Shoppers trading down on luxury second-hand purchases: Report

Luxury retail platform The RealReal (REAL) is reporting that shoppers are pivoting toward trade-down purchases on second-hand luxury items. Yahoo Finance's Alexandra Canal, Josh Schafer, and Pras Subramanian take a look at luxury spending patterns from younger consumers and growing demand in second-hand retail markets.

Video Transcript

ALEXANDRA CANAL: Well, from creators to consumers, this is an interesting story. The RealReal, which is a luxury resale platform, it's noting how a lot of consumers are still buying the Gucci bags. They're still buying these luxury brands. However, they're looking for more value.

So they're seeing more people gravitate towards a fair deal. So maybe they're going to purchase a bag that's in not great condition or perhaps a cheaper price comparatively. So interesting to see that even the luxury consumer, they're trying to be a little more picky and going towards value. And that's coming as we know the consumer has been really resilient within this current macro environment, too.

JOSH SCHAFER: Demand for bags in, quote, "fair conditions" up 130%. That sounds like you're probably searching for a used bag, right, that's still in decent shape.

ALEXANDRA CANAL: Totally. And that's what The RealReal is.

JOSH SCHAFER: Right. And so I think that's just an interesting takeaway, right, is you're seeing people look for something that is, quote, "lightly used" or "in fair condition" rather than new. I mean, if you're feeling really good about things, you'd probably just get the new bag, right?

PRAS SUBRAMANIAN: Well, the report says that fair is the lowest tier of quality on The RealReal. But hey, taking us a step back here. It's The RealReal talking about how, hey, the shoppers are more savvier. You had The RealReal saying that, right, because they want you to shop on RealReal.

ALEXANDRA CANAL: Totally.

PRAS SUBRAMANIAN: But I think it echoes what LVMH said about a month ago. They're seeing a little bit of weakness, especially in the States, on the high-end luxury consumer. Maybe they're trading down to The RealReal, maybe they're trading down to Grailed, things like that, where they can get good stuff that's used.

I mean, I don't know much about that from a younger shopper point of view. The report mentioned Gen Z and millennials are into that kind of stuff, but I'm not sure. But I guess there is a trend here.

ALEXANDRA CANAL: Totally. And there is this interesting graphic that was up about how lab-grown diamonds are becoming more of a thing and, basically, that you could get a diamond that's half the cost of a mined diamond. I know people have hot takes about this, but--

JOSH SCHAFER: Wow. Pras said we were out of his wheelhouse when talking about Gen Z shoppers. Lab-grown diamonds, I--

ALEXANDRA CANAL: Oh, that's Gen X. Excuse me. Gen X.

JOSH SCHAFER: I couldn't say I've done a lot of googling. But I think it is interesting, the brands that people are interested in still, too, right? That Gucci still pop-- like these brands--

PRAS SUBRAMANIAN: Right, they still want the high-end brands.

JOSH SCHAFER: Yeah, they still want the high-end brands. They just want it used. But a good overall sign you would think, if you are the luxury brand, that your brand is still carrying the weight, right? If I only have $50, I still-- or $100.

ALEXANDRA CANAL: They're still putting that towards--

JOSH SCHAFER: It's probably not $50 for something used Gucci. They're still in the hundreds.

ALEXANDRA CANAL: Oh.

JOSH SCHAFER: You're still well-- well, used.

ALEXANDRA CANAL: Yeah, they're not $50.

JOSH SCHAFER: You're still in the-- you're still well in the hundreds.

ALEXANDRA CANAL: They've been used. I've been to a RealReal store. I was shocked at how expensive some of those things are, even used.

JOSH SCHAFER: Real expensive.

ALEXANDRA CANAL: Real expensive.

PRAS SUBRAMANIAN: And you know what they--

ALEXANDRA CANAL: And--

PRAS SUBRAMANIAN: Yeah, go ahead to it.

ALEXANDRA CANAL: Oh, no, I'm just going to say real expensive like everything else.

PRAS SUBRAMANIAN: Well, and they also have-- they also have vintage watches, they resell watches. And this is--

ALEXANDRA CANAL: There you go. That's what you're looking for.

PRAS SUBRAMANIAN: And this is not the same thing, but Rolex has their own CPO-certified pre-owned program. And it's not because they want to offer a cheaper product to somebody. They want to offer a product period to somebody.

So maybe there's something there. Maybe you might see LVMH do a little bit. I mean, we have a certified pre-owned area here. I don't know if these second hand goods are so in desire?

JOSH SCHAFER: In demand?

PRAS SUBRAMANIAN: In demand.

ALEXANDRA CANAL: Hey, I'm still fine going on Amazon and getting the dupes.