The retail industry, traditionally built on selling new things, is responding to consumers’ growing appetite for resale. The latest example: Neiman Marcus said it has become the first major luxury retailer to directly invest in the pre-owned business, taking a minority stake in 20-year-old luxury resale player Fashionphile.
As part of the investment, Carlsbad, California-based Fashionphile, which sells “ultra-luxury” pre-owned handbags and accessories online, will set up space inside some Neiman Marcus stores for customers to bring in pre-owned products for sale. Fashionphile said it buys and pays for any product it takes outright, different from a luxury consignment business model like that of TheRealReal, which itself is capitalizing on the growing market demand and is reportedly eyeing going public.
Fashionphile, with an online inventory of 15,000 items and $200 million in gross merchandise value, is profitable, with sales set to grow 50% this year, following the same growth rate last year, Neiman Marcus CEO Geoffroy van Raemdonck said in an interview. He added that the business has never borrowed money to fund its expansion. “The model works,” he said.
Neiman Marcus, based in Dallas, decided to invest in resale last year after a company survey of its customers found that more than half of them engage in “re-commerce” but weren’t happy with their resale experience, Raemdonck said.
Meanwhile, another survey found that 75% of industrywide luxury customers who resell items spend on new luxury purchases within three months, he said. Another crucial statistic: Almost half of Neiman Marcus’ customers are millennials and Gen Xers, who increasingly care about sustainability, he said.
“Re-commerce is a key part of the luxury platform of the future,” Raemdonck told me. “We have a customer who’s participating in re-commerce. … That’s the new dynamic. They want to engage with retailers that understand and make it a valuable experience. … That’s a meaningful reason for them to come to the stores.”
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He said Neiman Marcus has had “conversations” with its luxury brand partners. “There’s a real understanding that (re-commerce) is happening,” he said. “The customer who buys into re-commerce usually enters luxury from that entry-price point. This is (also) a recruiting avenue for us.”
Raemdonck, an industry veteran who has been with companies including Ralph Lauren and Louis Vuitton, said he isn’t worried that re-commerce or the growing sustainability movement will hurt luxury industry demand.
“The luxury customer is wanting more and spending more,” he said, pointing to positive industry projections. But “it has to be emotional and part of the experience. It’s different from thinking, ‘I’m selling you a product.’ Re-commerce is within (young customers’) means for luxury. That proves luxury is relevant.”
Neiman Marcus's move, along with efforts by many other traditional brick-and-mortar retailers, reflects a broader resale trend that has swept the retail industry. Outdoor retailer REI, also with millennials in mind, recently said it was doubling down on the resale and rental business.
Teen retailer American Eagle, in its own bid to attract the even-younger Gen Z, has unveiled a sneaker resale shop inside its store in New York’s SoHo district via a partnership with Las Vegas sneaker consignment shop Urban Necessities. Online luxury fashion marketplace Farfetch in December said it bought three-year-old Stadium Goods, an online marketplace that sells new and secondhand sneakers and streetwear.
More retailers will likely jump on the resale bandwagon: Nearly nine in 10 apparel retailers said they want to get into the resale business by 2020, according to online fashion resale business thredUP’s 2019 resale report, including research and data from retail analytics firm GlobalData and others. Millennials and Gen Z are adopting secondhand fashion 2.5 times faster than other age groups while 40% of all consumers—nearly double the percentage from five years ago—consider the resale value when they buy an item, according to the report.
In another sharp contrast, the report showed the secondhand fashion market is projected to almost triple in 10 years, to $64 billion by 2028—1.5 times the size projected for the once-sizzling fast-fashion segment.
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