Hundreds of millions of luxury second-hand market: not only fashion darling, but also investment password

In the context of the global economic slowdown, consumers are "frugal", although luxury goods can not sell, but the second-hand luxury platform is "booming".

Bain & Company estimates that global sales of second-hand luxury goods will reach €45 billion ($49.3 billion) in 2023. The second-hand luxury market has nearly doubled in size over the past four years, reaching 12% of sales in the new luxury market.

Luxury brands have to take note - they don't like how easy it is for consumers to see which items hold their value and which don't. Sasha Skoda, senior marketing director at The RealReal, a second-hand luxury e-commerce company, said:

"Brands pay a lot of attention to their used value, and they want to dig into that data."

What's the best value to buy?

For some luxury brands, the price of second-hand goods is even higher than that of new ones. On average, used Hermes handbags are 25 percent more expensive than new ones, and some rare limited editions are even more so.

Hermes's Birkin 25, for example, costs about $10,000 for a new model in U.S. stores, but skyrockets to more than $24,000 on the Prive Porter. Similarly, the average premium for used watches from brands such as Rolex and Patek Philippe is 20% and 39% respectively.

However, the price of used goods decreased for most brands. According to The RealReal, Louis Vuitton handbags are typically "discounted" by about 40% when resold, while Christian Dior bags are almost halved in second-hand value.

At the same time, the capital market mania for luxury stocks is also "burning down". Wall Street has heard that this is the first time LVMH's revenue has missed expectations this year, and the third quarter was the lowest quarter for revenue growth, with revenue up 17% in both the first and second quarters. The growth rate in the third quarter was almost half that of the previous two quarters.

There has also been some weakness at the top brands of the group - used goods prices at Gucci, Balenciaga and Bottega Veneta, the company's three top brands, have fallen 10 per cent, 14 per cent and 23 per cent respectively over the past year. Reflecting its share price, Kering has lost more than a third of its value over the past year.

It is worth mentioning that second-hand market data can also verify whether the brand's aggressive price increase strategy is working. Chanel, for example, raised the price of its Classic mid-size Classic Flap bag by more than 70% during the pandemic, but prices in the second-hand market did not keep up, leading to a wider discount in the second-hand market.

Investors' 'wealth crypto'

The booming market not only enables fashionists to buy their favorite fashion items at a low price, but also enables many investors to find a "wealth password".

For example, some investors are buying detailed data from sites like WatchCharts for clues about which stocks to buy or avoid.

For example, although Rolex, Patek Philippe and Audemars Piguet are privately owned, the strong second-hand market for them usually bodes well for Watches of Switzerland, which derives 60 per cent of its revenues from these three brands.

It is worth mentioning that although the information provided by these second-hand luxury e-commerce companies is extremely valuable to investors, the second-hand luxury e-commerce stocks themselves have not brought significant returns. The lossmaking RealReal, for example, has lost more than 90% of its value since going public in 2019.

In general, there is little that most luxury companies can do about the booming second-hand luxury market.

Consumers will still be able to find bargains in the future, and investors will be able to tap into this data trove for potential stocks.