Buying a Chanel bag in Korea has never been so difficult.
Major retailers are now tapping into the resale market, as second-hand luxury items are the only choice left for shoppers looking for high-end designers.
Popular bags such as the classic Chanel flap are almost never stocked in stores, leaving shoppers with two choices: spend an all-nighter outside the department stores and hope the bag will be stocked that day, which is called the ‘open run’, or buying a used one online.
On online second-hand market Bungaejangter, 13.4 billion won ($11.2 million) worth of luxury goods were sold last September, which accounted for 10% of the site’s total transactions that month. the.
The second-hand market was 20 trillion won in 2020 according to Statistica, with luxury transactions accounting for about 40% of the total. The market is expected to grow 25% year-on-year to reach 25 trillion won in 2021.
Although luxury items are mainly traded on online second-hand market platforms created by start-ups such as Danggeun Market’s Karrot and Bungaejangter, large companies are also entering the growing market.
The retail giants are coming to market
Second-hand marketplaces generate revenue through advertisements and commissions earned by users using their payment services.
Despite their popularity, they are not the most profitable businesses. The Danggeun market recorded 13 billion won in operating losses in 2020, compared to a loss of 6.8 billion won the previous year. It recorded revenue of 11.7 billion won, up 303% year on year.
However, large retailers have entered the market in hopes of winning over younger consumers and taking the lead in the growing business.
E-commerce service SSG.com, 50.1% owned by Emart and a subsidiary of Shinsegae Group, is the latest to join the race. The company announced in January that it would open a luxury resale platform later this year, in partnership with an online second-hand market company.
Although the partner who will work with SSG.com to offer resale services has not been named, Bungaejangter is one of the likely choices. Signite Partners – a venture capital arm of the Shinsegae Group 50% owned by Shinsegae International – invested an undisclosed amount in the second-hand market on January 11.
Venture capital spokesman Cho Hyung-joo said he highly appreciates Bungaejangter for “having a high ratio of customers in MZ generation compared to rival companies”, referring to the demographics of millennials. and Generation Z, people born between 1985 and 2010.
SSG.com will also launch a resale service specifically for customers who have purchased luxury items on its website, connecting them with people who want to buy second-hand designer items.
Shinsegae rival Lotte has also shown interest in the deal. Lotte Shopping last March acquired 93.9% of Joonggonara, another second-hand market, with a consortium led by Eugene Asset Management 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% year-on-year.
Lotte Department Store, also run by Lotte Shopping, signed a memorandum of understanding with sneaker resale service Outofstock in 2020, becoming the first department store to open a thrift store in one of its branches.
Korea’s second-hand luxury market is not only coveted by local players, but also by big global names.
Vestiaire Collective, one of the largest second-hand fashion outlets in the world, is about to start operations in Korea.
The Paris-based company has more than 11 million members in 2021 across the 80 countries in which it operates. It plans to start its 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 second-hand sales is on the rise, customer complaints have always existed. Much of the value of a designer bag is in the brand, and verifying authenticity isn’t easy to do with an unofficial transaction between two people.
Asking for an authenticity card, product serial number or invoice – if the seller still has one – are the few ways to ensure authenticity. Despite methods to avoid counterfeits, Joonggonara removed 26,000 counterfeit or potentially counterfeit products between January and September last year.
“I once considered buying a Chanel wallet from an online second-hand site, but decided against it because I could never verify the authenticity,” Ko Yeon said. -ju, a 27-year-old graduate student. “The online seller wrote that he would give me the authenticity card as well, but I still felt uneasy because it could also be fake.”
“I guess you have to trust the authenticity card you were given, but I decided to wait until the wallet was replenished and just bought a new one.”
In these individual transactions, large companies become intermediaries. They use their name as a credibility value, offering to authenticate the designer and freeing customers from worrying if they are buying counterfeits.
“In the past, the downside of second-hand trading was not being able to completely trust the other person and other downsides of the reselling process,” said Kim Myoung-joo, an analyst at Korea Investment & Securities. . “But now, local and global recommerce platforms buy items directly and offer services such as authentication guarantees, boosting product credibility.”
Dubbed the 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).
He didn’t say whether the service will be applied on the soon-to-be-launched reselling platform, but the company says it’s effective for second-hand trading because NFTs “can be sent to others by one click when reselling them.”
Twice the original purchase price is compensated to the customer if the item turns out to be a fake.
People who want to sell on Naver’s sneaker resale platform, Kream, must send the shoes to the company. They are only allowed to sell after Kream’s team of authenticators determines that the sneakers are not counterfeits.
A certificate of authentication is sent with the purchase and the company compensates three times the price paid if the sneakers are found to be counterfeit.
A growing market?
With new players, the market has the potential to grow rapidly.
“It’s not ideal for conglomerates to dominate the market, but there’s a much lower chance of people buying counterfeits when using conglomerate-run services,” said Lee Eun-hee, professor of Consumer Studies at Inha University. “People are financially and emotionally drained when duped by counterfeit items, and they would even be willing to pay an extra price to conglomerates to authenticate luxury goods and help buy them safely.”
Traditional retailers like Lotte and Shinsegae are household names with older generations, and their long-accumulated corporate image of credibility is another factor that can help.
“There are a lot of people in their 40s and 50s who are interested in buying luxury goods, but don’t want to spend time on ‘open groceries’ or worry about being ripped off by items. counterfeit when buying from second-hand platforms,” Lee said. “If conglomerates enter the market and reliably compete in second-hand luxury sales, then people in their 40s and 50s will actively join in.”
However, large retailers can continue to take a conservative approach and only offer resale services through partnerships or focus on investments. Ensuring the authenticity of luxury items is an activity that attracts customers, but also a double-edged sword that could backfire if a counterfeit product is mistakenly approved.
BY LEE TAE-HEE [[email protected]]