Market Entry: Circular Economy (Resale) for Luxury Goods

Question

A French luxury fashion house is considering launching its own 'pre-owned' resale platform. 1. Why should they do this instead of letting The RealReal or Vestiaire Collective handle it? 2. What are the risks to brand equity? 3. Estimate the 'cannibalization' effect on new product sales.

Accepted Answer

1. Motivation: Data ownership (knowing who the secondary buyers are), capturing a share of the resale margin (20-30%), and controlling the authentication process to eliminate fakes. 2. Risks: Potential 'dilution' of exclusivity if the platform is too accessible, and the risk of the pre-owned experience (packaging/shipping) not meeting luxury standards. 3. Cannibalization: Likely low for 'Iconic' pieces (Birkins/Speedys) which hold value, but high for 'Seasonal' ready-to-wear. Mitigation involves limiting the resale platform to items older than 2 years. Recommendation: Launch a 'Verified Pre-Owned' pilot. Offer sellers 'Store Credit' at a 20% premium over cash to keep the capital within the brand ecosystem (Circular economy). This increases Customer Lifetime Value (LTV) and appeals to ESG-conscious Gen Z consumers.

Market Entry: Circular Economy (Resale) for Luxury Goods

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