Younger shoppers are considering resale value when making purchases: FASHIONPHILE Founder

FASHIONPHILE Founder, President and Chief Creative Officer Sarah Davis joins Yahoo Finance to discuss the secondhand luxury retail market and consumer shopping behaviors.

Video Transcript

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- Welcome back to Yahoo Finance. Well, luxury resale is having its moment in the sun as more fashion savvy look to acquire their perfect it bag without busting their wallet. And here to help us discuss the resale boom is Sarah Davis, Fashionphile founder, president and chief creative officer, Sarah, thanks so much for being with us today. So this astronomical rise in prices of luxury brands, I'm assuming that can only help your cause, right? But what are some of the other driving factors that are attracting people to come to Fashionphile?

SARAH DAVIS: Yeah, I think you're right. Obviously it does help us. We appreciate that they care so much about their brand and really looking at those supply-- keeping a really tight watch on their supply and distribution. But today there's so much thought into really making conscious shopping choices and circularity, sustainability.

And so people are really thinking about that before they make investments and make purchases, and that's helping us. And then obviously supply chain issues in the secondary market and resale, our inventory isn't sitting on containers out in Long Beach Harbor. So I think that all of those tailwinds together are really pushing us forward, and our growth is accelerating even faster than ever, even though we're 22 years into this business.

- And can you break some of that growth down by, let's say, demographics. In your notes, you're talking about Gen Zers and their affection for luxury goods, how that's risen over the last couple of years. Any details you can share there?

SARAH DAVIS: Yeah, it's fascinating because our target market has always been our regular customer. Again, we've been doing this a long time, and so we've got to know her very well. And it's usually 24 to 34-year-old demographic, fairly diverse. But what we've found that's super interesting is in the last year our audience of 18 to 24-year-olds has increased five times, grew five times as fast. So we're very excited about the orders that they're making.

And I think that what is driving that group is two things. One, like I said, circularity and sustainability has kind of brought this to mind and given a lot of awareness to the industry. And then they're honestly looking for a deal. It's a way to get access to a category that maybe they didn't have access to not that long ago, and it's fun.

When people are shopping now, they're thinking about the secondary purchase when they buy from the primary market, even, or if they buy for the secondary market. Kind of like how we used to do with cars, where you're like, OK, I'm looking at two cars. This one has a better resale value, so I might pay a little more for it because I can sell for more later. Especially with that younger group with 18 to 24 but people are thinking, you know what, I could buy this vintage Chanel flap because when I sell it in a couple of years, I'm basically going to sell it for what I bought it for. It's almost like a free bag.

- Yeah, and there are certain bags that you know will just hold their price no matter what. Like I'm sure a Chanel bag or something like an Hermes Birkin bag, those things never go down in value. They only seem to go up. But I want to-- as you say, people are buying these luxury items and they are thinking about reselling them, how does that work on your platform? Can you walk us through, really quickly, if someone wants to sell an item, how does it get priced? How much do they get back as a portion of the proceeds?

SARAH DAVIS: Yeah, this isn't a consignment business. This is a new model where you're using our app or website, you're taking photos, you maybe have a Gucci backpack that you bought a couple of years ago, and you never really wore it. It's been sitting in your closet. Take some photos, you send it to us, and we're going to say, we'll give you $1,000 for that item.

If you like that offer, then we'll send you a free shipping label. And then you're going to stick that in the old Amazon box that you've got sitting out in your garage or something, put our shipping label on it, send it to our facility here. I'm in our headquarters in Carlsbad, North County San Diego right now. And as soon as we authenticate that item, then we're going to send you your check or we could send you a wire.

We can pay you-- we actually were bootstrapped for 20 years, but we partnered with Neiman Marcus in 2019 as our first investor, and so we could pay you in Neiman Marcus store credit. There's lots of ways we could do that. But then we sell everything online. The world is our marketplace.

- And Sarah, something you said a minute ago reminded me of a different situation, so let me just recap. You said some of your customers might be buying luxury goods that they expect to be able to resell in a couple of years, maybe for the same price. And that's based on the high inflation that we're seeing right now. And in the 1970s, there was an analog where people would buy European sports cars, and because of the devaluing US dollar, they would be able to sell them for the same price in a number of years. I'm just wondering, how much do you think inflation is on the minds of your customers? And is that really one of their biggest considerations?

SARAH DAVIS: It's actually interesting because obviously inflation plays a part. But when you've got brands that, literally these brands are raising their prices every year, year over year since they made that particular style. If you look at a Chanel flap, since it was introduced, every single year they produce basically the same style bag. They produce them in limited quantities, and they raise the price throughout time. And they raise the price in line with inflation again. But this is something we've seen historically over time.

And so you might have a bag, a Chanel flap, jumbo flap that you bought for under $2,000 in the early 2000s. And then we're able, over time, as this price has gone up, now that bag is over $7,000 at retail. And so you can see how we would offer you more than you bought it for.

The thing that's kind of interesting too is that you see this behavior in the sneaker world, where you buy sneakers and the prices go up. But what's great about the things that we sell in this building is that you actually can wear them. So I'm not talking about buying a Chanel flap and sitting it in your closet and don't touch it, don't crease the box, or don't take the tags off. No. You can take that bag, keep good care of it. We always say leather is a skin, so you want to moisturize it, keep it clean or whatever. But just minor to keep good care of it. And that's going to continue to go up in price over time.

- I protect my bags with my life. But the only problem is, I can't resell any of them because my daughters take them all, and then they disappear. I don't know where they go. We will have to leave it there.

SARAH DAVIS: It's very--

- I know you say that you are expecting much more growth and are planning to open a 60,000-square foot authentication center as well. Thank you so much for your time today.