always remain in style. Iconic designs, like a Hermès Birkin, will forever be fashionable and are worth the money as they hold their value over time.
To generalize the resale markets, in times like these, you may opt to err on the side of classic investment pieces rather than the latest hot novelty. Topping the list of your leading sure bets are the Hermès Birkin, the Hermès Kelly, Chanel Medium Classic Flap, Louis Vuitton Neverfull, Chanel Boy Bag, Gucci GG Marmont, and Lady Dior. [1]
However, timely trends have also shown to be big players in the game as of late. The Supreme X Louis Vuitton shoulder bag cost up to $2,400 when it debuted in 2017. Recently, one was available on the luxury resale site, The RealReal, for $6,000. Despite the 150% markup, The RealReal called it a “smart investment”. [2]
The recent resurgence of the Dior Saddle Bag trend has seen resale values for the bag soar at a whopping 373% since it came back in style, according to The RealReal’s Luxury Resale Report for 2019. [2]
Although both these examples wouldn’t be deemed “classic standards” or staples, they are a good example of playing to the trends, which does require a bit more strategy and diligence.
Another notable factor in driving the resale price and demand of particular luxury brands is a designer’s departure from a brand. When Phoebe Philo left French fashion house Celine, The RealReal says resale value jumped 30% as year-over-year demand rose by nearly a third. The death of a designer has a similar effect. After Kate Spade’s death from suicide in June 2018, customers with an emotional connection to the brand sought out her purses, driving up prices. [2] We saw the same effect take place when the beloved Karl Lagerfeld passed away in 2019 causing a trend and price surge in Lagerfeld-era Chanel and Fendi products.
Know What You Got
Fine jewelry, watches, and handbags are always smart investments, since they hold strong resale value or even appreciate in value over time. Timeless classics and in-demand model handbags generally sell faster than clothing does, since they’re more versatile and less prone to wear. Fine jewelry and handbags are something buyers are always looking to invest in, especially when they’re made to last and well cared for.
Iconic styles from classic luxury brands have historically always retained their value and in some instances can also increase in value over time, like the Chanel classic flap bag and the Hermès Birkin bag. Limited-edition pieces are also something to consider. Rarity drives up the price. A one-of-a-kind colour or special collection increases the demand and holds interest over time as a collector’s item.
On many occasions, certain pieces come back in style, so it’s good to hold on to items that might not be valuable right now. Most importantly, take good care of your pieces so they don’t lose their value. Always invest in their care—if damaged, take your leather goods to a professional who can easily make them like new again.
The Secondhand/Resale Market - The New Frontier!
As previously mentioned, the secondhand market for luxury goods will reach $51 billion by 2023, more than double the $24 billion in 2018. Intriguingly enough, the luxury market is where resale is having an interesting/disruptive effect (driven by innovative business models) as the ability to buy used luxury goods (at a discount) introduces the brands to new customers. Having the ability to earn residual/resale value also spurs more sales through the primary channels, according to Wells Fargo analysts. [2]
Traditionally high-end luxury brands have always disassociated themselves with the resale or secondhand market as some believed it diluted the image of the brand, allowed more middle-class clients to purchase their products, and ultimately disrupted the general flow of consistently offering the newest trends, as opposed to existing ones. Now luxury brands know they can no longer run from the inevitable, so they’re embracing it! According to an article for Forbes magazine [4], both Burberry and Gucci have created marketing arrangements with secondhand - a key part of those arrangements is an effort to get closer to the consumer who wants luxury, but cares about environmental impact and other values. As consignment shopping thrives during the coronavirus-driven e-commerce boom and consumer demand shifts toward sustainability, high-end labels are definitely now tapping into this market. [5]
On top of sustainability concerns, there is also economic logic that will evolve with the luxury recommerce market. Just like the auto industry where the pre-owned car market has overtaken the new model market for luxury cars, the secondhand market is expected to overtake the designer market for high fashion. [5]
Not Only the Hottest Trend, But Also Better for the Environment!
Consumption you can feel better about? That’s the whole concept of the resale market! As consumers become more aware of the ecological impact of apparel production, they’re more frequently demanding apparel businesses expand their commitment to sustainability. Buying secondhand clothing provides consumers a way to push back against the fast-fashion system. [6]
In efforts to not only boost revenue streams, but also push for sustainability, brands like Gucci are breaking down the exclusivity barriers. “What this means for the luxury tier and how it will evolve is that brands will not try to distance themselves from the secondary market, which was the case in the past,” Ben Hemminger, CEO of luxury resale company Fashionphile, told FOX Business in an article from October of this year. He went on to state, “Brands will not only start to embrace it and increase their access to it, but also have a more sustainable business”. [5]
To end on an especially positive note, researchers who study clothing consumption and sustainability think the secondhand clothing trend has the potential to reshape the fashion industry and mitigate the industry’s detrimental environmental impact on the planet. [6] Though many thought for a second that sustainability was momentarily moved to the backburner during the COVID-19 crisis, Sarah Willersdorf, global head of luxury at Boston Consulting Group, told Forbes magazine last month [4], “Covid was the first time that a lot of people realized that their individual actions have societal consequences.” Sustainability is here to stay and brands need to include it in their products, packaging and delivery systems.
Happy investing, Luxers! xoxo
Sources:
- Julie Murphy, “Which Luxury Vintage Handbags are Worth the Investment?”, Dandelion Chandelier, April 17, 2020. https://www.dandelionchandelier.com/2020/04/17/luxury-vintage-handbag-investment/
- Tonya Garcia, “These luxury-fashion gifts could come in handy for a rainy day”, MarketWatch, December 24, 2019. https://www.marketwatch.com/story/these-luxury-fashion-gifts-can-also-be-good-investments-2019-11-26
- Camille Freestone, “Resale Experts on the Fashion Pieces Worth the Investment”, Coveteur, July 6, 2020. https://coveteur.com/2020/07/06/fashion-investment-pieces/
- Richard Kestenbaum, “The Future of Luxury, Post-Coronavirus”, Forbes, November 2, 2020. https://www.forbes.com/sites/richardkestenbaum/2020/11/02/the-future-of-luxury-post-coronavirus/?sh=45eb79b733ef
- Summer Park, “How Luxury Brands are Tapping into Consignment--and Winning”, Fox Business, October 31, 2020. https://www.foxbusiness.com/lifestyle/how-luxury-brands-are-tapping-into-consignment-and-winning
- Hyejune Park & Cosette Marie Joyner Armstrong, “Secondhand clothing sales are booming—and may help solve fashion’s sustainability crisis”, Quartz, November 17, 2020. https://qz.com/1933900/can-secondhand-clothing-solve-fashions-sustainability-crisis/
