BY LISA JUCCA

The circular economy will take off in style. A propensity for thrift instilled by the pandemic hit and a growing desire to curb pollution will prompt shoppers to swoop on pre-owned high-end clothing and accessories. That’s a boon for resellers of high-quality old Gucci bags or Prada frocks that can last a generation or more. The luxury houses themselves could even get involved.

Old goods are the new new goods. Denim maker Levi Strauss in October launched a buyback platform. Weeks later furniture giant Ikea opened its first shop for repaired furniture, and Amazon.com has been offering refurbished electronics since 2015. The durability and charm of a Louis Vuitton Speedy bag, first launched in the 1930s, allow it to retain much of its monetary value as it gets handed along. Because of scarcity, Hermès International’s used leather items tend to cost 10% more than the retail price.

Before the pandemic, second-hand luxury goods sales were already growing three times faster than the primary market and were expected to double to 41 billion euros between 2018 and 2023, says UBS. But the potential stock of goods is much larger. About 60% of a woman’s wardrobe sits idle in her closet, says U.S. reseller ThredUp. Based on the $1.4 trillion of high-end shoes, bags and clothes sold over the past 10 years, according to Breakingviews calculations based on Bain & Co estimates, and applying a 30% discount to the original price, that’s around $600 billion of goods waiting to come back into circulation.

For online players like The RealReal and Vestiaire Collective, which sell fancy items from multiple brands, that means tapping into a potential revenue stream of $120 billion, when applying a typical 20% commission. Or higher, if the same item is repeatedly passed on.

Online marketplaces are already on the case. But reselling such items could also tempt plush players like Kering’s Gucci or Burberry, which have already conducted pilot projects. Margins would probably be lower than for their new products. After all, pre-loved apparel has to be vetted and, if necessary, buffed up.

Still, it’s worth it. Up until the pandemic struck, the fashion industry was responsible for 10% of annual global carbon emissions and was the second-largest consumer of water, according to the World Economic Forum. Given that poor record, investors and customers alike may develop a new regard for brands that choose to embrace the virtuous circle.

First published December 2020