According to a recent report from McKinsey, luxury brands that choose not to participate in the rapidly growing resale market risk missing out on a significant opportunity. The global luxury resale market is already worth between $25 billion and $30 billion, with expectations of a 10% to 15% annual growth rate over the next decade. While some luxury brands have already made moves into the market, others are still unsure about how to navigate it without harming their brand identity or margins.

However, McKinsey’s report suggests that brands should be more concerned about letting this growth opportunity slip away. The report states that entering the resale market prudently should not erode margins and would only result in limited cannibalization. In fact, luxury brands expanding into resale can have a positive effect on consumers’ perceptions of the businesses, even if they themselves only buy new clothes.

McKinsey’s survey found that the majority of new-product buyers agreed that their perceptions of a luxury brand that had entered the resale market would be positive or at least unchanged. Additionally, many buyers agreed that brands directly selling or supporting pre-owned products would not change their perception of the brand, and an equal percentage said they might buy more new products from luxury brands offering pre-owned products in the future.

However, McKinsey highlights that the response to luxury brands entering the resale market varies in different national markets. While consumers in France and the United States mostly responded positively, Japanese consumers had a negative reaction. The current largest markets for pre-owned luxury are the European Union and the U.S., with China accounting for around 10% of the global market.

To effectively engage with resale, luxury brands need to understand the motivations behind consumer behavior. McKinsey’s research found that the top motivations for pre-owned luxury buyers are access to hard-to-find or discontinued items, sustainability, and financial reasons. Additionally, many pre-owned luxury buyers also act as resellers.

The study reveals a cyclical market with distinct but overlapping motivations for buyers and sellers. McKinsey suggests that luxury brands can tailor their approach to appeal to specific client segments, such as collectors or consumers looking to trade in products from previous seasons for the latest collection. The report concludes that the luxury resale market holds promise for both customers and brands, serving as a way for brands to expand their offerings, appeal to specific client segments, stay innovative, and reinforce sustainability efforts.

McKinsey’s report is based on consumer research conducted in North America, the EU, and Asia over the past three months.

For more information on the luxury resale market and how luxury brands can benefit from it, check out these useful links:

1. “Luxury brands tap into global resale market to chase young shoppers” – Reuters
2. “How reselling could improve brands’ perception among luxury consumers” – Vogue Business