The success of the modern fashion industry is reliant on its unsustainable business practices. In 2018, the global apparel and footwear industry was responsible for producing approximately four percent of greenhouse gas emissions. At approximately 2.1 billion tonnes, this represents more than France, Germany, and the United Kingdom’s total combined emissions. Activists and consumers alike are pressuring the industry to curb their emissions to 1.1 billion tonnes by 2030. It is also important to note the global presence of this industry, given that an estimated 1 in 8, or 430 million people, are employed in fashion and textile.
A month ago, an activist crashed the Louis Vuitton runway during Paris Fashion Week, with a sign displaying “Overconsumption = Extinction”. This directly attacks the seasonality and trend-based nature of these events, which are said to promote constant consumption according to industry cycles.
Recent developments in the luxury industry are disrupting this pattern of linear consumption. Digitalization and sustainability have become of key importance in this sector, and their integration by brands has been especially accelerated by the COVID-19 pandemic. This has resulted in the emergence of new players, such as The Real Real, a luxury resale platform. Its recent report found that the pandemic has resulted in more people buying and selling in the circular economy.
These changes, although catalyzed by the pandemic, are rooted in the evolving consumer demands of Generation Z. Globalization and the democratization of luxury over the last two decades have resulted in a more international client base, which has integrated the global value shift regarding sustainability into its purchasing preferences. Rati Sahi Levesque, president of The RealReal, supports this in claiming that Gen Z will be “the most conscious shopper yet.” Within luxury, a key approach to engaging in sustainable practices is through the purchase of pre-owned goods. In a recent survey conducted by Vogue Business, it was found that when shopping for handbags from well-known brands, consumers are equally likely to purchase a pre-owned bag compared to a new one. This is a significant shift in preference, which opens the door for reducing production while still creating new value in the market. Additionally, out of all luxury consumers in the United States, a whopping 69% have purchased pre-owned luxury goods during the past year. This, therefore, shows the rising popularity of a completely new way of consuming luxury.
Generation Z represents a change in luxury not only in their value-linked preferences, but also in how they perceive luxury goods.Along with other innovative forms of investments such as cryptocurrencies or NFTs, gen Z is diversifying its portfolio and increasingly sees luxury goods as investments. This contributes to a profound change in attitude towards luxury. It is no longer necessarily perceived as a good to be purchased, consumed, and discarded in a linear manner. Rather, products are viewed through the perspective of a circular economy. Individuals still use their capital to indulge or satisfy their desire for fashion, but in the form of durable investments rather than short-term goods of poor quality. Within this framework, a single good can be passed through several owners, where new value is created over time. Handbags are particularly popular, as it is widely believed that their style and quality give them an enduring “shelf life”. This is a clear challenge to the concept of planned obsolescence, and has both individual and environmental benefits.
Actors engaging in recommerce, the buying and selling of previously owned or used products, have emerged as a potential answer to this structural industry transformation and evolving consumer demands. The RealReal, Vestiaire Collective, or Rebag rapidly gained popularity in recent years, and exploded during the pandemic as stores shut down. These new actors in the luxury industry epitomize its future; a sustainable business model created in a digital space where younger consumers can interact with each other globally. This is confirmed by their popularity and conducive profitability: The RealReal saw six million new members join its platform in 2021, year-to-date. During the second quarter of 2021, its total revenue was $105 million, an 83% year-over-year increase. The promising future for these types of companies is also seen in the faith placed in them by large industry groups. In March, Kering (a French multinational corporation which manages houses such as Gucci, Saint Laurent, and Bottega Venetta) backed Vestiaire Collective in a new financing round where it raised 178 million euros. This has now given the company unicorn status (a term given to privately held companies with a valuation of over $1 billion), proving that investors are confident in the long-term viability of this business model. It is predicted that recommerce’s share of apparel, footwear, and accessories purchases will double in four years; from 7 to 14% between 2020 and 2024. Another enthusiastic forecast is the estimation of apparel resale at $64 billion by 2024.
These resale platforms have successfully integrated the environmental pillar of ESG at the heart of their business model. The concept of resale provides a sustainable manner for getting rid of an item. Resale also tackles overproduction and minimizes the extraction of natural resources. However, despite creating a circular product life, this model typically falls short of tackling the industry practice of destroying unsold goods. Burberry for example faced heavy scrutiny in 2018 when it was discovered that they had burned $37 million of apparel and accessories, in an attempt to protect brand value. Certain efforts are emerging to combat this such as The Real Real’s “Recollection” project, which prevents textile waste by upcycling un-sellable goods. Nevertheless, the success of these platforms reflects the rise of a new type of consumer, one that is keenly aware of the environmental impact of their purchases.
There are also many social benefits for both consumers and luxury houses. At the individual scale, users enjoy lower prices than retail according to a product’s condition, promoting a second wave of luxury democratization. Furthermore, by reselling items which a user no longer desires, they maximize their utility by receiving financial compensation for something which would have otherwise not been consumed. Brands also have a great deal to gain from this structure in terms of brand loyalty. These platforms enable consumers to sell pieces from a certain house in order to purchase a different or newly-released model; a system in which one item practically finances its “successor”, while still bringing profit to the house. Additionally, recommerce platforms hold a great deal of consumer insight data regarding popularity of products, purchasing patterns, and buyer preferences. This can be extremely useful for houses and bigger groups, which have initiated efforts to acquire such data.
The explosion of these resale platforms raises a question regarding the deeper driving force behind the sustainable market. Essentially, can this emerging interest in sustainable consumption truly be attributed to a deeper “environmental awakening” and consciousness in consumers? From a contrarian perspective, recall the rise of TikTok influencers promoting luxury second hand. Whenever these platforms were referred to, influencers would stress the trendiness of an acquired item, or its affordability over any environmental arguments which would be slipped in at a video’s last second. Thus, sustainability might happen to be a part of a new cycle of consumption that rose out of a self-interested following of trends and cheap deals. If this is the case, does this reduce the importance of a sustainable transition, or should we embrace sustainability no matter what drives it?
Recommerce’s impact on the sustainability of fashion’s supply and demand may be an insightful object of analysis. Resale platforms clearly transform the supply side by recycling products, creating new value and reducing waste. However, they do not necessarily go so far as to redefine consumer demand in a sustainable way. A key challenge faced when discussing sustainability and fashion is the need to steer away from the current model of overconsumption, in favor of purchasing fewer goods of higher quality. Luxury goods are inherently compatible with this new direction of consumption, given the high quality of materials and craftsmanship associated with the manufacture of these goods (alongside the timelessness of silhouettes). However, if resale platforms are used in terms of pure financial savings, they may actually be enabling consumers to continue engaging in overconsumption by cutting the price of luxury.
If younger generations are less concerned with the environmental benefits of resale platforms, it could be argued that their popularity is reliant on larger trend cycles which currently happen to coincide with resale. However, when assessing the material benefits those consumers gain from purchasing second hand (obtaining coveted luxury items for a cheaper price), this is a positive outcome that transcends seasonality and that consumers will most likely always seek out. Thus, although recommerce’s rise may be attributed to changing values and digitalization alongside trend cycles and influencers, this model of consumption may be so beneficial that it is now here to stay. In fact, following the disruption brought along by ecommerce, recommerce may be emerging as a new third pillar of consumption. In this new framework, environmental concerns and self-interest converge under a more sustainable way to shop.
Amidst the buzz around these third-party sites, we must also ask ourselves how luxury houses should, and will, interact with these actors in the future. Van Cleef and Arpels has taken an in-house approach to this phenomenon by creating a buy-back program where pieces are purchased from clients in return for store credit. Clients benefit by being able to exchange a piece they have sufficiently enjoyed in favor of a new item. When items are bought back, they go through the artisan workshops in order to be restored and studied. This also benefits them as they are able to interact with pieces that are often vintage, to learn from their craftsmanship as a source of inspiration for future collections. Such a program is a key example of a firm investing in its social governance as it prioritizes the welfare of its workers and creative spirit of its brand. Van Cleef and Arpels also gains a great deal from such a program as they are able to offer unique, vintage pieces to clients. The buy-back process helps create meaningful relationships with clients and promote long-term brand loyalty. Lastly, the environment also “wins” as new value is being created in preexisting pieces which can be consumed again, rather than needing to source raw materials for the creation of a new piece of haute joaillerie. Luxury resale therefore creates a “win-win-win-win” scenario. Another approach has been for brands to collaborate with third-party sites, such as Alexander McQueen and Vestiaire Collective. Here, the brand sources previously owned pieces from clients (in exchange for store credit on future McQueen pieces on Vestiaire Collective), which Vestiaire Collective then sells under a special “brand approved” label.
This raises a key challenge for luxury houses whose products are found in recommerce: authenticity. Despite the great success of these resale platforms, brands fear that they have lost control over their image and their distribution. In fact, their reputation may be severely tarnished should counterfeited products end up being sold under their name, or if products are marketed in a manner incompatible with their values. For the luxury industry to continue benefiting from this market development, resale sites will need to work on digital innovations for better authenticity mechanisms. Should they fail to do so, luxury houses may no longer view these platforms as profitable or in their best interest, and instead turn to in-house programs for more control over their second-hand market.