Much is said about the meteoric rise of online retail in a world where consumers are demanding access to global products at the click of a button. Many bricks and mortar retailers are reported to be struggling and store closures are increasingly common. Why then, would a digitally native fashion company that has seen tremendous growth (and raised over €100 million in funding) in its first 10 years of web-based selling, go offline? What would drive it to bricks and mortar retail? Several factors, it seems, following a meeting with the cofounders and CEO of Vestiaire Collective.
Despite the confirmation that it is data that drives this peer-to-peer premium and luxury apparel resale company, the allure and immediacy of presenting unique and hard to find products to a global audience via one very specific retailer is a key part of their growth strategy. The retailer in question is Selfridges—repeatedly named the “best department store in the world” and considered exceptional at delivering unique customer experiences.
A conversation with Selfridges buying director, Bosse Mhyr, who has almost 20 years of experience in retail, revealed that there has been a shift of values and expectations of Selfridges consumers. His buying team, spanning several generations and reflective of the store’s diverse customer base, meet with him weekly to make decisions about product drops. “80% of buying decisions are based on sales data,” he said, with the other 20% resulting from what he describes as intangible and subjective magic that comes from working with a team on the hunt for brands and products that are nuanced and unexpected. This, coupled with the regular product drops and in-store experiences, is what makes a store like Selfridges worth visiting every week, rather than every couple of months.
Sitting neatly inside of this data and magic-based buying model is the consignment team at Vestiaire Collective. This team scours the 40,000+ items that the Vestiaire global selling community submit to the online sales platform every week, in search of rare and in-demand apparel and accessories. While this sounds like an almost unmanageable volume, by combining data from the most sought-after products with the pricing sentiment of shoppers, then utilizing visual recognition software to compare incoming stock with what is already selling, it starts to look like a much more manageable (and potent) prospect. Of the 40,000 items uploaded only a portion pass vetting and appear on the site, and the most special pieces are acquired by Vestiaire for their consignment stock. This is what will feed their new store within Selfridges, along with pieces submitted by shoppers (once they pass vetting and brand and product quality authentication).
I asked Max Bittner, CEO, what part does AI play in the mechanics of this business. Being from a data background (he’s ex-Lazada) and joining the company in January this year, he explained that the data team has increased from 3 to 15 staff since he joined—“it’s a mix of data scientists and engineers” who hone the algorithmic functions of the site to respond to changing demands from buyers and sellers, he said.
Why bricks and mortar and why now, I asked Bittner. “We are at a critical time—a perfect storm is forming now and the industry is trying to adjust to what consumers want.” This suggests that Vestiaire can leverage its online model to give customers exactly what they want in-store. Of course, Vestiaire know who their buyers and sellers in the U.K. are already, so this data informs their product selection for the Selfridges store, but they also know the Selfridges customer demographic through this new partnership, so they can leverage their online data to sell successfully and strategically offline, too. Importantly, any products submitted for resale in person at Selfridges pass straight into the online process exactly as though they were submitted remotely online. The business model hasn’t changed. The difference here, essentially, is that instead of Vestiaire paying fulfillment costs, this burden is taken on by Selfridges. The Vestiaire cost-saving covers the retail commission. That way, the retail prices in-store are the same as they would be online “We do not want to create confusion with buyers. The pricing has to be consistent,” said Bittner.
Underpinning this move is a recent partnership with Boston Consulting Group which revealed that the resale tendencies of Gen Z and millennial consumers are growing— just look at Depop for further proof of that. Where Vestiaire Collective is different from Depop is in the vetting and authentication processes, which is carried out in authentication hubs by trained staff. These processes, however, have also meant that the platform remains a transactional space and doesn’t visually represent its community of buyers and sellers in the way Depop does, for example. Bittner told me that this is set to change in the next few months as they launch new community-building tools on the site. Bringing in this social element aims to ensure that the rich and, as yet, untold stories of the extraordinary fashion on the platform (much of which has only been worn a couple of times) is conveyed. Cofounders Sophie Hersan and Fanny Moizant want to unite sellers with shoppers in their mutual love of certain eras, design movements, iconic designers and cultural fashion references. It is this added value that Sophie and Fanny, are so keen to convey, as Hersan says “eCommerce doesn’t offer the full story.”
Another key driver for Gen Z and millennial consumers is sustainability and the circularity offered by fashion resale. Selfridges has been delivering on sustainability in several initiatives, and partnering with Vestiaire, which recently partnered with Boston Consulting Group (BCG) to publish the report “Why luxury brands should embrace the resale boom” looks to be a natural next step. A recent BCG-Altagamma study revealed that the purchasing behavior of 59% of luxury customers in both the primary and secondary markets is influenced by sustainability, while 17% of customers in the second-hand market purchase pre-owned because they consider it “truly sustainable behavior.” There is no doubt that the resale market is growing faster than other segments of fashion retail. BCG has reported that global sales of second-hand luxury goods “are growing at a rate of an average 12% year-on-year growth, compared to a 3% average for the core luxury market.” Furthermore, the resale industry turnover is forecast to grow from $25 billion in 2018 to $36 billion in 2021, representing around 7% of the luxury market.In terms of age segmentation, ThredUp state that “millennials and Gen Z [are] adopting second-hand 2.5x faster than other age groups” in their resale report.
The market is really mature and circularity is new—how to engage the community around this is our motivation
Launching last week, the store has hot and hard to find streetwear pieces from Off White hanging next to vintage 90s Valentino. Where else would you find such a mix? Perhaps only on sites like Vestiaire Collective and The RealReal. When asked what the ultimate aim of their permanent store at Selfridges is, Bittner immediately declared “raising brand awareness.” For cofounder Moizant it is the opportunity to partner with the “best store in the world” at the time of their 10th anniversary. I asked whether this was seen as an opportunity to access a large number of shopping tourists visiting London and Bittner confirmed that this placement at Selfridges is an important part of the strategy to expand sales in China, for example. They established a Hong Kong base recently and the market opportunity in Asia is significant.
With sustainability and circularity beginning to permeate the vernacular of shoppers, it makes complete sense for this symbiotic partnership between Vestiaire Collective and Selfridges to bring together resale and retail, combining the best of online and off-line shopping in one local (and simultaneously global) location.