Luxury Fashion Brands Should Look to Car Dealerships for Inspiration
Certified pre-owned programs make it easier for people to own fancy cars. The same could work for fancy clothes.
In an interview for Vanity Fair, Mark Cuban offered some advice about how to be just a little bit richer. The first recommendation he made was that you continue to live like a student and not buy an expensive car after you land your first job. I almost followed this advice. I bought a slightly pricier ride than necessary, but I did it the certified pre-owned way. In other words, I got to enjoy the customer service and experience from a brand I have always loved without the monthly bloodletting. The access and association led me to the question: Why aren’t luxury brands in fashion taking advantage of this opportunity?
What Is “Certified Pre-Owned”?
Certified pre-owned (CPO) is a process that allows customers to buy a used product that has been certified by the brand without the sticker shock of a fully new price. It lets the buyer know that the product is restored and passes the brand’s quality expectations, despite it not coming directly from the factory. Despite the luxury resale market’s noteworthy growth forecast, fashion houses are hesitant to participate. Instead, resale giants like the RealReal and Vestiare Collective enjoy leading the luxury resale industry without direct competition from the companies that make their eventual product offering.
Meanwhile, these companies continue to capitalize on the belief-driven shopping behavior of millennials and Gen Z, who value contributing toward sustainability and green commerce while also saving money — because, you know, student loans.
Let’s look a little closer at some of the opportunities that brands can start to enjoy should they experiment with launching their own CPO programs.
Sustainability
Press releases on behalf of major luxury retailers worldwide seem to share one thing in common this year — they’re going green. Such proclamations are adjoined by operational plans that demonstrate how manufacturing and supply chains will help offset their carbon footprint in the near future. These efforts deserve applause, though I wonder if the factories producing such sustainable fashion will indeed achieve their environmental discharge limits set by local and national governments.
By allowing them to purchase something that has been restored, brands can encourage people to experience luxury and sustainability simultaneously.
One of the most salient criticisms of the retail industry, especially fast fashion, is its propensity for seasonal sales. After all, a new item bought once and then dispensed has lived a fairly brief and arguably disastrous life cycle. This strategy may be beneficial when building revenue in the traditional sense. However, it avoids the opportunity to manufacture less and to sell the same product more than once, satisfying environmentally conscious customers and bottom-line motivated shareholders.
When a company manages and leads a resale experience, they gain the opportunity to transform customers into brand advocates. This is crucial as millennials and Gen Z are now the largest consumer block in the United States and their penchant for environmental awareness is quickly becoming a mainstay consumer expectation. In other words, by allowing them to purchase something that has been restored, brands can encourage people to experience luxury and sustainability simultaneously.
Second Chances
It is widely accepted that the allure to own something exclusive motivates customers to purchase and praise. Small product runs and one-off collabs help to espouse that desire. Despite the exclusive connotation, the process to obtain such products has become exceedingly egalitarian. Regardless of brand loyalty or yearly spend, everyone is required to either line up outside (hopefully it’s not too cold out) or to rapidly navigate a website (hopefully it doesn’t crash).
For those brand loyalists who are unsuccessful, they are forced to turn to fashion resellers with the limited hope of finding something from a recent product drop. Vintage stores, online resellers, and auction houses, as well as fashion rentals represent their last chances to access that one-of-a-kind moment. The frustration is palpable. They waited hours to get in on the action, didn’t, and here they are begrudgingly searching other companies’ websites that advertise after-the-fact access.
With CPO, customers are provided a second chance. The brand now becomes the first stop twice per season rather than one. By controlling product resale, the brand ensures that the customer experience is protected and meets the online standard for luxury shopping. In essence, CPO allows customers to sustain their emotional desire without dampening the allure brought on by exclusivity and capsule collections — all in moderation, of course.
Revenue Stream
Money moves retail decisions. Before the rise of the millennial consumer wave, companies could focus exclusively on new ways to increase profit. Regardless of what needed to change, reduced costs and explosive revenue generation drove all strategic decisions. But now, roughly seven in 10 millennials will consider if the company aligns with their values before purchasing. It would seem, then, that operational costs and profit must now reconcile with millennial values. Fortunately, they are overwhelmingly willing to pay extra for products that are sustainable.
While CPO requires its own supply chain, it is arguably less invasive compared to the burden of producing and selling new products. Pre-owned goods only need be collected, authenticated, marketed, and shipped. New products, on the other hand, must be designed, tested, manufactured, marketed, and shipped. This is surely not an extensive list but represents how pre-owned products can blend easily into an existing business model.
In doing so, the brand is then able to sell a CPO product for additional revenue, thereby creating a complementary revenue stream. Thus, the CPO model extends a product’s life cycle, allowing a brand to enjoy revenue from the same product for a second or even third time. Obviously, how this translates to profit is contingent upon operating costs. Nonetheless, with a new stream from an old product comes the opportunity to benefit immediately from the circular economy.
Value Control
An original sin of buying something used is quality. This sentiment is shared by both the customer and the company, as they must navigate how secondhand purchases are socially perceived. In other words, companies must reconcile that their brand value can now be determined by the free market. As prices fluctuate according to demand, a brand’s popularity, often construed as worth, can be seen by customers and competitors alike.
A low price indicates the market’s lack of awe with the brand or product design. This info is disclosed to customers and competitors, signaling a weaker brand position and market fit. When value is lowered and a surplus of products are available from third parties, the ability for a luxury brand to portray its product as exclusive is also at risk. Moreover, if a customer can purchase secondhand for nearly 75% less, then why buy directly from the brand? Why not transfer loyalty to a reseller?
With a CPO program, brands regain the ability to influence their perceived value in the marketplace. Through a strategy called “stealth positioning” they can enter the market category, in this case resale, that is otherwise considered tainted, without abandoning their market position. Should a brand create a CPO rather than a reseller program, they can competitively enter the secondhand market through an alternative category. In doing so, a luxury brand enters the secondhand market without competing head-to-head against niche leading resellers, while better controlling its perceived brand value.
There was once a time when purchasing luxury clothing online was unthinkable. Now, it’s increasingly becoming the norm. Luxury fashion brands should consider reselling luxury items as a possible next profitable step in an evolving industry.
