True Value: A Dive Inside Secondary Luxury Market
There is a metric that most luxury brands ignore (minus Rolex!) and almost no analyst talks about. It's secondary market value, and specifically how quickly a brand's product moves on the resale market, and at what premium relative to original retail.
I've spent the last two years operating in the secondary market for luxury menswear. What started as a “fun” $7,000 experiment in pricing inefficiencies has become a $230,000+ business built entirely on a few aspects: seasonal timings, product research (and to some extent, extremely deep and specialized knowledge in the industry), but also an understanding of the secondary market dynamics. Here is a very quick breakdown:
Brand is king. This identifies your buyer pool and their spending power.
The more expensive the product, the less buyers (obviously). But I’ve found these to generally be the highest ROI, attract exceptional professionals (great for networking!), and space allocation for inventory is less troublesome.
The type of product will attract a different subcategory of buyers. I’ve only had people in the startup space, luxury retail, lawyers, and C-suite individuals buy suits and blazers. Think client-facing roles where first impressions and the way you dress signals things to prospective investors and customers.
Very few care about the specifics of a product. They need to know a few things: does it fit, can I afford it, and will I regret this?
There are some exceptions to this rule, but nobody actually cares (besides me) about when a company was founded, what makes the material so special, if it’s sustainable, if it’s vertically integrated, and how skilled the artisan is at stitching. Not in a snobbish way, but realistically, they’ve heard either online or from friends that a brand does something well. And hopefully, they trust this source enough to drop thousands on clothing, so you don’t need to sell someone something they already want.
Don’t bother trying to list things for a steal.
This is one of the most bizarre observations I’ve made. The existence of luxury as a category defies logic and economics. Normally, people love discounts and finding bargains. Who doesn’t? But this has happened to me too many times to be a coincidence. Products get sold faster the more expensive they are. I’ve tried to do inventory clearance a ton of times, discount a bunch of products that haven’t sold for 3-4 months. Literally no one touches it. The second the discounts expire and they (accidentally) go back up to full retail price, I get 3 offers on it the next morning. Imagine this. A sweater that retails for $2,000. I’m selling it for half that, but no one touches it at that price so I lower it to $600. No views, no saves, no offers, nothing. After a month, the discount event ends and it shoots back up to $2,000. I get several offers at $1,200-$1,500. I’m not complaining though. Just an observation.
I’m reading this again and realizing that none of the points are realistically relevant maybe except the first one. I personally think that it’s important to understand the psychology of your buyers to do correct client profiling. Let’s get into something more fascinating; the brands, their premiums, and an analysis of why they command such prices. I am only going to do one brand that has absurd secondary market value, and another that is severely undervalued.
Brunello Cucinelli: The King of Cashmere and Overpriced Pants
This is a name anyone remotely in the industry would recognize. Without boring you of the details, Mr. Brunello was born quite poor but had a love for brightly colored cashmere sweaters, something that was different at the time since boring beiges, navy, and grey dominated the market. He eventually garnered the attention of consumers for being exquisitely made, at a fair price point, and unique. Eventually, cashmere wasn’t enough and his company has since expanded to encompass a complete lifestyle, with shoes, hats, leather goods, and pants that are too tight. His edge however, is the sense of duty and morality he instills upon his global billion-dollar brand. He pays his workers 25% more than the average wage, has long and free lunches with wine, no one is allowed to work past 5pm, and he donates a chunk of the profits towards education and revitalizing his wife’s hometown.
The brand image and storytelling is on point. The ideal customer profile he has inadvertently targeted is… everyone? Specifically, everyone who can afford the exorbitant prices, cares about people (?), and likes ethically, well made clothes. Analyzing the secondary market, we expect a used sweater that retailed for $1,500 to be maybe 80-90% off? I would say logically $200 for a used sweater is pretty generous. It’s more like $600.
Lanificio Colombo: The Actual King of Cashmere
No one knows this name. They are a third generation family owned fabric mill that is venturing into producing garments from their own textiles, which to say is possible the best cashmere money can buy. There is no clear narrative, no storytelling, and no real marketing campaigns. They just simply make sweaters, pants, and blazers out of the most absurdly rare materials and proceed not to tell anyone about it. I feel like there is a perfect balance to be figured out here. Their superfine wool called “Kid Wool 12.8” is one of the rarest fibers on this planet. Specially bred merino sheep from Australia are able to achieve this low of a micron count (the name 12.8 is the diameter of a single strand of wool in microns, for reference a human hair is about 75 microns and cashmere is around 17 microns.), and brands like Loro Piana and Zegna named their same product line “The Gift of Kings” and “Vellus Aureum” (meaning golden fleece). How is anyone suppose to know you are competing in the same product category as two giants, selling the same product for half the price, when you don’t name your product as outrageously as them?
This is directly reflected in the secondary market where I’ve seen a brand new Kid Wool sweater that retailed for $2,500 sell for $400. The point isn’t to make fun of the brand, they are one of my favorites, but the people have spoken. It doesn’t matter how rare and expensive your product is, if you cannot properly articulate that to the customers and expect them to educate themselves, you’ve added several layers of friction. Brunello Cucinelli jumps over all the hoops and everyone without insane insider knowledge unanimously agrees that their product is great value and well-constructed, without needed to be educated by the sales associate.
I had to spend a thousand hours reading every single article and thread about fibers just to know who has the edge. But until they solve this hurdle, I will continue to enjoy the brand at absurd value.
The Third-Generation Founder of Lanificio Colombo
