Resellers invest in new technology to compete – Glossy
In early March, the luxury conglomerate Kering took a minority stake of 5% in the French luxury resale platform Vestiaire Collective. It was one of the most significant crossroads between the worlds of luxury brands and resale.
There have long been conflicts between the two sectors, most evident in the ongoing legal battle between The RealReal and Chanel. But increasingly, luxury brands are starting to see retailers as allies rather than enemies. When the company invested in Vestiaire Collective, François-Henri Pinault, CEO of Kering, called the resale a “real and deeply rooted trend” in a press release. And the Kering Gucci brand has embraced resale since collaborating with The RealReal last October.
As retailers grow, they compete more directly with fast fashion than with the luxury brands themselves. Resellers are focused on laser scaling, and they are currently looking to do so through new investments in technology that enables algorithmic curation and AI-based authentication.
Tracy DiNunzio, CEO and co-founder of luxury resale platform Tradesy, said the technology her team has invested in has helped the company grow significantly over the past year. Site registrations grew 50% year-over-year in 2020, thanks to new behind-the-scenes technology like a personalization algorithm that delivers relevant items to consumers based on their previous purchases and history. of research. DiNunzio said the technology has generated thousands of new conversions per month since its introduction in early 2020.
“Our goal is to eradicate fast fashion,” said DiNunzio. “You can buy a well-made designer dress for $ 80 to $ 100 on Tradesy, when it would cost $ 500 at a retailer. This puts us in direct competition with fast fashion. We don’t want to compete with luxury brands or even other resellers because we believe there is a lot of room in resale so you don’t have to compete. But we want to compete with fast fashion. As a result, brands are starting to see us as friends and not as enemies. “
Fast fashion and resale are targeting the same customer, DiNunzio said: someone who wants luxury style at a lower price than the brands offer. She compares luxury trade and resale, in general, to the small leather items displayed on the front of Tiffany & Co. stores, which are generally much more affordable than other pieces in the store. These items are intended to provide customers with a lower barrier to entry, in the hope that they will purchase something larger in the future. Resale can work the same way, allowing customers to get a taste of a brand at a lower price before buying something at full price later. This was Gucci’s strategy when it partnered with The RealReal last year.
But fast fashion has the advantage of scale and speed. While a fast fashion factory can produce thousands of new items per day, resale is comparatively much slower, especially for platforms like The RealReal which must treat each item as a unique SKU. According to several platform reps interviewed for this story, the only way to scale reselling is through technology.
In mid-2020, DiNunzio restructured several of its in-house teams, with a focus on research and development. As a result, over 50% of the business is now made up of engineers working on various technology efforts, like Tradesy’s internal authentication tool and its new system to facilitate shipments between buyers and sellers on the platform. .
While DiNunzio said she doesn’t have any partnerships with any luxury brands she can talk about publicly, she shared that the brands have had a noticeable change in tone over the past year, showing more interest. for collaboration.
“Five or six years ago the commercial side of big brands started to take a little more interest in working with us, but a lot of designers, on the designer side, were still skeptical,” she said. “And that is really starting to change drastically.”
The Rebag resale platform has also invested in the technology. In February, the company launched an extension of its “Kelley Blue Book for handbags” program called Clair, with Clair AI. The new mobile app allows customers to scan any handbag (or the image of a handbag in an online store or print ad) and receive an immediate price estimate for Rebag. Founder Charles Gorra said his team of 30 engineers is the largest team in the business and absorbs the majority of the company’s budget. They spent six years working on the technology.
“That’s why we’ve raised a few fundraisers,” Gorra said. The company raised $ 15 million in May and $ 25 million in 2020. “This funding has been put to good use and our technical team has grown with each funding cycle. Resale can only evolve effectively with technology. “
Gorra said that one of the planned use cases for Clare AI is to push customers to buy a new handbag, knowing that they will then be able to sell it for 80% of the price, for example. This will encourage customers to buy directly from luxury brands, rather than buying fakes or similar products from fast fashion companies.
In 2020, Vestiaire Collective’s turnover and sales volume increased by more than 100%. According to the company, it now plans to hire 155 new people for its technology team. Ed Lavery, director of investor solutions at data firm SimilarWeb, said the majority of Vestiaire Collective’s conversions – around 54% – come from direct searches for the company. The resale market as a whole is ready to reach $ 64 billion annual sales by 2025.
“This is a positive signal because direct traffic tends to be the most targeted, with visitors specifically looking for the website in question, ”Lavery said.