Luxury resale leads the way for growth

26 Aug 2020 , 7:48pm

The pandemic has escalated the luxury resale marketplace, but unless there's a relationship between brand and reseller, counterfeits will remain a problem, says Kate Goulding at IP specialist law firm HGF.

In the most recent turbulent months, financial forecasts for the luxury market have made for an uncomfortable read. Consulting firm Boston Consulting Group has estimated a shortfall in luxury sales of up to $600 billion worldwide compared to last year’s figures for the industry.  However, the pandemic is only one of a number of circumstances having impact - and not all impacts are necessarily as bleak. 

Emerging trends in recent years are also opening pockets of luxury to new opportunities which, in current times, have the potential to offset some of the fallout of recent months. Some divide opinion but one thing that is consistent is the important role that intellectual property has to play in safeguarding the luxury sector in new landscapes, protecting reputation, minimising losses and fortifying their brands for recovery and reward in the years to come. 

Luxury resale is one corner of the sector that continues to grow and grow. Consumers have, for obvious reasons, turned to online purchasing with a furore like never before during lockdown but consumers are also selling at an increased rate – clear-out, minimalise and make money have opened up the access to “Instagrammable” designer goods at achievable price points. 

Second-hand luxury platform Vestiaire Collective is reported to have seen its daily listings increase by 33% since the pandemic hit  but it could be the solid investment of €59 million it secured in the thick of a pandemic that tells us why luxury brands might want to give real consideration to collaboration or proprietary digital innovation in the resale sector; investors are now looking to ventures that can show resilience in the worst times and that answer a collective pressure for environmental consciousness. The pandemic might have accelerated the trend but luxury resale had already started to climb up on the industry’s list as consumer demand for a circular economy continues to impact purchasing choices, especially of younger aspirational generations. 

The fashion ecosystem is changing. Stella McCartney is a designer that has been ahead of the curve. Working in partnership with TheRealReal, sellers of pre-owned items from the eponymous brand are rewarded with a $100 discount at Stella McCartney. Such a partnership model offers a clear benefit for IP; greater control over authenticity and product lifecycle. The relationship can encourage further discussion and support for the authentication process and a together effort to kerb counterfeits; after all, the success of a luxury re-seller relies on its community being able to trust its authentication process. Add to this a financial incentive that drives sellers back to the manufacturer for a fresh replenish of their wardrobe and the argument that resales undermine first sale figures starts to diminish. 

However, without a relationship between brand and reseller, or an absolutely water-tight verification process with experts in the field, counterfeits will continue to be a problem on these platforms. That is less of a concern of course where manufacturers take control by investing in their own technologies and resale channels, or acquiring those of others like, for example, H&M’s control in Sellpy.

At the time of writing, the case between Chanel and TheRealReal continues with claims of trademark counterfeiting and infringement still standing and a decision is scheduled for early-mid 2021. The Judge’s summary on the infringement claim highlights clearly the risk and liability for direct infringement faced by resale platforms: "By adopting a business model in which The RealReal itself controls a secondary market for trademarked luxury goods, and by curating the products offered through that market and defining the terms on which customers can purchase those products, The RealReal reaps substantial benefit. As a result of this business model, The RealReal must bear the corresponding burden of the potential liability stemming from its 'sale, offering for sale, distribution, [and] advertising of' the goods in the market it has created.” 

Whether brands like it or not, resale is an exploding trend and IP strategies need to account for it. At a minimum, this should include reviewing geographical protection against delivery countries of the reseller, not just the brand’s own commercial territories (though one would expect that the market for the latter drive the markets for the former). At a time when the sector is facing such enormous decline, revised IP strategies will inevitably include trimming and delaying IP expenditure but monitoring legitimate reseller platforms (not just sites ‘notorious’ for fakes) can be undertaken at little to no cost with measurable benefit, albeit resource and capacity of in-house teams will determine the capacity and scope of such investigations if external software isn’t used. 

Invariably, education around product and brand to reseller platforms can assist with reducing the number of instances that fakes slip the net during the authentication process, however putting a formal agreement in place instead is preferable to provide for a measurable financial return, thereby maximising the value of the brand’s IP and allowing the manufacturer to access vital data held by resellers about the demographics and expenditure of brand followers. With an agreement in place, there is also an easier argument of a trade mark being used with the consent of the proprietor for creating or maintaining a market share, thereby mitigating the risk of losing registrations to revocation actions where the only use is second-hand use; not a concern for the house brands but potentially a growing grey area for those named products that now fall squarely within “vintage” without any new productions. Take for example the Jackie handbag which has just seen its relaunch by Gucci after over 10 years of only being available in the second-hand market. Certainly for the more famous named goods, no longer being produced but ripe for revival because of the size of following, a strategy that secures ongoing protection and renewal may be warranted. 

We watch with keen interest to see if collaboration between brand and resale increases as luxury resale thrives in a world causing the sector to flounder. 

Katie Goulding is a senior trade mark attorney at European IP specialist, HGF and a member of its dedicated fashion and retail team