Mainland Chinese Tourists Are Seen with Luxury Brand Shopping Bags in Hong Kong China 17 May 2011 the Strength of the Chinese Yuan Against the Hong Kong Dollar Makes Shopping in Hong Kong Inexpensive For the Emerging Middle Classes of China who Often Travel to Hong Kong to Buy Luxury Goods and Even Apartments in the City China Hong KongChina Hong Kong Luxury Shopping - May 2011

SHANGHAI — On a visit to Paris, Zhen Yue fell in love with a small Gucci bamboo handbag. Then 23 years old, the white-collar worker was making less than 100,000 yuan, or about $14,500, a year in Beijing, yet she was willing to pay more than 3,000 yuan, or $440, for the fashionable bag. Showing off in front of her friends was important, but so was knowing that she’d be able to recoup some of the costs. “When I fell out of love with it, I sold it online for 1,500 yuan,” the legal secretary said.

In China, 70 percent of luxury goods are bought by white-collar workers like Zhen, who are willing to spend a large part of their income on high-end items, Daxue Consulting found in a 2014 report on China’s secondhand market. Designer handbags are particularly popular. As this aspiring middle class grows rapidly, online platforms are hoping to tap into their demand for luxury fashion by offering authentic goods marketed as “pre-owned.”

“The importance,” Daxue Consulting wrote, “resides in the ownership of an authentic luxury product with the potential to impress others.”

In Europe and the U.S., resale sites for high-end fashion such as The Real Real and Vestiaire Collective have long been popular, but more and more platforms are now trying to woo the Chinese middle class.

Homegrown site Secoo has been so successful with its secondhand luxury model that it secured $100 million in series D funding. Hong Kong’s Guiltless and Luxify, as well as Luxsens, entered the market in 2015. Last month, Japan’s secondhand luxury goods store Komehyo unveiled a joint venture with a Chinese investment management company, aiming to bring its products to the Mainland. All are labeling their goods “pre-owned” and seem to have found that impersonal, long-lasting items such as watches and handbags sell best.

“It’s the same as buying secondhand Maseratis. The Chinese want to floss,” said Kenny Au, cofounder of Luxsens, a Shanghai-based company supported by the country’s biggest start-up incubator, Chinaccelerator. Currently, a “gently used” Salvatore Ferragamo Thalia cocktail leather clutch sells for $412, or more than $700 off the original price, and a medium Fendi 2Jours goes for $1,450, while new ones sell for around $2,350.

While only 4 percent of the urban population was considered middle class in 2000, the consultancy firm McKinsey & Co. expects that number to grow in the next five years to 76 percent. Using current population figures, that would be 550 million people. Many of them will make less than $35,000 a year, leaving most luxury products out of reach — unless they’re secondhand and sell for between 30 percent to 70 percent off their original prices.

Reseller Milan Station, which started out in Hong Kong, became one of the first to introduce authentic, secondhand luxury handbags in major cities on the Mainland, opening its initial store in Beijing in 2009. China is still known as the home of counterfeit goods, and buying products that cost less than the original makes many shoppers suspicious. Although the company’s brick-and-mortar stores were disorganized and messy, they were a success because customers were able to see and feel the products.

Ben Cavender, a senior analyst at China Market Research, has been observing the trend for several years, and said there’s a clear shift toward shopping for these items online.

While the barrier to entry for secondhand luxury sites is very low, Cavender said establishing trust is a major hurdle to their success. Taobao, the online retail platform of China’s Alibaba, launched a secondhand platform called Xian Yu, which reported more than 200,000 daily sales in 2016. But customers have complained that some of the few high-end items on the C2C site were fakes.

Penny Peng, a media-planning supervisor in Shanghai, said she would love to buy affordable luxury handbags. She knows of sites such as Xian Yu but has never bought one online. “How could I be sure that they are authentic?” she said.

Au agrees that trust is an issue, but he hopes that the content on his site will make the difference. In short blog posts, his team explains a product’s history, how the design came to be, how to tell counterfeits from originals — and from whom they are purchasing. Transparency is key. Like other platforms, he only works with sellers he has personally vetted and knows to be trustworthy — experts in secondhand luxury who’ve been in the business for a long time.

Luxify, a Hong Kong-based site that offers 60,000 products ranging from luxury watches and handbags to yachts, also works exclusively with established vendors, which are all established retailers.

“As soon as you start to bring in private businesses, you will get counterfeits, and the risk for our reputation is too high,” Luxify cofounder Alexis Zirah said.

Through travel, awareness of secondhand stores has risen among the middle class and that’s accelerating sales, Zirah said.

“In Japan and South Korea, secondhand luxury stores have been very popular for many, many years, and that is now driving purchases on the Mainland,” he said.

Travel has also increased the need for cheaper luxury fashion, Cavender said. White-collar workers used to spend large parts of their income on one or two luxury items a month, but as their needs are diversifying, buying habits are changing.

“They are still spending at a high rate, but many Millennial consumers now also want to spend more money on experiences, like overseas travel, and at the same time they don’t want to give up on these consumer goods,” Cavender said. Buying secondhand is the natural conclusion for many.

By 2020, spending by consumers between the ages of 18 and 35 is expected to drive 65 percent of consumption growth and account for 53 percent of China’s total consumption, according to research by the Boston Consulting Group and AliResearch.

And the sites have discovered that they often have an edge: Some handbags are seen as ultimate status symbols, like Hermès Birkins, partly because production is so tight that even wealthy Chinese shoppers would need to put their names on a waiting list at official stores. Online, though, many get lucky, in which case it’s only a matter of a few clicks.

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