The Sustainable Shift: Should Luxury Brands Embrace Renting or Resale?

Introduction

In the rapidly evolving world of luxury fashion, it is undergoing unique transformative changes that are re shaping the way that brands and consumers are exploring sustainable practices. This has lead to a significant increase in demand for luxury products. Exploring this dynamic evolution of the fashion industry, studies conducted highlight the fact that almost 2/3 of the retailers that are involved in selling these second hand luxury items anticipate an increase in their expenditure to match this growing demand within the next two years, allowing us to understand the impact this market has on not just consumers but brands too. As consumers shift their demand towards sustainable options, brands selling products in the luxury markets currently face a pivotal dilemma, whether they should embrace the trend of renting out these luxury items or navigate the thriving market of second hand resale.

Traditional, brands have focused their efforts towards an exclusive narrative and are now being challenged by the potential increase in brand value through flexible and environment friendly practices. In order to make sure that your brand is able to seamlessly adapt to this market trend, one must make a fundamental choice between operating in the rental market or to tap into the transformative landscape of luxury resale. By doing so, your brand has the ability to maintain its quality while meeting sustainability demands.

Are you ready to provide exceptional craftsmanship while promoting sustainable and mindful consumption? As we explore the complexities and challenges within the realm of luxury commerce, it is essential to focus on where you want your brand to stand in this transformative journey, should your brand embrace these global rental opportunities, diversify into the economy of resale or merely adapt to both in order to flourish in this consumer conscious landscape.

Understanding the Luxury Resale Market

Despite inflation posing as a concerning challenge to the global economy, second hand wallet share is increasing regardless of the fact that inflation persists, almost 42% believe that second hand products are more accessible in terms of value for price.This allows us to understand that this luxury resale market has transformed significantly into a niche sector which has become a significant asset for brands within the broader luxury landscape.

Prior to this dynamic shift, second hand luxury was once stigmatized but now is considered as a statement to individual style as well as consumer commitment towards environmental consciousness. As consumers are starting to embrace this ethos of resale fashion, this resale market has emerged as a cultural movement within the fashion industry that comes with its own status of prestige and must be embraced by brands within the 21st century in order to prove successful in these changing times.

Curated Collections and Authentication

In this realm focused towards the purchase and sales of luxury products be it bags, clothes or even accessories, it is crucial to ensure the proper selection and visual presentation of products. In simple words, this process can be understood as a 'curation' process. Curation has been identified as one of the most critical driving factors towards providing consumers and sellers with a unique and enjoyable shopping experience. When it comes to understanding curation for your brand or store, it is important to understand that this process doesn't simply involve item selection, but is focused rather on ensuring that the products being sold are of high quality, and have a story backing them. Modern day customers, when shopping for these pre-owned items, tend to prefer one of a kind and unique items that scream fashion statements and this is where have a well 'curated' collection comes into play.

Additionally, it goes without saying that it is of utmost importance that you check the extent to which these products are authentic. Not only to prevent fake products being sold, but also to increase the trust factor between your brand and target audience. By doing so your brand has the ability to make this experience of purchasing second hand luxury items both reliable and valuable.

Notable Players in Luxury Resale

When it comes to luxury resale markets, while the landscape isn't saturated, there are some brands that have strategically placed themselves within this market making them titans, namely The RealReal, Vestiaire Collective, Fashionphile, Redeluxe, etc. Each distinguished player brings a unique touch to the market, shaping the narrative of second-hand luxury.

RealReal: Focuses its efforts towards authenticated consignment, merges sustainability with luxury seamlessly.

Vestiaire Collective: This brand is a global fashion resale platform, that works on the idea of a circular wardrobe, emphasizing community and style.

Fashionphile: Has strategically positioned itself as market leader with its commitment towards unparalleled quality assurance.

These brands are not only giving consumers access to these luxurious products but rather have redefined and paved a pathway to success, accessibility and exclusivity in this transformative landscape.

Navigating Luxury Renting: A Comparative Analysis

In a response to this evolution within the luxury fashion sector, while reselling luxury products has emerged as a high in demand trend, some brands have emerged with a unique and novel approach in response to these dynamics offering consumers interested in the luxury market to rent out their favourite fashion statements. This next segment of the article focuses directly on understanding in depth the steps involved within this rental process, while highlighting the unique features offered by these platforms.

Examining the Rental Process

Accessibility and Variety

One of the most attractive features when it comes to the rental of luxury products, is the fact that brands practising this approach have the opportunity to give their consumers easy access to high quality products with the inherit flexibility of using these products for a short period of time without the added financial stress of owning these items indefinitely. Are you ready to broaden your consumer base, by giving consumers the flexibility of experiencing luxury first hand with minimal investments.

Trend Flexibility

When it comes to luxury fashion, brands are required to follow a 3-month strategy, as compared to a year round strategy, due to the simple fact that fashion enthusiasts often tend to keep up with constant changes in trends. Implying that what consumers may purchase today, may be out of style in a short span of a few months. With the implementation of a successful rental strategy, your brand now has the ability to provide consumers with a cost-effective way to wear their favourite designer and luxury items while providing flexibility, without the stress of ownership.

Sustainability

By partaking in this practice of luxury fashion rental, your rentals are contributing to both buyer and seller's abilities to actively work towards a more environmental conscious approach towards consumption.

Trial before purchase

A unique yet stand out feature of rental markets over luxury resale markets are that, rental companies have the ability to offer a try before purchasing service to consumers. This means that as a brand, you can create room for consumers to first-hand try and get a feel of the product before actually committing to renting it out. So what are you waiting for?

Challenges Associated with Luxury Rentals

While there are numerous advantages, supported by unique features that could help you excel within this landscape, it is important to take into consideration the challenges that come with practising such a business model. Namely:

Brand Image

When you think of luxury, the first thing that comes to mind is the fact that owning luxury means being exclusive. This element of exclusivity, implies that when promoting rental services, can act as a potential hindrance due to the fact that brands may unconsciously dilute the prestige associated with these products.

Wear and Tear

In addition to an exclusive element, luxury products are considered to be delicate due to the high quality materials being used in their manufacturing. With multiple owners, these products when rented out may be faced with wear and tear, increasing the over all costs of maintenance, which in the short term may be considered acceptable, but after a while impacts the long term value of these products and may lead to a depreciation as compared to the trend of appreciation with luxury goods.

Hygiene

The most critical challange to navigate that comes to mind when renting out these luxury products is the fact that, brands must allocate budget and resources towards the proper cleaning of these products. Thus, while trying to provide customers with the highest standard of products, brands may incur additional costs that may affect them financially in the long run if not streamlined and strategised effectively.

Comparitive Analysis Pricing and the Rarity Factor

1. Pricing Model

• Resale: When it comes to resale market strategy, consumers are often faced with a single purchase or a one time purchase at a reduced value from the actual retail price. As a buyer, you are expected to make an upfront payment but for a long term ownership and with a potential of the product increasing in value with time.
• Rental: Rental platforms operate on a periodic fee structure or in simpler words a monthly subscription structure, allowing customers to experience high-end products for a limited duration without the need for full financial commitment. This appeals to those seeking temporary luxury experiences.

2. Rarity and Exclusivity
3. Resale: As mentioned above, the resale market is known for its ability to capitalize on the exclusivity of these luxury products. This exclusivity increases the appeal for sellers and buyers, with buyers gaining permanent ownership of these exclusive luxur products.
4. Rental: On the other hand, rental platforms tend to capitalize on the rarity element to attract its customers towards leasing these products for short periods of time. This is a exploitable and profitable market for you as a brand as you offer customers the ability to use these products for one time events catering to those consumers who seek unique variety for different events. However, rentals tend to take away from the exlusivity element due to the fact that multiple individuals can own the very same piece.
5. Comparitive Cost Analysis

• Resale: A comparative cost analysis for resale involves considering the upfront purchase cost against the potential long-term value and utility of the item. Buyers anticipate continuous and long term use to justify the initial investment.
• Rental: The total cost of renting versus buying pre-owned luxury items is a crucial consideration. Renting provides short-term access at a fraction of the retail price, making it appealing for those who prefer a more cost-effective, and short term luxury experience.

The Role of Designer Brands in the Resale and Rental Markets

With market data emphasising upon the fact that in just 2022 there was a 3.4x growth witnessed by those brands that implented 'branded' resale programs, we can infer that retailers and designer brands are acknowledging these market channels as potential landscapes for increased rates of brand growth. This is because while traditional retail remains a standard, designer brands are able to improve brand image through reduced wastage, and in turn increase their customer engagement by selling both products as well as value.

Building a Sustainable Image

One of the key benefits as a brand practicing or looking to practice resale or rental of luxury goods and services, is the positive impact it has on brand image. The reason for this impact on brand image is due to the following reasons:

• Circular Economy: In simple terms this can be understood as the promotion of using products owned my multiple owners rather than from retail with an aim towards reducing the harmful impact fast fashion has on the environment. Thus, through not only resale but rental too, brands have the ability to pave a pathway for a circular economy.
• Material Efficiency: One of the most controversial elements within the fashion landscape is the fact that this industry has a huge requirement for raw materials. By implementing resale and rental programs brands have the ability to extend the lifeline of these products addressing this concern of over consumption and in return leading to a notable increase in material efficiency.
• Consumer Education: The final aspect is creating a compelling story or in simple words selling your beliefs and values to customers with a hope of educating and encouraging them to practice environment conscious shopping. This aim towards educating consumers on how they can have a positive impact, fosters a sense of community improving both brand image as well as brand loyalty.

Protecting yourself in economic crisis: Case Study

As both a brand and consumer it is essential to note that luxury collectibles are often considered as stable financial investments with the ability to appreciate significantly in value over time. Amongst the global economic crisis, this new trend has emerged with a significant interest towards these unique financial investments. As a matter of fact, this trend initially started to gain traction during the global pandemic of 2019, where individuals were shifting their assets towards these luxury collectibles. But what makes these luxury products such and attractive investment? Its a number of factors, with the driving element being the strategic shift of these luxury brands with they focus diverted towards carefully maintaining the scarcity, along with already developed supply chain issues, made these products seamlessly increase in value. In simple words this can be termed as a scarcity-driven approach.

An ideal example that elaborates on this strategy is the brand Chanel. In 2021, the brand was seen to have increased its prices a whooping 3 times within the year itself. In addition to this they were seen to have lead with an introduction towards fixed quotas in order to curate a limit to the cumulative quantity of handbags that a single customer could purchase within a single year. This strategy is significantly reflective of that implemented by Hermes in the initial days where, consumers would be waiting for years together in order to get their hands on the Birkin or Kelly Bag. The resale market in addition to these scarcity driven approaches underscores the true investment potential from a financial perspective these products may have.

Along with handbags, another segment worth noting is that of watches on a whole. Let’s take a look at titans in the industry such as Patek Philippe or Rolex. Both of these brands are known to produce, the highest of quality products, with certain rare models within their catalogues such as the Patel Philippe Nautilus 5711 or even the Rolex Daytona, being discontinued. You might be wondering how Is this relevant, it’s simple, once these rare items have stopped production it is understood that their supply is finite. This means that owners of these items can set a price of their choice, usually significantly higher than retail and come off as highly profitable due to this appreciation. An important metric to note, in support of this claim is the Subdial50 Index, which Is a financial index that essentially represents graphically the value of the 50 most traded watches globally and what’s interesting is that this index in the past 12 months was bullish with a whopping rise of almost 27% and was seen to have outperformed traditional stable indices such as the S&P500.

But the question that remains is are these items risk free investments with hight return potential? World renowned research firm such as Deloitte conducted a market analysis focused primarily on the resale of watches and handbags and classified these products as low risk assets with a fairly low volatility factor. Moving back to the case of Rolex and Chanel, this study highlights that post covid-19, in 2021 despite the global economic crosses, Rolex witnessed a return of 33% within the year itself, with Chanel following closely behind with a whooping 25% rise. This allows us as buyers and sellers that these luxury products which are considered assets are not coupled to traditional assets and macro economic factors, making them a viable diversification strategy.

Now that we’ve explored the extent to which these assets can offer high yielding returns, it is important to understand that this simply implies that these assets are recession proof, specially Chanel handbags and Rolex watches. Due to this immunity against inflation, consumers are turning their interests towards the resale market in order to not only be the proud owner of these assets but at the same time earn a potential profit by purchasing them and then selling them at an appreciated value. Thus, leading to an increase in the liquid nature of this dynamic landscape.

For many fashion enthusiasts as well as collectors investing in this unique one of a kind hand pieces as well as handbags has sustainable growth potential towards the upside. This is through the value itself appreciating along with the unique history behind these fashion statements making these collectibles a meaningful investment opportunity.

Making the Decision: Renting, Luxury Fashion Resale, or Both?

Now that we have explored the unique nature of both renting out luxury products as well as reselling them, here are a few considerations from both a consumer and brands perspective to keep in mind, to ensure the success and growth of your brand.

Considerations for Consumers:

• Resale: Ideal for individuals looking for long-term investments, repeated use, and building a collection of luxury items.
• Rental: Suitable for those seeking temporary access to exclusive pieces for special occasions without the commitment of permanent ownership.

Considerations for Brands:

• Resale: Brands in the resale market focus on maintaining the long-term value of their items, emphasizing quality and authenticity to attract buyers seeking permanent ownership.
• Rental: Brands in the rental market emphasize periodic experiences, requiring a focus on item maintenance, cleanliness, and short-term customer satisfaction.
• In this transformative landscape where, luxury fashion enthusiasts and brands have a choice to embrace these sustainable trends of second-hand resale and renting, brands are faced with a crucial decision in order to navigate down this path successfully. With notable fashion brands already having positioned themselves strategically, what are you waiting for?
• Don’t forget that while these strategies were stigmatised they have transformed over the years into a cultural movement you don’t want to miss out on. Remember, curated collections and transparency in terms of product authenticity are the driving factors to provide your customers with a unique and reliable shopping journey. Don’t forget, there are considerations to keep in mind.
• These strategies, create room for your brand to be flexible and meet the demands of these dynamic trends. Now that we have explored in detail both retail and resale, it’s your turn to make a decision on which one or wether both are suitable for your brands growth be it short term or long term. Align your strategies and don’t forget that this transformative landscape, is your pathway to thrive in this revolutionary landscape.