China’s corruption crackdown is helping fuel a second-hand luxury market

November 5, 2013
Obsession
How We Buy
November 5, 2013

As fur coats and Swiss watches fall out of vogue among China’s elites facing a corruption crackdown, another luxury sector is quietly thriving. The second-hand luxury market has seen a jump this year, according to a survey of stores by Fortune Character Institute, FCI, a Chinese luxury lifestyle publication.

China’s second-hand luxury stores range from independent boutiques selling, renting, or repairing designer wares to chains like Hong Kong’s Milan Station or Japan’s Brand Off, both of which have stores on the mainland. (They’re not to be confused with the stalls full of fake Vuitton in Beijing’s famous Silk Street Market.) Online operations have sprung up too, such as Secoo.com, which has around 600,000 registered users.

Second-hand designer goods can cost as little as a third of their original price. On Secco, a Louis Vuitton bag sells for 2,750 yuan or $450 (link in Chinese), compared to a retail price of 8,350 renminbi. Rare or limited-edition items can even fetch more second-hand than the original price.

According to the FCI survey of about 200 second-hand luxury shops in Beijing, Shanghai and Guangzhou, sales totaled about 3 billion yuan ($490 million) in the first half of 2013. That’s pretty small compared to China’s overall luxury market, worth about $18 billion in 2012 (paywall) according to Bain & Company. But it’s a 30% jump from the year before. FCI posits that the second-hand luxury market could grow 20% this year, which is about how much sales in China’s traditional luxury sector grew in 2012. (Analysts are expecting the traditional luxe sector to grow a measly 5% to 7% (paywall) this year.)

The number of second-hand stores has grown too, to a little over 800, from just over 500 last year. Stores have been setting up in smaller cities like Changsha, Hangzhou and Chengdu as well as in larger, wealthier urban centers, the publication said.

While China’s austerity campaign and the increasing scrutiny of officials’ behavior by Chinese bloggers are likely helping, second-hand stores have been around for a while, as a way for wealthy Chinese to sell off unwanted goods. Pawn shops began appearing in the country in the 1990s and copycat stores of Milan Station, the second-hand luxury chain from Hong Kong, were all over the country by 2011. Today, second-hand stores always see extra business after the holidays when the most “gifting” occurs. Another explanation is that as more Chinese travel abroad—especially in Asia where second-hand luxury stores have been popular for years in Japan and South Korea—they’ve become more accepting of the idea of wearing someone else’s expensive hand-me-downs.

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