In the battle for luxury goods, secondhand sellers see success
Buying a Chanel bag in Korea has never been more difficult.
Big retailers are now tapping into the resale market as secondhand luxury items are the only choice left for customers lusting after high-end designer.
Popular bags such as the Chanel classic flap are almost never stocked at stores, leaving shoppers with two choices: Pulling an all-nighter in front of department stores and hoping that the bag is stocked that day, known as the "open run," or buying a secondhand one online.
On online secondhand marketplace Bungaejangter, 13.4-billion-won ($11.2 million) worth of luxury goods were sold last September, which accounted for 10 percent of the total transactions on the site that month.
The secondhand market was 20 trillion won in 2020 according to Statistica, with luxury transactions making up for some 40 percent of the total. The market is expected to rise 25 percent on year to 25 trillion won in 2021.
Although luxury items are mostly traded on start-up-made online secondhand marketplace platforms such as Danggeun Market's Karrot and Bungaejangter, big name companies are also entering the growing market.
Retail giants reach the market
Secondhand marketplaces generate revenue through advertisements and commission earned from users using their payment services.
Despite their popularity, they are not the most profitable businesses. Danggeun Market saw 13 billion won in operating losses in 2020, compared to a 6.8 billion won loss the previous year. It logged revenue of 11.7 billion won, up 303 percent on year.
However, big retailers have been entering the market in hopes of winning over young consumers and taking the lead in the growing business.
E-commerce service SSG.com, which is 50.1 percent owned by Emart and an affiliate of Shinsegae Group, is the latest to join the race. The company announced in January that it will be opening a luxury resale platform within this year, partnering with an online secondhand marketplace company.
Although the partner that will work with SSG.com to offer resale services was not named, Bungaejangter is one of the likely choices. Signite Partners — a venture capital arm of Shinsegae Group 50 percent owned by Shinsegae International — invested an undisclosed amount into the secondhand marketplace on Jan. 11.
The venture capital’s spokesperson Cho Hyung-joo said they highly valued Bungaejangter for “having a high ratio of customers in the MZ Generation compared to rival companies,” referring to the demographic of millennials and Gen Z, people born between 1985 and 2010.
SSG.com will also start a resale service specifically for customers who bought luxury items on its website, connecting them to people who want to buy the pre-owned designer goods.
Shinsegae’s rival Lotte has also been expressing interest in the market. Lotte Shopping last March acquired 93.9 percent of Joonggonara, another secondhand marketplace, with a Eugene Asset Management-led consortium for 100 billion won. Joonggonara started as an online community in 2003, and was incorporated as a venture company under Qdillion. There were 5-trillion-won worth of items sold on the company's website and app in 2020, up 43 percent on year.
Lotte Department Store, also run by Lotte Shopping, signed a memorandum of understanding with sneaker reselling service Outofstock in 2020, becoming the first department store to open a secondhand store in one of its branches.
Korea’s secondhand luxury market is not only eyed by local players, but also by big global names.
Vestiaire Collective, one of the biggest pre-owned fashion sales websites in the world, is set to start business in Korea.
The Paris-based company has over 11 million members as of 2021 across the 80 countries it operates business in. It plans to start service in Korea in the first half of this year and is currently hiring employees and a team of authenticators.
Authenticity in question
Although the popularity of secondhand selling is on the rise, customer complaints have always existed. Much of a designer bag's value lies with the brand, and verifying the authenticity isn't easy to do with an unofficial transaction between two individuals.
Asking for an authenticity card, serial number of the product or invoice — if the seller still has one — are the few ways to assure authenticity. Despite methods to avoid fakes, Joonggonara took down 26,000 products that were counterfeit or could possibly be fake between January and September last year.
"I once considered buying a Chanel wallet from an online secondhand website, but I decided not to because I could never verify the authenticity," said Ko Yeon-ju, a 27-year-old graduate student. "The online seller wrote that they would also give me the authenticity card, but I still felt uneasy about it because that could be fake as well."
"I guess you have to trust the authenticity card you're given, but I decided to wait for the wallet to be restocked and just bought a new one."
In these one-on-one transactions, big companies are becoming the middle men. They use their name value as credibility, offering to authenticate designer and saving customers the trouble of worrying if they're buying fakes.
“In the past, the downside of secondhand trading was not being able to entirely trust the other person and other inconveniences of the resale process,” said Kim Myoung-joo, an analyst at Korea Investment & Securities. “But now, both local and global recommerce platforms directly buy items and offer services such as authentication guarantees, enhancing the credibility of the products.”
Dubbed SSG Guarantee, SSG.com hires a team of professionals to verify the authenticity of luxury products — even brand new items — sold on its website. It issues a certificate of authenticity in the form of a non-fungible token (NFT).
It hasn’t stated whether the service will be applied on the soon-to-be-launched resale platform, but the company says it is efficient for secondhand trading because the NFTs “can be sent to others with a click of a button when reselling them.”
Twice the original purchase price is compensated to the customer if the item is found to be fake.
People who wish to sell on Naver's sneaker resale platform Kream need to send the shoes to the company. They are only allowed to sell after Kream's team of authenticators determine the sneakers aren't a fake.
A certificate of authentication is sent with the purchase and the company compensates three times the paid price if the sneakers are found to be counterfeit.
A growing market?
With new players, the market has the potential to grow rapidly.
"It isn't ideal for conglomerates to dominate the market, but there is much less chance for people to buy fakes when using services run by conglomerates," said Lee Eun-hee, a consumer studies professor at Inha University. "People get financially and emotionally drained when they are fooled by counterfeit items, and they would be willing to even pay an additional price to the conglomerates to authenticate luxury goods and help to buy them safely."
Traditional retailers like Lotte and Shinsegae are familiar names with older generations, and their long-accumulated corporate image of being credible is another factor that can help.
"There are many people in their 40s and 50s who are interested in purchasing luxury goods, but don't want to spend time on 'open runs' or worry about being scammed by counterfeit items when buying from secondhand platforms," said Lee. "If conglomerates enter the market and intermediate secondhand luxury sales in a trustworthy way, then people in their 40s and 50s will actively join in."
However, big retailers may continue to take a conservative approach and only offer resale services through partnerships or focus on investments. Guaranteeing the authenticity of luxury items is a business that attracts customers, but also a double edged sword that could backfire if one counterfeit product gets mistakenly approved.
BY LEE TAE-HEE [firstname.lastname@example.org]