The second-hand luxury market is becoming increasingly important for the sector
As part of our initiative to analyse the private company market, we take a closer look at traditional auction houses and online resale players which are increasingly relevant for public luxury goods companies.
Amid the growing importance of the second-hand luxury market, of which the annual Bain-Altagamma Luxury Goods Worldwide Market Study recorded as generating $1.6 trillion globally in 2023, many of the traditional auction houses have been focusing their efforts on selling high-end luxury items. The increasing popularity of those auctions, which in recent years have on many occasions fetched record-breaking prices, have boosted consumers' interest in luxury goods, both new and pre-owned. As this trend is set to continue, we believe investors cannot afford to ignore that market segment, which provides a window into brand desirability amid widening performance gaps between various luxury players.
What's the impact of the resale market on publicly listed luxury players?
In our previous work on the luxury resale market, we have been long of the view that an active and visible resale market benefits the luxury goods industry. UBS Evidence Lab and other industry sources suggest that the resale market:
(1) keeps consumers in the cycle, and thus fuels purchases in the primary market (i.e. proceeds from sale of pre-owned items are used to acquire new goods);
(2) validates the price paid for luxury goods (i.e. evidence that they keep value), thus making consumers more likely to buy such items; and
(3) helps to fight the counterfeit market (i.e. consumers can enter the category by buying authenticated pre-loved luxury goods rather than fakes).
But importantly, prices achieved in the resale market by various brands can help us understand their desirability, so important in valuing the publicly listed luxury players.
From auction saleroom to your closet
The traditional auction houses sell unique pieces of the most sought-after absolute luxury brands across all product categories such as ready-to-wear, handbags, watches and jewellery. This increasing focus of the long-established players on selling high-end luxury items has also boosted the wider pre-owned luxury market dominated by the online resale platforms, which allow the consumers to buy and sell their "pre-loved" goods from the comfort of their homes. Our discussions with industry experts suggest that the widely reported results of some of the auctions, such as Paul Newman's Rolex Daytona sold for a record $17.8m in 2017, have been driving consumers' interest in luxury goods as "collectables" and at the same time driving ever-widening performance gaps between the best performing and lagging brands.
