Buy luxury products without burning a hole in your pocket

Chanel, Christian Louboutin, Hermes, Givenchy, Victoria Beckham, Charlotte Olympia, Alexander McQueen, if you are a luxury goods fanatic, you would be as familiar with these names just as a football fan is with Cristiano Ronaldo and David Beckham.
These flurry of brands that define one’s luxury quotient have served as labels for a startup headquartered in the San Francisco Bay Area. Consigned as ‘The RealReal’ these luxury brands commanded prices closest to their original tag when resold. Showcasing Chanel, Hermès, and Louis Vuitton; jewellery and watches from Cartier, Rolex, and Van Cleef & Arpels; and blue-chip art from Andy Warhol, Roy Lichtenstein, Sam Francis and hundreds of others, they have earned 60-70 per cent of the sale price, items selling off in record time of 3 days.
The RealReal is a marketplace for used designer goods. Founded in 2011, the startup did sales of $100 million in 2014 and has attracted total funding of some $83 million so far amongst others, Canaan Partners and Greycroft Growth. As the name suggests, one of The RealReal’s key propositions is that it authenticates the goods and spots the fakes.
As Good as New
Considered a pioneer in luxury reselling The RealReal has recently began shipping to India. That was around the same time a clutch of Indian startups with a similar model began sensing a demand amongst the aspirational and net-savvy millennials for luxury goods – at budget prices. From Louis Vuittons, Guccis to Fendis, these ventures are finding takers who want to flaunt it at affordable prices. Anvita Mehra, 25, was one such buyer looking to pamper herself in the low-cost lap of luxury way back in 2009 in England.
An undergraduate student with University of Nottingham, Mehra chanced upon a rare Louis Vuitton handbag during a visit to Sloane Street. It is an exclusive luxurious shopping destination in London, on a par with Bond Street. At £1,000, however, she knew she couldn’t afford it, but that surely doesn’t mean she can never have it. Three months later, she spotted the same bag on a pre-owned portal called instantluxe.co.uk at just half the price. Not only did the website vouch for its authencity, the buyer can never figure out that this bag had been used before.
Mehra didn’t just buy her designer bag, she also stumbled upon a business opportunity. In June 2014, she co-founded Confidential Couture – an online marketplace for buying and selling pre-owned luxury goods. The trigger for the startup was “Luxury must be enjoyed by the mass, and not just confined to the class.”
Confidential Couture has made a steady start – not obviously a la The RealReal — selling two to four products every day with an average ticket size of Rs 20,000. In 2015 it clocked an annual turnover of Rs 1 crore and counts Louis Vuitton, Gucci and Christian Dior among its top-selling brands.
“We are feeding the growing luxury consumption mindset in India,” says Mehra.
Welcome to the yet-small-second-hand-or pre-owned, which is a more respectable term in India. Here is a bunch of online startups bringing luxury within affordable distance of the middle class Indians who yearn to flaunt expensive luxury brands but owning them seems like a castle in the air. For Vijay KG, co-founder of Luxepolis, it was an unflinching belief in the value-conscious mentality of Indian consumers. Whether rich or not so rich, their enthusiasm made him take a plunge into the business of ‘value luxury’. “Indians wouldn’t mind buying pre-owned goods if they carry a value that can be realised,” he says, adding that his tryst with second-hand goods started quite early in life – collecting old coins, currency notes and buying second-hand books.
“We hardly used to buy new books during our engineering college days, second-hand cameras and music albums used to be common those days” he recalls. But, then again, used luxury goods is another (bone China) cup of tea, altogether. It’s huge and largely under-penetrated, contends Vijay. While the overall used-goods market is estimated to be worth $20 billion and growing at 15 per cent year on year, the used luxury market in India is worth a 10th of that, but growing at 25 per cent every year, he claims. “There’s a huge gap between aspirations and affordability and we aim to bridge it,” he says.
In the four months since starting up, Vijay claims Luxepolis to have sold goods worth Rs 1.1 crore, 40 per cent of those sales from tier II and III cities. With an average ticket size of Rs 24,000 in January, the startup says it is selling 7-10 goods per day.
Pocket-friendly Luxury
The profile of the Indian luxury consumer has undergone a tectonic shift over the last few years. Though for most of the decades, the luxury market was largely fuelled by ultra high net worth households (HNHs). The category is thriving and expected to grow at a compounded annual rate of 27 per cent till 2018 with the aspiring middle class leading the show.
Brand strategist Harish Bijoor says “The second generation of consumers come from this aspirational class of young and financially empowered Indians”. “These are the next-gen buyers of luxury brands,” he reckons. Bijoor adds that the startups that are making luxury affordable are becoming the “OLX and Quikr (both online classified ventures) of the sector”.
If there are thousands of fashionistas right at the peak of the pyramid of consumption, who can afford a first-hand, in-mint condition luxury brand, then there are millions who want it, but can’t afford it at mint prices. And the new breed of luxury buyers is not only aspirational, but also seeking value.”They are the ‘closet consumers or value seekers’ and the ‘bargain hunters’ who have high aspiration levels,” says Abhay Gupta, founder of Gurgaon-based Luxury Connect Business School.
“However, their aspirations do not necessarily match their pockets,” he adds. This group of consumers would either wait for end-of-season sales or simply till someone they know has bought a similar product. This enables them to get a first-hand opinion or feel of the high-value luxury goods. “Pre-owned luxury is a perfect experimentation point for them,” maintains Gupta.
“This is where a huge opportunity lies.” What these startups are also doing is exponentially increasing the chances of converting a preowned consumer into a first-hand buyer. “A second-hand product makes her (consumer) believe in the value proposition offered by a firsthand product,” says Gupta. Ultimately, a pre-owned customer will graduate to become a firsthand customer. “This is where a huge opportunity lies and is only going to grow,” he adds, pointing out that India is the fastest growing emerging luxury market in the world.
While the size of the luxury market was $8.5 billion in 2013, it is expected to hit $14 billion this year, according to a Assocham-KPMG study. Globally, the preused market has been booming. In 2014, the market for used luxury bags, watches and jewellery had hit the $17.5-billion mark. According to a study by consultancy Bain and Altagamma, the Italian brand committee that has fashion firms on it. While 80 per cent of the sales were taking place in bricksand-mortar stores, online sales were also rocketing as the study added.
Back home, young buyers such as Neola Mahapatra are fueling the second-hand online sale. Pursuing dentistry from DY Patil College in Navi Mumbai, Mahapatra bought a pre-owned Tissot watch for Rs 37,000 via Confidential Couture. A new piece costs Rs 1 lakh.” While the rich shell out lakhs to buy luxury, smart ones like me shell out thousands to own it,” she chuckles. “Second-hand doesn’t mean that they look shabby. Most of the time they look almost as new as a fresh one.”
Baits & Hooks
Anvita Mehra of Confidential Couture says it’s not magic but science. Before any product is listed on the site, it goes through examination by authenticating partners in the US as well as an inhouse team of authenticators. They ensure that the products are genuine and also undergo bio-cleansing.”Many items come with their original boxes, dust bags and certificates,” she says. The products are broadly classified under three categories: ‘Never been Used’, ‘Gently Used’ and ‘Fairly Used’. Each category is well-defined and also carries clarifications about the state of the product so as to make the process transparent.
With a bargain of almost 60 per cent of the original price and top-notch packaging, Confidential Couture tries to make the experience as satisfying as a first-hand luxury buy. Mehra maintains, adding that a free-return policy and cash on delivery act as extra baits for hesitant consumers.The bait does appear to work, ask Harshmi Bali, 22, who is studying sociology at the Delhi University. Bali bought a Louis Vuitton bag for Rs 32,000, less than half what a new one would have cost (Rs 68,000).
“The bag was for half the actual price and I flaunt it because it’s luxury at the end of the day,” she says. Initially hesitant to buy online as she was not sure about the authenticity of the products, Bali took a leap of faith when she was reassured about the quality of the product and the ease of purchase. But isn’t there a stigma attached to buying second-hand luxury goods? Bali doesn’t think so. “It’s all about mindset and the new-generation doesn’t believe in such stereotypes,” she says. Probably what is also helping the startups in overcoming the stigma is the secrecy attached to the entire process of buying and selling.
“This is a business of clever subterfuge,” says Bijoor. “The stigma is attached if everyone knows. But if no one knows, subterfuge wins,” he adds. And it’s not a win-win situation for buyers only. There’s a supply side as well and Rashi Menda of Zapyle wants to make most of this supply side. “Just like me, millions of Indian women stock their closets with stuff worth over $1 billion every year and still have nothing to wear,” contends Menda, who started pre-owned online luxury marketplace Zapyle in May last year.
Nearly a third of their closet is never worn and another third is used once or twice at the most, she maintains, adding that Zapyle was born from this realisation that India lacks a platform that assists pre-owned clothes and accessories in finding new homes. Zapyle claims to use its proprietary formula to set its parameters and has narrowed down on a range of prices for each product.
The users then select the price-point that they wish to list the merchandise. Knowing fully well that selecting a price-point at the lower end of the range would increase its marketability. “It is important to allow the sellers to select the price-point themselves,” she says.
Menda contends that her startup uses image recognition algorithms, coupled with access to luxury fashion retailers’ databases. It authenticates each product and flag the suspicious ones. The startup charges a flat 25 per cent commission on the sale value, which includes transaction-related costs such as logistics, packaging and verification of the product. “So neither the purchaser nor the seller has to worry about any hidden costs,” she adds.
Smart Deals
While the going now looks easy for Menda, it was not so to begin with. She spent months understanding customers, had to counter people who questioned the idea that Indian women would be comfortable buying and wearing second-hand fashion. It was a great struggle to convince people about the concept of the business.Finally, her conviction was validated by her research, “It showed that young millennial women have ever-growing aspirations driven by exposure via social media and access to disposable income,” she says. India’s significant income-inequality leaves millions of women with an unquenched desire to own luxury fashion goods. “Zapyle was born to address this desire,” she maintains.
Priyanka Vinod is one such confident, new-age consumer who would be Zapyle’s target audience. The 24-year-old fashion consultant in Bengaluru bought a Michael Kors clutch for Rs 12,000, used it for eight months and sold it for Rs 5,000. Bad deal? Absolutely not, she says. “I do have a wardrobe that overflows and I would love to monetise it to buy new stuff,” she adds.
Then there are those whose attitude to luxury goods is not too different from their mobile handset — it’s got to go sooner than later and make way for a new one. Take, for instance, Amrita Valeja, a 28-year-old media professional in Mumbai. Valeja bought a Gucci bag for Rs 1 lakh, used it for a year and then sold it online for Rs 30,000. “Selling off the stuff that I’m done with rather that piling it up is a smarter move. Upgrading my wardrobe with topnotch products makes sense,” she says.
Demand and supply of pre-owned luxury products is not confined to the metros, tier II and III cities; towns are also joining the party. “We are seeing a good demand from cities such as Pune and Chandigarh,” says Bhargav Errangi, co-founder of pre-owned online luxury firm Spoyl, which started up last November. There is also interest from Udupi, Mangalore, Hampi and Udaipur.
For Errangi, the biggest challenge is not to convince people about the pre-owned luxury concept but to meet the rapidly growing demand. “It’s not just the quantity, but also the quality of the supply,” he says, adding that he is working hard to augment the demand with enough supply.
While the startups might be busy expanding the market for pre-owned luxury items, their biggest challenge is convincing people about the authenticity of the products sold. “Consumers need to be vary as there is no way one could authenticate the product,” says Varsha Ahuja, India brand manager of luxury brand Judith Leiber. Luxury is all about touch and feel, she adds. We don’t believe an Indian luxury connoisseur would plan to buy high-end products online, she maintains.
Gupta of Luxury Connect Business School also explains that the chances of getting into a counterfeit product purchase could be the highest risk in this business.The startups will have to be highly responsible to ensure that they source goods from users who have an authentic purchase history available.In most cases, the buyers who sell may or may not have their old records available. This is where the risk may arise, he maintains.
Trending in Style
Globally, luxury reselling is big and a relatively evolved business. The RealReal, for instance, holds internal ‘find the fake’ contests, with authenticators getting rewarded for spotting giveaway signs on counterfeits.
Another way of building customer confidence is via service. In Japan – one of the world’s biggest luxury markets – The RealReal offers a ‘white glove service’- potential sellers can make an appointment (via their smartphones) and associates of the startups. They can go through their wardrobes and select items that are shipped to the The RealReal warehouse, for free.
In the US, it sends drivers to consumers’ homes to pick up items. India’s luxury resellers may lack the resources to provide such services – most of them have not yet attracted any serious funding – but it may be just a matter of time. As Gupta points out – “Luxury is here to stay and it will evolve and create its own new paradigm.”