Customers clamor for secondhand luxury goods

Items in hot demand as market offers significant growth potential

China's booming secondhand luxury market has fueled online and offline sales in recent years as more consumers eye cost-effective top-range products.

Luxury authentication agencies and related training institutions for appraisers are also benefiting from this market momentum.

According to iResearch, a leading provider of online audience measurement and consumer insights in China, the value of idle luxury goods in the nation, including valuable secondhand accessories, jewelry, watches, high-end clothing and handbags, reached 2.87 trillion yuan ($392 billion) in 2020, and is expected to stand at 3.9 trillion yuan by 2025.

The scale of the domestic idle luxury goods retail market grew from 16.2 billion yuan in 2016 to 51 billion yuan in 2020, and it is estimated that the market will reach 208 billion yuan in 2025, indicating huge growth potential.

Feng Peikang, general manager of the China Luxury Exhibition Center in Shanghai, said, "The large stock of idle luxury goods has laid a solid foundation for the long-term development of the secondhand luxury industry, which has gradually transformed its method of trading between sellers and buyers from traditional offline exhibitions to livestreaming platforms."

The center, which opened in August by Douyin and a local secondhand luxury brand Feiyu, and is the first of its kind in Shanghai, offers 85 stands for rent, nine themed livestreaming studios, an authentication center operated in collaboration with China Certification & Inspection (Group) Co, and a consignment service center. To date, it has attracted more than 40 companies to become tenants on monthly contracts.

Those renting stands display their goods on shelves, before selling them to other shops through regular peer trading fairs and to individual customers via livestreaming activities at the venue.

Feng said, "We are trying to create an innovative gathering of shops, different from traditional malls. Our mission is to promote the circular economy in the secondhand luxury market by being the trading center and digital center for secondhand luxury goods and the incubation center for livestreamers."

Offline sales were long the main transaction channel for trading in secondhand luxury goods. In recent years, with the increased popularity of e-shopping, professional online luxury trading platforms have emerged to promote and improve service experience. The number of such platforms has risen rapidly, and they offer high growth potential and commercial value.

Feng said, "Once the secondhand luxury industry becomes more standardized and digitalized, more businesses will join us. We aim to help them avoid being sidetracked, understand the livestreaming industry, and expand the market healthily step by step."

In the past five years, the global secondhand luxury market has grown by 64.7 percent, with leading luxury trading platforms recently recovering well from the COVID-19 pandemic. According to the consultancy Bain & Co, the global luxury market reached 28 billion euros ($27.17 billion) in 2020, with year-on-year growth of 7.7 percent despite the impact of the pandemic.

For example, the annual gross merchandise volume of The RealReal, an overseas luxury trading platform, fell by 2.1 percent in 2020, but rebounded to $1.48 billion last year, registering a net rise of $474 million compared with 2019, before the pandemic emerged.

According to the China Luxury Report 2020-2021 released by the Yaok Research Institute, China became the world's largest luxury market for the first time last year. Its market growth far outstripped that of other countries and regions worldwide for two consecutive years, with its share rising to 30 percent.

Zhou Ting, head of the institute, which observes and studies the luxury industry, said, "The luxury market in China is expanding along with strong growth in the global market, as the nation's high net worth individuals have gradually become the main driving force behind the boom in luxury spending."

China's secondhand luxury goods market has great potential for further development, because more companies are emerging to provide one-stop distribution services, Zhou said.

More customers

Plum, an online trading platform for circular fashion goods, which was launched in 2017, is an example of such companies offering comprehensive services for more customers.

Xu Wei, founder of Plum, which aims to make people's lives more comfortable and environmentally friendly, said, "Initially, we were keen to be a lifestyle brand and create a fashion lifestyle platform by allowing users to resell their idle goods or buy other brand items at a lower price anytime in exchange."

Typical users of Plum pursue a new lifestyle of circulation fashion, advocate environmental protection, and seek high-quality goods, Xu said. Circular fashion refers to clothing and personal belongings being produced in a more considered way, in which the production of an item and the end of its life are equally important.

Plum links buyers and sellers by providing users with an integrated trading chain of standardized services.

It offers buyers more cost-effective fashion items, as well as authenticated identification, pre-sales and aftersales services. It also helps sellers with one-stop consignment and recycling services, including warehousing and logistics, enabling all those concerned to make money without leaving home.

Xu said, "The huge domestic luxury goods market with its influx of young consumers is the foundation for active secondhand luxury trading, especially development of the secondhand luxury online business."

Plum is not just an application, but a new lifestyle aimed at forming a "circulation of wardrobes" among millions of users and making the planet more sustainable with a new low-carbon consumption mode, Xu added.

According to the Market Capacity Analysis and Investment Decision Consulting Report of China's Secondhand Luxury Industry (2020-2027) released by Zhiyan Consulting, there were some 4,200 large-scale secondhand luxury stores in China by the end of 2019, with an annual growth rate of more than 10 percent. Goods most frequently traded in these stores include handbags, watches, eyeglasses, jewelry, scarves and perfume.

The market size of China's secondhand luxury goods industry reached 13.5 billion yuan in 2019, up from 11 billion yuan in 2018.

The nation's secondhand luxury goods trade is dominated by handbags and leather goods, for which transactions reached 8.13 billion yuan in 2019, accounting for 60.22 percent of the market. Shoes and hats were also in demand, with their transaction value standing at 2.98 billion yuan, or 22.07 percent of the market.

Wei Mingsheng, who sells secondhand luxury goods, runs a studio in Shanghai, and owns a shop in Shenzhen, Guangdong province, said: "We've made adjustments from time to time in the past three years. These changes include launching livestreaming channels, switching our handbags from vintage-style to fashionable, and expanding our network nationwide to keep up with rapidly changing secondhand luxury trends."

A stand at the China Luxury Exhibition Center is regularly rented by Wei as another outlet for his business.

"The center has helped us further grow our sales volume and profits by organizing regular peer trading events, introducing experienced livestreamers, and offering authorized authenticated services," said Wei, who tried livestreaming in 2019, but failed due to a lack of experience.

Most buyers of secondhand goods in China are mainly looking for luxury items at reasonable prices, or popular products available for resale.

Feng, from the China Luxury Exhibition Center, said: "Our goal is to let more people know about and gradually appreciate secondhand luxury goods. Some of them then become professional buyers or sellers, and overall trust in the industry will increase if more people become involved.

According to the In-depth Research and Future Development Trend Forecast Report of the Luxury Industry 2022-2027 released by China IRN, a domestic industrial think tank, prices for some luxury goods have risen by as much as 95 percent since last year. On average, such prices have gone up by 5 to 20 percent.

However, there is no regulated pricing standard for secondhand luxury goods, which are increasingly in demand, and this difficult task is left to companies specializing in authentication and pricing.

Earning trust

Lei Yuchun, the founder of ANJLE, a leading after-sales professional maintenance and authentication company for secondhand luxury goods, said: "The key to secondhand trading is to be sufficiently professional to earn trust, which is mostly related to authenticity. That's why we focus on offering professional training and guidance to popularize the authentication of secondhand luxury goods."

Launched in Hangzhou, Zhejiang province, in 2008, ANJLE had completed more than 3.6 million orders by September for businesses and individual clients.

Its services include recycling, buying and reselling, initial authentication, maintenance, repairing, training and final authentication conducted by China Certification & Inspection (Group) Co.

To solve problems with authentication and pricing, at the end of last month ANJLE launched Leixiao'an, an online one-stop service system for secondhand luxury goods, equipped with information collected by the company aimed at its business clients.

"The prospects for the industry are bright, so we are keen to standardize the market by introducing a comprehensive online platform for businesses to have products authenticated and assessed, receive related training, and obtain updated analysis on market trends," Lei said.

All goods received by ANJLE must be registered in the company's system by passing internal authentication, price evaluation and data management before being eligible for resale.

The first organization in China to launch training courses related to luxury goods, ANJLE introduced its first such course in 2014 on authentication — making a contribution to regulating pricing standards in the industry. About 10,000 people have completed the training courses before entering the secondhand luxury industry. ANJLE also has 27 offline chain stores nationwide, many of them franchised by former trainees.

To further professionalize the authentication of materials with high technology, ANJLE is working with research institutes equipped with testing laboratories. It is also seeking permission from the central government to issue authorized work certificates on authentication training.

Lei said, "We are trying to offer assistance and guidance for newcomers to improve risk awareness, professional knowledge and anti-risk ability amid growing fierce competition."

Unlike ANJLE, which has focused on its specialized business for many years, Youshe, an online secondhand luxury goods auction platform, has made adjustments in the past five years to meet changing demands. It switched its focus from offline to online authentication in 2017, and then from authentication to online trading in 2020.

Wang Tianchi, founder of Youshe, the first online authentication platform for luxury goods in China, said: "We've noticed that with the gradual improvement and scale of e-commerce platforms, authentication is bound to become a basic tool for secondhand luxury platforms. Therefore, we gradually shifted our focus to online trading with professional authentication and brand influence."

Youshe mainly targets individual customers willing for their products to be authenticated on the platform, before they are sold directly to buyers in the online auction system at the highest bidding price. As a primary source of goods for individuals, Youshe directly reduces the intermediate cost for users by about 30 percent.

Wang said: "For consumers, market prices are not transparent, which leads to reduced trust in online merchants. If the market becomes more mature and consumers become more rational, cost performance and service guarantees will be key concerns in the future."

Youshe is aiming to be technology-oriented by accumulating its trading information and a summary of trading prices in the industry. It also wants to provide users with objective and genuine real-time trading market analysis and promote the establishment of a transparent market trading price system, Wang added.

"Development of the domestic secondhand luxury industry has a long way to go to reach a high level compared with the overseas market, so we have much to do and plenty of opportunities to explore before we have a mature market in five or 10 years," Wang said.