Luxury brand Gucci announced a partnership with online consignment shop The RealReal to address the demand for secondhand luxury products. The partnership involves The RealReal adding a designated portal on its website for products supplied by Gucci itself, in addition to Gucci products consigned by The RealReal’s customers. The move signals the fashion industry’s embrace of the growing demand for secondhand luxury. It also demonstrates the industry’s adaptation to more environmentally sustainable practices.

Younger Shoppers Fueling Trend

Younger shoppers have fueled the demand for luxury resale goods. The unusual partnership shows how luxury brands have had to reinvent themselves to keep pace with new market opportunities. Other luxury brands such as Stella McCartney and Burberry have previously partnered with The RealReal. In 2019 Burberry created a program to incentivize customers to consign Burberry items on The RealReal. It offered them a personal shopping experience and high tea in certain physical store locations.

In The RealReal’s latest partnership with Italian fashion house Gucci, both companies have vowed to donate some profits of secondhand sales to the environmental nonprofit One Tree Planted that supports reforestation. They also have emphasized how luxury consignment helps reduce environmental damage by reusing rather than discarding old fashion.

Gucci and its Parent Own Luxury Brands

Gucci’s parent company, Kering, owns a number of luxury fashion and jewelry brands such as Alexander McQueen, Balenciaga, and Saint Laurent. It follows a similar model to its primary rival in the global luxury goods market, LVMH. The French luxury conglomerate LVMH owns high-end fashion labels such as Dior and Fendi, It also owns as popular alcohol brands like Dom Pérignon.

The online luxury consignment company has faced its share of conflicts with luxury retailers. Chanel has been ensnared in a trademark lawsuit with The RealReal for allegedly selling counterfeit goods on its site. The allegations include using the Chanel label to dupe customers into believing it is affiliated with Chanel. The lawsuit is still ongoing, with some of Chanel’s claims dismissed and others moving forward.

The RealReal, An Online Secondhand Shop

The RealReal, based in San Francisco, was founded in 2011 by Julie Wainwright. Prior to her role as founder and CEO of The RealReal, Wainwright gained experience as an early tech entrepreneur. She led the online video startup Reel.com in 1997. Hollywood Video purchased it shortly thereafter in a deal valued at $100 million. In 1998, she become CEO of Pets.com, now a defining case study of the dot.com bubble. In the interim before launching The RealReal in 2011, she was involved in numerous other internet startups.

Wainwright’s inspiration for the idea behind The RealReal came from observing her friend rapidly spending money in the consignment section of a store. The company quickly took off, shipping its first orders only months after its founding. Since then The RealReal has received a lot of venture capital funding. It went public in the summer of 2019 (NASDAQ: REAL). The company currently has a valuation well over $1 billion.

Competition in the Secondhand Market

The RealReal faces competition from online fashion resale businesses such as Poshmark and Tradesy. Poshmark has filed an S-1 registration statement with the Securities and Exchange Commission (SEC) to initiate the IPO process. Tradesy, which is popular among millennial women, has seen an uptick in first-time sellers. The company attributes the uptick to time spent at home cleaning out closets. Lingering economic uncertainty has also increased the appeal of secondhand fashion.

Contrary to popular notions, according to many analysts the secondhand market actually helps the primary market for brand new luxury goods. It can serve as an entry point for shoppers into luxury. It also can demonstrate to more established customers the potential resale value of their full-priced, high-end purchases.

Online Competition from Amazon

Beyond the sophisticated high-end of the fashion market, the $2.4 trillion fashion industry has had to adapt to growing online players. Amazon Fashion, which includes the Prime Wardrobe program that allows people to try on clothes before purchasing, has become a formidable force. According to estimates by Wells Fargo and Morgan Stanley, Amazon is the leading apparel retailer in the U.S. with $30 billion in sales. The company has also aggressively expanded its private-label offerings, developing about 100 of its own fashion brands. Amazon recently launched Luxury Stores, a shopping service focused on high-end fashion and beauty brands. The feature will only be accessible to Amazon prime members that receive an invitation. It will enable brands to create a “store within a store”, leveraging Amazon’s large customer base while giving luxury brands a platform to display fancy items.

The RealReal Has Rebounded From the Pandemic

At the beginning of the pandemic, activity on The RealReal went down. But activity has since returned to sustained growth and the future outlook is bright. Many analysts predict that the secondhand luxury market will be more resilient to the pandemic relative to the overall luxury market. The Boston Consulting Group (BCG) estimates that the secondhand market will grow 15% to 20% per year for the next five years. That rate would be significantly higher than the single digit pre-COVID growth figures.