The Race to Resale: Second-Hand Luxury

By Lars Rensing, CEO of enterprise blockchain and Web3 solutions company Protokol 

Resale: A surge in popularity

Second-hand luxury goods are surging in popularity, with no sign of this trend slowing down. The global luxury resale market is currently predicted to reach US$51.77 billion by 2026, with growth rates outpacing those of the wider luxury market. In fact, a recent study from Bain predicted that by 2030, resale could provide as much as 20% of a modern luxury brand’s revenue. With so much at stake from this market, resale is fast becoming a priority market for luxury brands looking to expand their revenue streams and expand to new areas.

Resale markets present a unique opportunity for luxury brands to unlock new revenue streams, engage with different demographics, and discover new ways to expand their offerings to customers. As such, several brands are already beginning to explore resale. For instance, in 2021 Cartier launched its Vintage initiative to restore and sell classic Cartier watches with authentication from the brand. As resale continues to rise, luxury brands are racing to provide solutions which cater to shifting consumer perceptions and buying habits, without also compromising on brand values and product authenticity.

However, entering the resale market presents some challenges for brands. A majority of luxury brands have not previously prioritised resale, as authenticating goods was such a time consuming and resource-intensive process that it made participating in resale markets seem like a less viable option. But now, with the rise in resale markets indicating that customer concerns and demands are evolving, brands need to keep up with the pace of these changes.

New technologies like blockchain-enabled digital product passports, NFTs, the metaverse and more can help lower the barrier to entry in the resale market for brands and address these issues and create innovative solutions. This piece outlines some of the biggest challenges in the race to resale, and how brands are rising to meet them.??

Authenticating brand reputation

The growth we’re seeing in resale markets can largely be attributed to the changing priorities of increasingly conscious consumers. There are four main ways that customers are seeing resale at the moment. They see it as: a sustainable and convenient replacement for fast fashion brands; an opportunity to acquire luxury goods at more affordable prices; a means to foster their interest in trending vintage styles; and a new form of investment.

New resale solutions from brands, then, will need to address consumer concerns by allowing buyers to verify the history, sustainability and legitimacy of the luxury products they’re buying, in order to protect their reputation as a brand.

Digital ‘product passports’ are letting brands address these concerns and take advantage of resale markets. These kinds of passports track a product’s sustainable credentials and at the same time tackle counterfeiting by proving authenticity of an item. This is done by creating a ‘digital twin’ for each item – a completely digital version of a real-life item that holds real-time data relating to each individual product.

Underpinning these passports with technology like blockchain, means that brands can provide tamper-proof records of a product’s authenticity, source, ownership, manufacture, lifecycle, warranty and more. Blockchain is transparent by nature – all parties authorised to view the information stored on the blockchain, from manufacturers to customers, can see the transactions and history on it. This means brands can ensure full traceability and transparency of an item, as well as an easy way to validate an items’ legitimacy and details of ownership for customers.

Giving customers access to the data related to the origins of the product they’re buying, such as raw material origin, component sourcing and supplier networks is invaluable for brands. Digital product passports let customers verify for themselves that sustainability criteria and ethical standards were met in both sourcing and manufacturing, meaning environmentally conscious consumers can be reassured that they are buying a sustainable product. For brands, this is an important tool to help build trust with their customers.

Digital product passports can record major events in an item’s lifecycle, such as repairs, services or upgrades. Not only this, but original warranty information or manufacturer guarantees could also be stored and easily accessed by customers via a mobile application for product passports. This means that customers verify that the product they’re buying is an authentic item, preventing fraud or counterfeits, as well as seeing the history of an item for themselves. This can prove essential for brands looking to engage with resale.

When it comes to the ability to resell any luxury items, having a verified audit trail of source and condition is essential for not only sellers but purchasers, including ownership data that is both viewable and transferable quickly and easily via blockchain technology.

Uncovering new audiences

Resale is an important tool for luxury brands to engage with news audiences. Research has shown that younger people are the fastest-growing generation of second-hand fashion consumers. Millennials and Gen-Z’s are increasingly influential customers within the second-hand luxury space, and as such multiple brands are looking to engage these customers in areas where they are already showing interest. The NFT space is one of these areas.

Utilising NFTs and the metaverse to shape their customer experience is a key strategy for luxury brands looking to take advantage of the NFT resale market; younger audiences are digital natives, and often expect more online opportunities. NFTs – unique tokens stored on the blockchain – can be sold by luxury brands to offer customers access to exclusive experiences, collectibles and rewards. These NFTs can then be resold or traded by customers if they wish. Luxury brands, then can use NFTs to engage with resale markets more commonly used by a different, younger audience to the one they might be used to.

For example, Bulgari announced that it is launching an exclusive watch that will have a QR code engraved in it. When scanned, the code gives the purchaser access to a unique NFT. Luxury brands who attach NFTs to their products in a similar way are able to engage younger generations and potential new customers through resale markets, particularly those who wish to resell NFTs or see them as a form of investment, so this technology can be extremely valuable for those in the luxury industry looking to expand into new revenue streams from resale markets.

NFTs also present the luxury industry with the potential to engage new customers via resale within the metaverse (a type of digital universe). For instance, customers might sell on ‘wearable’ NFTs from luxury brands, like Balenciaga’s Fortnite skins, which their avatars within popular games can wear.

Luxury brands can even set up their NFT offerings so that they can get a cut of the future sales of NFTs, letting them take full advantage of popular resale markets. For example, when Gucci launched Gucci Garden, a virtual exhibit where consumers could purchase exclusive digital collectibles, once the garden ran out of NFTs buyers began to put them up for further auction and resale. This ultimately meant prices rose; one of the NFTs even resold for $4,100, a total of $700 higher than the original retail price of the real-life version. Brands could harness this audience of NFT resellers by building in a percentage cut on any further NFT sales following the original purchase, opening up a new resale market for brands and engaging digital native audiences at the same time.

It’s clear that resale is in itself the new trend that luxury brands need to monitor. Resale markets are only going to expand. By tapping into available technology to meet evolving customer demands, luxury brands can take advantage of resale’s growth. Technologies like blockchain can help these brands not only engage their customers, but create new revenue streams to continue growth and build a long-term plan for success?

Lars Rensing is CEO and Co-Founder of enterprise blockchain services provider?Protokol. He has over 4 years’ experience in the blockchain industry, helping to lead and co-found Ark; the open-source blockchain platform which underpins Protokol’s blockchain services. He is passionate about helping everyone from start-ups to enterprises unlock the opportunities of blockchain technology for their business, and as a result currently also serves as an adviser for a number of startups leveraging blockchain technology.

Lars leads the overall strategy and direction for Protokol, which is helping businesses across the world solve real challenges though custom blockchain solutions.

Protokol aims to unlock the value of blockchain technology for enterprises by removing complexity and the barriers to entry through its industry-leading digital advisory, blockchain consulting, blockchain development and support services.