Circular Economy: Luxury Brand Market Entry into Resale

Question

A French luxury fashion house (e.g., LVMH brand) is considering launching its own 'Certified Pre-Owned' (CPO) platform to compete with The RealReal and Vestiaire Collective. Should they do it? Sub-questions: 1) What are the strategic benefits? 2) How does this affect 'Brand Dilution'? 3) What should the business model look like (Consignment vs. Buy-back)?

Accepted Answer

Strategic Benefits: 1) Data: Reclaiming the customer relationship in the secondary market. 2) Sustainability: Meeting ESG targets and appealing to Gen Z. 3) Incremental Revenue: Taking a commission on a product that currently generates $0 after the first sale.

Brand Dilution: This is the primary risk. If resale is 'too easy,' it might cannibalize new sales. However, the 'Veblen effect' in luxury suggests that a strong resale value actually supports new sales prices (like a Rolex or Porsche). By 'certifying' products, the brand maintains the 'aura of quality.'

Business Model Recommendation: A 'Hybrid Consignment' model.
- The customer sends the item to the brand for authentication.
- The brand offers the customer a choice: $1,000 in cash OR $1,300 in 'Store Credit' (driving them back to the primary boutiques).
- The brand sells the item on a dedicated section of their website with a 'Certified' seal.

Conclusion: Enter the market. The resale market is growing 3x faster than the primary market. Controlling the 'Certified' status allows the brand to set the floor price and prevent counterfeits from damaging the brand's reputation.

Circular Economy: Luxury Brand Market Entry into Resale

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