Luxury’s Gray Market Comes Out of the Shadows

[ad_1]

Imagine hunting online for a pair of square finger slides from Bottega Veneta, one of the most exciting luxury brands of the moment. A new season pair can cost upwards of $550 from the brand’s website, an older store like Neiman Marcus, or a newer e-commerce player like Net-a-Porter.

But what if you choose to buy ruler, a website that offers up to 30 percent off the latest fashion styles? You’ll be a player in the multi-billion dollar luxury “gray” market, a fast-growing sales sector that has historically operated out of sight of most Western consumers. However, with the advent of similar companies in recent years baldini in Italy, Italian In the United States and Cettire, traded on the Australian Stock Exchange at the end of 2020, gray sales are turning into millions of digital shopping carts.

Unlike the illegal counterfeit items often found on the black market, the gray market sells authentic luxury items – but at a significant discount, usually between 15 and 35 percent, and has no contact with brands. Via an application sometimes known as parallel import, gray market vendors They tend to take advantage of varying pricing strategies and taxation requirements for luxury items in different regions to get certain hot items cheaper to those who want them.

One of the most well-known examples is daigousor purchasing agents that meet China’s demand for foreign goods, especially luxury goods. Daigous usually buys products from an area outside of China where a product is cheaper, then sells the goods for profit, either by post or returning to China.

The price differences between markets can be striking. According to this Research published recently by Money.co.ukA customer in Europe will pay just over $2,800 for a Yves Saint Laurent sac de jour, but the same bag will cost more than $3,700 in South Korea. A shopper can buy a white Fendi canvas baguette bag for about $2,620 in continental Europe. The same item will cost around $3,350 if purchased in mainland China.

Taking advantage of these inequalities has become big business. Luca Solca, an analyst at research firm Sanford C. Bernstein, said last year the gray market was estimated to be worth up to 8 percent of the $257 billion personal luxury goods market.

“Traditionally, many luxury brands have either turned a blind eye to or even dived into gray market sales as this meant quick cash and the chance to beautify their numbers from wholesale retail partners, particularly those reported as inactive or overstock.” said Mr. Solca. “But in recent years, this attitude has had to change as the market has become something that is becoming more and more difficult to control.”

A number of daigous formed large-scale collectives and companies. like beyond It arose for easier cross-border transactions from the US to China. Recently, Western businesses have emerged using similar gray market tactics on a large scale, including Cettire, which expanded rapidly during the pandemic, and Cettire, which expanded without permission. watch dealers Like Authenticwatches.com and Chrono24.

Cettire was started in 2017 by Dean Mintz, a reclusive young founder Offering consumers worldwide who have neither technology nor fashion experience, Prada offers deep discounts on some of the top names in luxury, such as Gucci, Chanel and Saint Laurent. According to the prospectus for the initial public offering, sales between March and June 2020 increased by 331 percent compared to the previous year. Cettire raised $49 million when it went public in December, and its share price rose more than 400 percent in a short time.

Later in June, questions were raised in a report about the long-term viability of Cettire’s business model. Australian Financial Review It caused the share price to drop 30 percent. The trading of the company’s shares was stopped on June 15, the same day Cettire Public letter from compliance officers at the Australian Securities Exchange. Cettire did not respond to requests for comment for this article.

Cettire can be seen as a case study of how a company operates in the gray market. It claims to have sold around 160,000 items from nearly 1,300 top fashion brands on its “unique proprietary platform” through a process known as dropshipping. Dropshippers are online sellers who do not have any products in stock. Instead, when a product is purchased, it purchases the product from abroad and ships it to the customer.

Cettire receives commissions on sales to customers in the United States and Asia, mostly of products manufactured and priced in Europe. like Farfetch, a based in London The site is an intermediary between Cettire boutiques and customers. Cettire has no direct affiliation with luxury brands.

“The luxury gray market is not new, thanks to fashion’s notorious inability to really control production volumes,” said Julie Zerbo, the company’s founder and attorney. Fashion Law, a website that explores the legal and business challenges facing the industry. “Especially in Southern Europe, the original product often found a way to exit through the back door of a factory or the back of a truck and eventually end up in the hands of consumers willing to pay less than full price.”

Of course, many customers now find bargains through affiliate ads on Google or mass search sites like Lyst. Price discrepancies become sharper when deals are only a few clicks away from full-priced items on a brand’s own website.

Cettire caught the attention of fashion e-commerce veteran Tommy Mathew, who has served at Acne Studios and Helmut Lang. In May, she noticed Bottega Veneta slides, one of the brand’s most current styles, for 24 percent less than the recommended retail price on Cettire. Similar deals can be found at Cettire for $3,506.65, $300 cheaper than on the official Bottega site, for the “Chain” pouch leather shoulder bag, and on items such as Chanel glasses, Prada skirts, and Saint Laurent belts. (These deals fell through after Cettire caught the attention of the press this summer.)

“The Cettire business model is not illegal – it’s just very good at exploiting loopholes in business regulations,” said Mr. Mathew. He noted that shipments under $800 can usually be shipped exempt from import duties to the United States, where two-thirds of Cettire customers are. Cettire’s second largest market, China, has a similar exemption.

But Cettire also has its quirks. Despite selling to other European locations, it blocked web traffic from France, Italy, and Switzerland, where many of the world’s largest luxury conglomerates are located. (Inside letter To Australian regulators, Cettire denied that this was a strategy to prevent brands from viewing the site’s products and prices, and said the platform is “currently not available in certain markets as the company prioritizes its global expansion”.)

“The main reason authorized retailers don’t take advantage of such loopholes is because they’re likely to lose access to products by clearly undermining brands,” said Mr. Mathew. “Cettire provides reasonable deniability to suppliers who engage in such practices while preventing their suppliers from gaining access to luxury goods.”

Three brands have been discontinued in Cettire: Celine, Vetements and Acne. Other brands like Chanel, Prada, and Yves Saint Laurent all declined to comment for this post.

Luxury brands are now actively competing with themselves. It is difficult to measure exactly how much they will lose. But most are certainly aware of the gradual thinning of the exclusivity veneer, which they have worked hard to establish and which has already been partially diluted. heavy discount off-season stock by stores and outlets.

Most brands are now working with consultants and local governments to develop new ways to combat the gray market after previous attempts to control the app. destroying unsold stocks – led to backlash on sustainability issues.

“If brands don’t want to fall victim to these platforms, they need to speed up their distribution and reduce their wholesale volumes to protect their image,” Mr. Brands like Gucci, Prada, and Burberry have recently reduced their wholesale orders in an effort to reduce the appearance of ubiquity and the risks of heavy discounts. Eyeglass maker Luxottica is producing chips for its glasses that will allow it to better track products. Others are discovering using blockchain technology or enhanced auditing measures to identify problem suppliers and retailers.

Still, incentives remain for customers to look into the gray market. Brands like Chanel have raised prices just as much. 15 percent last year as a result of changes in raw material prices and exchange rates.

In July, weeks after the controversy that shook the stock, Cettire suggested it would expand its stake. to children’s clothing and said it was “still assessing new opportunities for growth

“Eventually, this market will shrink, but for now there are a lot of price-sensitive luxury consumers who want to buy authentic products at a discount through gray channels,” Solca said. “This demand is not going to go away anytime soon.”

[ad_2]

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *