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Consumers are clamouring for second-hand luxury goods, prompting the luxury sector at large to start mobilising for action.

Second-hand or vintage luxury goods sold on dedicated web platforms have soared in popularity, and are now outperforming sales growth in the primary luxury goods sector. Traditionally luxury brands have kept their distance from the second-hand trade for fear of undermining their exclusivity and sales. They are having to re-think this stance. The second-hand luxury business is now worth $25 billion in annual revenue, and according to analysts at Berenberg, expected to grow by up to 10% annually. This is more than twice the projected growth of the primary market.

The trend is exemplified by market leader The RealReal. Founded seven years ago, the company could be ready for an IPO within two years. Founder and CEO Julie Wainwright expects that by then, the value of the products sold on the site will have doubled to some $1 billion annually. The RealReal is also discussing partnerships with LVMH and Kering, which own iconic luxury brands Louis Vuitton and Gucci respectively. It already has a partnership with British label Stella McCartney.

Competition in the sector is starting to intensify as other online fashion resellers, such as thredUP, branch into luxury in hopes of getting their share of the market. More established companies like Vestiaire Collective also pose a competitive threat. The platforms make money by taking a cut of the resale price, varying from 10% to as much as 50%, depending on demand for the item and how much the seller has sold on the site. They attract mostly younger consumers who are looking for bargains and want to support recycling.

It is not known whether any in-house ventures are in the works at big luxury brands, but they are weighing how they might extract some value from the flourishing resale sector. Partnerships with big luxury goods brands could raise the profile of fashion resellers like The RealReal, giving them an edge. Some executives, including Vestiaire CEO Sebastien Fabre, said deals could include data-sharing that would allow the brands to track what kind of people are buying and selling their products, and how much value the items are holding.

Resale platforms believe most luxury firms will opt for strategic alliances, due in part to the difficult logistics of the business. “I think we’re past the point where they may have felt we were a threat,” said The RealReal’s Wainwright. “For many millennials it’s their first-time experience with a luxury brand on our site.”

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