Neiman Marcus Pushes into growing market for ‘Preloved’ Handbags

By guest author Suzanne Kapner writes about the retail industry for The Wall Street Journal

Luxury players are starting to embrace a booming resale market; ‘shoppers just want bargains’

The market for secondhand clothing and accessories is going mainstream.

Neiman Marcus Group Ltd is taking a minority stake in Fashionphile LLC, an online seller of preowned designer handbags and accessories, according to company executives.

The RealReal Inc., a larger competitor to Fashionphile, is preparing for an initial public offering, according to people familiar with the situation. And, on Monday, a retail chain owned by H&M Group began allowing shoppers in Sweden to buy and sell previously owned goods.

“Resale is at the nexus of a lot of trends,” said Oliver Chen, a senior equity analyst at Cowen Inc. “You have a new generation who is interested in sustainability and recycling. But most of all, shoppers just want bargains.”

Mr. Chen says items in the secondary market sell for 30 % to 90 % less than the retail price of similar new items.

The U.S. luxury resale market totalled USD 6 billion in 2018, according to the consulting firm Bain & Co. But the overall U.S. recommerce market for clothing, accessories and footwear is far larger and growing fast. It is expected to reach USD 51 billion by 2023, up from USD 24 billion last year, according to GlobalData PLC, which prepared the research for a report published by online reseller ThredUP.

For Neiman Marcus, the investment in Fashionphile—the terms of which were not disclosed—is its second attempt at cracking what some call the “preloved” market. A partnership with The RealReal ended in 2016, a year after it launched. Chanel had expressed displeasure with the arrangement, according to people familiar with the situation. A Neiman Marcus executive previously told The Wall Street Journal that the partnership did not make sense at the time for the retailer or its customers.

“We are at a different point in time than we were three years ago,” said Neiman Marcus Chief Executive Geoffroy van Raemdonck. “The resale industry has grown faster and is now something our customers are much more engaged in.”

According to a survey conducted by Neiman Marcus, half its customers buy or sell preowned luxury goods.

Neiman Marcus plans to introduce Fashionphile “salons” to some of its stores, where customers can drop off handbags, jewelry and other accessories. Unlike some of its competitors that operate on a consignment model, Fashionphile pays sellers on the spot for their goods once they have been authenticated. To buy the secondhand goods, shoppers will have to visit Fashionphile’s website or one of its four boutiques.

Mr. van Raemdonck said the move is part of a strategy to increase Neiman Marcus’s reach. “We want customers to think of us for all the categories we sell, but also those we don’t currently offer,” he said. “Recommerce is one of those areas.”

The hope is that once they receive the cash, shoppers will spend it buying new items at Neiman Marcus. The retailer plans to test different types of incentives to encourage customers to do that, but Mr. van Raemdonck declined to elaborate.

One challenge for luxury resellers has been opposition from brands, who worry that the secondary market degrades their image. Chanel is suing The RealReal for allegedly selling counterfeit products. The RealReal denies the claims.

Mr. van Raemdonck said Neiman Marcus won’t sell any secondhand products in its stores. By allowing customers to drop off their preowned goods, it is simply providing a service they want, he said.

A previous lawsuit by Chanel against Fashionphile was settled when the reseller agreed to change some wording on its website to make it clear it isn’t affiliated with Chanel, according to Ben Hemminger, Fashionphile’s chief executive.

“Chanel will one day recognize that resale isn’t going away,” said Sarah Davis, Fashionphile’s president, who started the company in 1999 after selling her own luxury handbags on eBay Inc.

“I always wanted to own things that I couldn’t afford, but I realized that I could afford them if I bought them secondhand,” Ms. Davis said.

Mr. Hemminger said Fashionphile is on track to sell USD 200 million worth of goods this year, up 50% from a year ago. That is smaller than RealReal and other luxury resellers such as Vestiaire Collective, according to analyst estimates. Unlike those players, Fashionphile only sells handbags and accessories, not clothing.

Fashionphile says the average bag sells for USD 1,400. It has sold trendy items such as Chanel handbags designed in collaboration with the musician Pharrell Williams as well as Chanel Classic Flap bags.

“Fashionphile shares with us the mentality that they will only sell the best products,” Mr. van Raemdonck said. “Other players might be bigger, but they are truly luxury.”