Why Luxury Brands Should Celebrate the Preowned Boom (Vestiaire CollectivexBCG)

This article was co-published by Ventech portfolio company Vestiaire Collective and global consulting firm Boston Consulting Group, describing the results of an October 2018 BCG survey of 1,005 Vestiaire Collective customers and the 2019 BCG-Altagamma True-Luxury Global Consumer Insight study, which surveyed more than 12,000 consumers in ten countries.

Luxury goods manufacturers have much to gain by encouraging and participating in the fast-growing luxury resale market. Although many manufacturers once viewed this market as an unattractive niche, a recent BCG survey reveals that it has found new life through the online channel and now offers a powerful opportunity for luxury brands to boost their image and grow their customer base.

The secondary market has always been a steppingstone into the luxury world for customers who don’t have access to the primary market. Online sales have accelerated this effect, as more and more customers who may one day become primary-market luxury clients discover that it offers an avenue to goods they didn’t think they could afford. These resale customers typically are not primary-market buyers—and therefore tend not to be secondhand sellers. Instead, sellers are usually firsthand buyers who use resale to get money back so they can reinvest in new, full-priced luxury products.

In addition, a thriving resale market makes the luxury industry more sustainable—and more popular with environmentally aware millennials—by supporting a circular luxury economy. Brands that go further and actively collaborate with the preowned market can secure a number of previously unforeseen benefits, including the ability to connect with their customers in an innovative way.

A BOOM IN RESALE

The secondary market is expected to grow from an estimated $25 billion in revenues in 2018 to around $36 billion in 2021.

The secondary market for luxury goods has always existed in the shadow of the primary market, but now it’s moving into the spotlight, becoming one of the fastest-growing areas of luxury. This market niche is expected to grow from an estimated $25 billion in revenues in 2018 to around $36 billion in 2021, increasing by an average of 12% per annum and boosting its share of total personal luxury goods to around 9%, according to the 2019 BCG-Altagamma True-Luxury Global Consumer Insight study, which surveyed more than 12,000 consumers in ten countries. The primary luxury market, in contrast, is expected to grow more slowly over the same period, at around 3% per annum.

Much of the growth in resale will come from online platforms, which currently generate around 25% of global secondhand luxury-market sales, according to BCG research. Small, independent stores that worked on consignment once dominated the resale market—and we expect this mature offline retail channel to remain highly fragmented, with slow growth for independent stores, which tend to lack a luxury look and feel.

In sharp contrast to that sales model, online retailers are concentrated and organized, offering large catalogs of goods, price transparency, home delivery, and even repairs to ensure that products are in good condition. Further fueling growth, a number of new specialist online players are emerging, and generalist online platforms are expanding to include luxury goods.

Among individual secondhand luxury segments, leather goods such as handbags are extremely popular, as they are an aspirational product for first-time buyers, easy to buy online, and yet relatively scarce in the traditional offline retail channel. Most firsthand luxury goods companies have a vested interest in this category because leather goods are typically their primary focus—and in many cases account for the bulk of their sales. The watches and jewelry segment is also well developed. Meanwhile, clothing and shoes make up a relatively small proportion of today’s luxury resale items, as their potential is capped by the typical barriers for online purchase of such goods: the inability to try them on, the wide range of sizes, and, therefore, the risk that they won’t fit.

Looking across geographies, we find that resale is a global phenomenon. Its presence is particularly strong in the US, where 50% of luxury customers—defined as those who have purchased a luxury item in the previous 12 months—participate in the resale market, according to the BCG-Altagamma survey, and in Europe, where the market is developing quickly. The resale market in China is emerging steadily, too, although it is not yet well structured and no large players have appeared.

In terms of generational differences, younger luxury consumers are the largest participants in the secondhand market, with 54% of Generation Z and 48% of millennial luxury customers buying preowned goods. In contrast, just 38% of Generation X luxury customers and 35% of Baby Boomer luxury customers buy secondhand. Younger luxury consumers are the largest participants in the secondhand market, with 54% of Generation Z and 48% of millennial luxury customers buying preowned goods.

PRIMARY GROWTH ENGINES

An October 2018 BCG survey of 1,005 Vestiaire Collective customers and the 2019 BCG-Altagamma survey highlight four main factors behind the growth in luxury resale: price accessibility, the increasing professionalization and concentration of the secondhand market, changing consumer preferences, and access to a broad selection of products.

Price Accessibility

The first major growth engine behind increasing secondhand sales is the ability of customers to gain access to luxury items at affordable prices. Buying and selling in the preowned market allows these consumers to increase their disposable income by limiting their total cost of ownership (TCO). In fact, around 96% of buyers in the BCG-Vestiaire Collective survey say that they purchase secondhand items in part because they are looking for good deals. (See Exhibit 1.)

Growing Professionalization and Concentration

Traditional brick-and-mortar luxury resale includes very few players of significant size. Instead, the market consists largely of a long tail of small businesses that focus on a specific product category or geographic footprint.

Online resale platforms for luxury goods have won over consumers by offering far greater brand selection and product assortment. In addition, each platform has developed its own services and approach, with specific offerings that include product authenticity and curation (Vestiaire Collective, The RealReal); consignment, at-home pickup, photos, and storage (The RealReal, Vestiaire Collective); and category expertise (StockX for sneakers, Chrono24 for watches). Many have upgraded the buyer experience to premium standards, providing websites with a luxurious look and feel. Others are creating offline expansions through brick-and-mortar stores. The RealReal and Rebag, for example, have opened a few physical stores, while Vestiaire Collective has opened pop-up stores at large retailers such as Selfridges and Le Bon Marché.

The willingness of these online resellers to grow and professionalize their offers has not only attracted buyers and sellers into the space, but also drawn sizable venture capital and equity investments, such as the more than $280 million raised in 2018 by The RealReal—a company that went on to raise $300 million in an IPO in June 2019. As such investments continue, they create barriers to entry, boosting market concentration and establishing a few clear winners as a result.

Changing Consumer Preferences

Another source of growth in the preowned market is shifting consumer preferences. Today, consumers—especially millennials and Generation Z, the market’s largest participants—tend to care more about sustainability and responsible consumption than did prior generations. Our BCG-Altagamma study found that 59% of luxury customers in both the primary and secondary markets say that the issue of sustainability influences their purchasing behavior, while 17% of customers in the secondhand market purchase preowned items because they consider doing so to be “truly sustainable behavior.” Our survey of Vestiaire Collective customers yielded similar data, with more than 70% of respondents saying that they try to shop ethically and 13% saying that sustainability is extremely important to them. Of those that shop ethically, 57% say that environmental impact is their primary concern.

Access to a Broad Selection of Products

The preowned market is also growing quickly because it offers customers a large selection of products. Beyond vintage items and items made available from past luxury collections at affordable prices, two types of items are especially popular on the resale market: rare or iconic items, including limited editions, that suffer from scarcity in the firsthand sales network; and collaborations. Resale prices for the former typically build in a premium that is highly correlated with the items’ desirability and scarcity, sometimes making them more expensive than the same items sold firsthand.

Increasingly, luxury brands are collaborating with artists or other brands. In fact, awareness of such collaborations reached around 90% of survey participants in 2018, and 50% of them had actually purchased collaborations or special editions. Such purchases are most common among Chinese customers (62% of those surveyed) and younger generations of shoppers (67% of Generation Z customers and 60% of millennial customers).

Of the buyers we surveyed, 62% say that they find the preowned market attractive today because they are looking for sold-out items or limited editions (“strongly agree” or “slightly agree”), and 83% point to the large choice of items and brands available there.

REASONS TO SUPPORT PREOWNED

Luxury players might understandably regard a growing preowned market as a threat. However, the secondhand market has much to offer the luxury industry, including serving as a recruiting mechanism into the luxury world, encouraging primary-market buyers to purchase additional premium items in light of their lower TCO, and boosting sustainability. The secondhand market can recruit new buyers into the luxury world, encourage primary-market buyers to purchase additional premium items in light of their lower TCO, and boost sustainability.

Preowned Purchases Are a Recruiting Mechanism

Buyers of preowned luxury items are usually consumers who either don’t have access to the primary luxury market or don’t want to purchase new products at full price. In fact, 71% of the preowned item buyers we surveyed lean toward items and brands that they can’t afford firsthand. The secondhand market is therefore a powerful way for luxury brands to connect with—and anchor their brand in the minds of—buyers who may become primary customers in the future. Social media generated around the preowned market can help, too, by publicizing high-quality products and brands through the comments and feedback that market participants provide and by creating transparency around the products in most demand.

As buyers of secondhand luxury items mature, their purchasing power tends to increase, giving them the financial resources needed to shift to the primary market. When they do, they will already be educated in a given brand or brands and may remain loyal after the transition. Among survey participants, 62% say that their first purchase of a brand they currently like was secondhand on Vestiaire Collective; and within that 62%, almost all of them say that they would consider buying that brand again. Although 43% say that they would probably stick to secondhand, the remaining 57% would either definitely buy or consider buying the item firsthand—making them very good prospects for the firsthand market.

Secondhand Sellers Are Firsthand Buyers

Secondhand sellers typically use resale to regain some of the money they spent on firsthand purchases—often so they can reinvest in new, full-priced luxury products. Of the sellers we surveyed, 32% say that their primary reason for selling was to be able to purchase new firsthand goods. Most sellers of preowned items buy very little in the secondhand market. For example, 70% of all preowned sales on the Vestiaire Collective platform are generated by sellers who rarely purchase secondhand (less than 20% of their transactions are purchases). And these purchases in aggregate represent only 3% of all transactions made on the platform.

As reselling a luxury purchase becomes easier, primary luxury customers are even adjusting the way they buy. Some customers are trading up and buying higher-ticket firsthand items, in anticipation of the lower TCO. Among survey respondents, in fact, 44% say that they purchase more-expensive luxury items than they would have bought without a resale market. Other customers purchase more frequently, investing approximately the same amount on individual items overall, but buying repeatedly as they free up their budgets by reselling used items. Preowned sales clearly boost these sellers’ purchasing power for new items and, therefore, create an opportunity for manufacturers to increase primary-market sales, benefiting luxury players.

Preowned Boosts Sustainability in the Luxury World

The preowned market extends the lifetime of luxury products. Most products sold on preowned luxury platforms are of high quality, with 62% of them unworn or scarcely worn (worn three to ten times), according to our survey.

It also helps create a circular luxury economy, a hot topic in the fashion industry today. As Stella McCartney has said, “If every single second there’s a truckload of fast fashion being incinerated or landfilled, then I’m a big, big, believer in reusing that and [participating in] the circular economy.” And “extending the life of clothes by just nine extra months of active use would reduce carbon, waste, and waste footprints by around 20–30% each,” according to environmental action group WRAP. Luxury companies that support sustainability will ultimately benefit from participating in a more responsible ecosystem.

Luxury companies that support sustainability can take pride in participating in a more responsible ecosystem, and they will ultimately benefit from such positioning. This is especially true in view of the importance of sustainability to young consumers today, as illustrated by initiatives such as Stella McCartney’s sustainability partnership with The RealReal, along with the Bash and SMCP partnerships with Vestiaire Collective.

In contrast, behaviors such as stock destruction can backfire in the eyes of the younger generation, particularly when these customers are ready to shift to primary luxury. One European luxury goods manufacturer experienced this firsthand, when its customers discovered that it had burned all of the prior year’s unsold products. The company quickly announced a policy change, saying that henceforth it would take a more sustainable path.

A more responsible industry sales ecosystem can also serve as a strong complement to and differentiator from the various ethical and corporate social responsibility (CSR) initiatives that luxury players typically pursue. And it meshes well with the new Fashion Pact introduced by French president Emmanuel Macron at this year’s G7 summit—a set of objectives intended to encourage the fashion industry to reduce its environmental impact. Thirty-two companies, comprising roughly 150 brands, have signed the pact so far, thereby committing to collective achievement of practical objectives in three areas: stopping global warming, restoring biodiversity, and preserving the oceans.

COLLABORATION BRINGS FURTHER BENEFITS TO THE LUXURY ECOSYSTEM

Luxury players that actively support and collaborate with the preowned market can garner even greater benefits. Brands can actively collaborate in several ways. First, they can provide access to a resale service that helps buyers consume more sustainably and supports the circular economy. (See Exhibit 2.) Second, they can create unique or exclusive events and collaborations that mix current and vintage treasures to celebrate a brand’s heritage. Third, they can reinforce the fight against counterfeiting. And fourth, they can work with resale players to engage with a community of advocates and prospective customers.

Such collaborations might enable luxury players to benefit from access to data on purchasing patterns, giving them a better understanding of underlying trends, including potentially collecting insights for the primary market. Alternatively, they might interact with communities of engaged consumers to obtain feedback on products and brand positioning. Any active involvement would also contribute toward eventually converting clients to the primary market.

All of these factors point toward the same conclusion: brands that support the secondhand market—without fearing consumer feedback or competition—are most likely to emerge as winners.

(Source: Boston Consulting Group, Vestiaire Collective Joint Study)

Tilkal lève 3,5 M€ pour mieux répondre à l’exigence de transparence des consommateurs et consolider la traçabilité des filières industrielles grâce à la blockchain

Paris, le 17 juin 2019 – Tilkal, infrastructure logicielle pour la traçabilité et la transparence des supply chains, annonce une levée de fonds de 3,5M€ auprès de Breega (investisseur lead), de Ventech et de business angels. Ce financement permettra à Tilkal de devenir l’un des premiers opérateurs de la traçabilité en Europe. 

UNE PERTE DE CONFIANCE CROISSANTE DU CONSOMMATEUR

À l’origine, il y a un constat simple. La perte de confiance du consommateur est devenue un véritable enjeu pour les industriels : 75% des consommateurs déclarent ne plus avoir confiance dans les produits qu’ils achètent, et 28% seulement font confiance aux marques, un phénomène amplifié par des crises sanitaires de moins en moins tolérées, et plus généralement par le développement du commerce illicite (contrefaçon, marchés gris, ingrédients non conformes, travail d’enfants, etc.).

En conséquence, la traçabilité des produits est devenue le défi premier des supply chains et nécessite d’être repensée en profondeur.

La solution développée par Tilkal apporte une réponse globale permettant de passer d’une analyse statique et ponctuelle des cahiers des charges à une analyse dynamique et continue des pratiques et des échanges entre industriels.

UNE INFRASTRUCTURE LOGICIELLE AU SERVICE DE LA TRANSPARENCE GRÂCE À  BLOCKCHAIN ET BIG DATA

En combinant blockchain et analyse (big data), Tilkal permet enfin la reconstitution et le contrôle de l’ensemble du cycle de vie des produits.

L’infrastructure réunit les parties prenantes au sein d’un réseau de traçabilité temps réel des produits, de la production à la distribution. Tilkal fournit à chacun une “tour de contrôle” de la supply chain pour en analyser le fonctionnement de bout en bout ainsi que des outils de transparence vis-à-vis des clients finaux (applications mobiles). Avec Tilkal, il devient possible de fiabiliser des processus critiques tels que les rappels produits, et de permettre au consommateur de choisir ses produits sur la base d’une information engageante, en confiance et en conscience.

L’UNE DES TOUTES PREMIÈRES SOLUTIONS DE TRAÇABILITÉ “BLOCKCHAIN” DÉPLOYÉE EN FRANCE

Tilkal a mis en oeuvre avec Groupe Casino et plusieurs coopératives la traçabilité de plus de 8M de produits par an actuellement disponibles en magasin (miel, volaille et œufs). Tilkal est également présent dans une dizaine d’autres filières agroalimentaires parmi lesquelles le porc, le transport de frais, le lait infantile, les compléments alimentaires. Des projets sont en cours dans la restauration collective ainsi que dans d’autres industries.

“À l’origine, Tilkal est né de notre engagement à Joseph, Sébastien et moi-même, de contribuer à une économie plus éthique et plus responsable. Cet engagement trouve écho auprès de nos clients, qui souhaitent légitimement se différencier en démontrant leur maîtrise industrielle bout en bout. Aujourd’hui, pour continuer à innover et à nous développer, nous comptons sur des partenaires financiers tels Breega et Ventech, engagés, ambitieux et ayant la capacité de nous accompagner dans notre développement au service du secteur agro-alimentaire, puis vers d’autres industries” – Matthieu Hug, CEO et co-fondateur de Tilkal.

“La traçabilité et la transparence sont des enjeux que nous connaissons bien chez Breega. La solution développée par Tilkal prend en compte les questions essentielles de la localisation des nœuds et de la gouvernance du réseau. On garde ainsi l’équilibre entre les différents acteurs engagés. Il est en effet essentiel de s’assurer que la blockchain ne permet pas à un seul acteur de s’approprier les données de toute une filière.” – Maximilien Bacot, Partner chez Breega.

“Tilkal propose une solution de traitement et de partage des données industrielles, aux filières agroalimentaires. Acteur européen, elle leur permet d’assurer le contrôle et la souveraineté de ces données, ce qui est un différenciant important. L’enjeu est comparable à celui des données personnelles.” – Claire Houry, General Partner chez Ventech.

mediarithmics fuels its international development raising 3m€

In a snapshot:

  • mediarithmics is the first open and integrated European platform for Data Marketing (DMP, Cross DMP, DSP, DCO, marketing automation).
  • mediarithmics convinced more than 30 Digital Leaders in its first two years of commercial development.
  •  mediarithmics was retained in July 2017 as a technology provider for the implementation of the Alliance Data Gravity project.

Paris, August 29, 2017 – After a first fundraising of 1.2 million euros realized with Jaïna Capital in 2013, mediarithmics announces a round of 3 million euros to develop internationally. This auction is entirely carried out by Ventech, a major player in venture capital investing in high-growth companies in the digital sector.

Created in 2013 by Stéphane Dugelay and the result of 3 years of R&D, mediarithmics offers an open, integrated and modular cloud technology allowing to simply orchestrate personalized marketing campaigns. The mediarithmics technology includes the Data Management Platform (DMP) for the collection and analysis of customer and prospect data, the Demand-Side Platform (DSP) module and the Dynamic Creative Optimization (DCO) module for A real-time customization of banner ads).
Confirming that an integrated offer is more effective than a technology assembly, mediarithmics helps publishers and their advertising companies to better value their data assets. Mediarithmics also allows advertisers to collect customer and prospect data to script high-performance campaigns that can be activated in programmatic advertising, via emailing or directly on their site. Finally, mediarithmics technology makes it possible to build Data alliances between complementary players, each actor retaining full ownership of its Data assets and thus able to measure its contribution within an alliance. Mediarithmics has been selected as the technological partner of the Gravity project (alliance of fifteen media leaders, e-commerce and / or TV) to propose a targeting of French Internet users in a Brand-Safety environment.
During its first two years of commercial development, mediarithmics has convinced more than thirty sector leaders, often among the most mature on their Data Marketing needs (BlaBlaCar, 3W Régie, Coca-Cola European Partners, Alliance Gravity, ShowRoomPrivé, Prisma Media, Altice Media …).

For Stéphane Dugelay, CEO of mediarithmics: “Our latest commercial successes, and even more the ROI that we have created for our first customers, have confirmed our initial: an integrated technology is needed to simply and efficiently carry out a personalized marketing based on. We are pleased to be able to offer our open platform developed in France in a market today strongly dominated by platforms and publishers of American technologies. The arrival of Ventech in our capital allows us to pursue our growth serenely by strengthening our technological leadership and by strengthening our sales teams. Thanks to its many successes, especially in Adtech, Ventech is a valuable ally to bring us advice and international openings. ”

As part of this fundraising campaign, Claire Houry, Managing Partner at Ventech, joins the Board of Mediarithmics: “mediarithmics brings a real technological breakthrough solution and positioning in a fast-paced Data Marketing market. Although it is difficult to arrive in a market dominated by the American actors, mediarithmics very quickly constituted an impressive client portfolio. From the first discussions with Stéphane Dugelay (CEO and Founder) and Grégoire Fremiot (VP Sales & Marketing), we quickly saw, in mediarithmics, a real potential to become a leading actor. We are particularly proud to support the team in their international expansion. ”

Mediarithmics will now accelerate its commercial development, especially with publishers and advertising agencies in major European countries (Germany, England, Spain, Italy …), and plans to strengthen its teams with a dozen recruitments (developers, consultants…).

About mediarithmics

Mediarithmics is the first truly open and integrated European Data Marketing platform (DMP, Cross DMP, DSP, automation marketing, COD). Mediarithmics allows advertisers to simply launch custom multichannel campaigns that seamlessly integrate programming. Mediarithmics also helps media publishers and their media to protect, structure and value their Data assets in new business models. The mediarithmics technology allows the formation of Data alliances between actors, respecting the full Data ownership of each party and their fair remuneration. After 3 years of R&D, mediarithmics has convinced over the last two years about thirty advertisers and publishers leaders in their sector.

More information: www.mediarithmics.com

About Ventech

Ventech, a major player in venture capital in Europe, invests in high-growth companies in the digital sector (big data, media, marketplaces, mobile, software and telecom infrastructures). Ventech has offices in Paris, Munich and Helsinki and has also been present in China since 2006 with a local team based in Shanghai which invests a dedicated fund and contributes to the development of European companies in Asia. With more than € 650M managed since 1998, Ventech has invested in more than 120 companies in Europe, China, Russia and the United States. Active portfolio includes prestigious companies such as Augure, Believe, Ogury, StickyADS.tv (acquired by Comcast), Vestiaire Collective, Webedia (acquired by Fimalac), or Withings (acquired by Nokia).

For more information: www.ventechvc.com