The retailer’s almost 3-year-old investment in online luxury preowned retailer Fashionphile was a bold idea that’s paying off for both companies and customers.
By guest author Maria Halkias from Dallas Morning News
Neiman Marcus is moving deeper into the luxury resale business, but it’s not selling pre-loved Chanel, Gucci and Louis Vuitton, it’s buying it.
Three years ago April, when Dallas-based Neiman Marcus made an investment in online ultra-luxury reseller Fashionphile, it was considered a bold move. The idea is paying off for both companies and for customers ready to cash out a once-loved handbag or pair of shoes to pay for a new pair of boots.
To date, through the partnership, consumers have sold 43000 luxury items at Fashionphile’s selling studios in Neiman Marcus stores and were paid USD 47 million for those goods.
That’s a lot of expensive stuff that was collecting dust in the closet, although at this level, handbags are stored in their own cloth bags.
Neiman Marcus has opened 10 Fashionphile shops in its stores, including at NorthPark Center in Dallas. The newest Fashionphile selling shop opened in December in the Neiman Marcus at Austin’s Domain shopping center. At least five more are in the works for this year in San Antonio; Las Vegas; Troy, Mich.; Short Hills, N.J.; and Northbrook, Ill.
There’s still some confusion about the relationship. Sarah Davis, Fashionphile founder and president, is often asked how she got Neiman Marcus to sell preowned handbags.
She didn’t and it doesn’t.
“I explain the circularity of the process — customers taking something from their closet — to shop at Neiman Marcus. You now have a gift card and those USD 1100 boots you want are free,” she said. The reaction she gets is, “Oh, that’s brilliant.”
Customers drop off their item and browse in the store while it’s authenticated. That takes about 20 minutes, and when the customer returns, she’s handed a check or can opt for a Neiman Marcus gift card and get 10% more.
“It’s a lovely strategic relationship. These were all quality purchases of things that have value, and we just help the customer spend that value, some of it at Neiman Marcus,” Davis said.
Neiman Marcus’ network of 350 digital and in-store stylists with their “fantastic client lists” have been brought into the Fashionphile fold, said John Walls, spokesman for Neiman Marcus. The stylists provide “white glove” service with customers in their homes and handle the entire resale process. Neiman Marcus stylists will help customers go through their closets to find items that shoppers are ready to sell.
About 65 % of the customers who sell through the stylist program opt to take a Neiman Marcus gift card with the 10 % bonus, Walls said.
“Our core customers are refreshing their closets, and younger customers and people looking for a more sustainable option are encouraged to shop at Fashionphile,” Walls said.
Luxury brand loyalty is showing up in the process, he said. It’s common to see customers sell to Fashionphile and come straight back into the store and buy the newest item of the same brand.
The items are resold through Fashionphile, not in Neiman Marcus stores. Fashionphile sells online and has showrooms in California and New York.
Fashionphile has partnered with another Dallas-based company, Neighborhood Goods, to open two pop-up shops in Texas, at Legacy West in Plano and on South Congress Avenue in Austin.
Davis said she’s impressed with the customer traffic on South Congress and the luxury tenants at Legacy West. Gucci, Louis Vuitton and Tiffany & Co. opened stores at Legacy West last year.
The Neighborhood Goods pop-ups opened in August in larger spaces than is usually carved out for a brand in the store, which was created to feature online direct-to-consumer brands.
Matt Alexander, CEO of Dallas-based Neighborhood Goods, said it’s been a great partnership. This is only the second time it has dipped into the preowned market. The first time was sneaker seller Stadium Goods, which was acquired by Farfetch in 2018.
Fashionphile is hosting a SXSW 2022 panel in the Neighborhood Goods store in March.
Davis founded California-based Fashionphile in 1999 by selling handbags on eBay out of her bedroom. Having Neiman Marcus invest in her company 20 years later was “a Cinderella story” for her, she said. “The first 13 years I had zero competitors, and we had been bootstrapping our business without any raised money,” Davis said.
But with the influx of competition, she needed outside investors to keep growing her business. Neiman Marcus came calling as she was seeking funds from private investors.
Fashionphile received its second round of funding, USD 38.5 million, in 2020 from private equity group NewSpring Capital.
he secondhand luxury goods market was a USD 37.5 billion segment last year, according to Bain & Co. That’s up 65 % in five years, and Bain projects that it will keep growing.
Fashionphile competitor The RealReal opened a store on Knox Street a year ago and has formed partnerships with Gucci, Burberry, Stella McCartney and Alexander McQueen to help the brands cash in on the circular economy.
Most luxury consumers, as many as 80 %, are still strictly new-product buyers, according to a McKinsey & Co. report released in November.
Luxury preowned sellers mostly sell items to free up space (41 %) or to change their style (36 %). About 26 % said they needed some extra cash to buy a similar premium product, and 20 % simply said they needed the money.