Second-hand, or even third and fourth-hand diamond jewelry could represent a treasure trove over coming years suggests a recently published report released by McKinsey & Company, which has estimated that the resale luxury market already was worth between $25 billion and $30 billion in 2020, and is likely to grow at an annual rate of between 10 percent and 15 percent over the coming decade.
Indeed, by 2025 resold products could comprise as much as one third of the luxury market, McKinsey suggests
The report, which was authored by Achim Berg, Bassel Berjaoui, Naoyuki Iwatani and Stefano Zerbi, suggests that this rapid growth is thanks to in part to the success of specialized digital trading platforms, but also to fundamental changes in consumer behavior.
“These patterns have been accelerated by the pandemic, by digitization, and by the so-called ‘generational headwind,’” the McKinsey analysts write, noting that younger buyers, mainly members of Generation Z and Millennials, are significantly more willing than Generation X and older to purchase pre-owned products.
The McKinsey study was carried out over three-month period, with the company conducting consumer research in North America, the European Union and Asia.
JEWELRY AND WATCHES COMPRISE HALF OF SALES
Jewelry, which is comprised of valuable materials that inherently retain their worth and often appreciate in value, are already strongly positioned in this growing market segment.
According to the report’s authors, about half the luxury resale trade currently consists of jewelry and watches, with handbags and shoes comprising just over a third. The entire market is mainly oriented towards women’s products, they state.
Source: McKinsey & Company
The market is located largely in the European Union, with the United States in second position. China lies in third place, with a 10 percent share.
The second-hand trade is still largely offline, the report stated, but online platforms are growing a quicker rate. “Indeed, specialized digital platforms for trading pre-used goods, with a 25-30 percent market share, are driving much of the sector’s growth, with a predicted expansion of 20-30 percent per annum,” they said
Part of what is attracting buyers is access to rare and exclusive products, the authors noted, with research showing that this was key incentive for 41 percent of the individuals they polled. However, a similar percentage wants to contribute to greater sustainability in the industry. Only 35 percent cites affordability as a reason for selecting pre-owned luxury products.
MAJOR LUXURY BRANDS COMING ON BOARD
One may have thought that the larger luxury brands may discourage second and third-hand sales, but according to the report an increasing number of them of them are being attracted to what this market segment has to offer.
According to McKinsey, Gucci is partnering with TheRealReal to recycle clothing, while Richemont have acquired UK-based used watch specialist Watchfinder, which means that it actually is becoming a retailer of rival brands. Kering has invested in Vestiaire Collective, an application specializing in “pre-loved” fashion, which used sustainability as its key marketing pitch.
Concern that resold luxury goods will cut into the brands’ market for newly manufactured goods are largely unfounded, the report suggests. “Our findings confirm the appeal of the resale trade: done prudently, brand entry should not erode margins, and would result in only limited cannibalization,” the authors state.
In any case, the research shows that 75 percent to 80 percent of luxury consumers are still strictly new-product buyers. Furthermore, they add, nine in ten customers currently participating in the resale market are also buyers of new products, and three-quarters sell goods too. What the numbers reveal is a circular trade, with customers frequently selling items to free up space in their closet.
The major players also realize is that demand for their vintage products is also a strong indicator of brand loyalty. “The ability of a brand to sustain and engage in a secondary market reinforces a desirable aura of craftsmanship, durability and sustainability,” the McKinsey report suggests.
Source: McKinsey & Company