China’s cash-strapped shoppers drawn to second-hand luxury items

At a cavernous underground store near Shanghai’s Hongqiao airport, shoppers peruse aisles stacked with goods from some of the biggest names in the world of luxury — Louis Vuitton, Dior and Gucci.

But in contrast to the gleaming malls downtown, the items here are not brand new. “Here are gift-ready items . . . with most of their original packaging,” says one sign. “Be yourself,” says another, “and think second-hand first.”

The ZZER store is a bricks-and-mortar incarnation of a thriving online second-hand market for luxury goods, at a time when the wider industry has come under mounting pressure in what was once a booming market.

Luxury groups including Cartier owner Richemont, Gucci parent Kering and LVMH reported third-quarter sales drops in the Asia-Pacific region outside Japan, which is dominated by China. Richemont’s chief Nicolas Bos has said that the Chinese consumer slowdown “is probably a mid- to long-term phenomenon”, while Kering warned profits would halve this year.

While concerns over demand for new luxury products in China are growing amid heightened fears over the economy, there are signs of a strong appetite for second-hand goods. In September, luxury resale platform Hongbulin was acquired by Zhuanzhuan Group, an online marketplace for used goods.

The wider market surpassed Rmb1tn ($138bn) in 2020, compared with just Rmb300bn in 2015, according to a report from consulting firm Frost & Sullivan and Tsinghua University.

Although there is a lack of recent data on the second-hand luxury market, there has been a rise in users of online platforms such as ZZER and Xianyu that provide a venue for users to resell luxury goods for a commission.

The ZZER store in Shanghai, which opened its doors in 2022, alone says it receives 5,000 new products a day, highlighting the sheer volume of handbags and high-end clothing circulating the country.

On Xianyu, users comment on aggressive bargaining, suggesting heightened price sensitivity among consumers.

Jacob Cooke, chief executive of Beijing-based marketing group WPIC, pointed to “growing interest in second-hand luxury as a cost-effective alternative” during the Covid-19 pandemic, given its economic pressures and travel restrictions that prevented people from buying goods abroad.

“We’re still seeing economic pressures post-pandemic,” he added.

“People like us who are close to the middle class, who have a salary of over Rmb10,000 a month, might be reluctant to invest in luxury goods,” said a 28-year-old shopper at ZZER who gave her name as Li and was visiting Shanghai from Xi’an. “[We might prefer] to save money.”

While some price-conscious buyers such as Li are looking for deals, others are searching for high-end products that can “preserve their value or even appreciate”, according to Mark Tanner, managing director of Shanghai-based marketing agency China Skinny. Tanner noted that there was a preference among Chinese second-hand luxury goods buyers for “the higher end of the market”.

In ZZER, a bag labelled Louis Vuitton is on sale for Rmb4,762, compared with an original price of Rmb14,300.

A few miles away in Shanghai’s French Concession neighbourhood, many shops specialise in second-hand bags. In one, a Chanel bag dating from about 2014 is on sale for Rmb35,800, down from Rmb41,000 originally.

As with a distinct grey luxury market that relies on new products brought in from overseas, some question the authenticity of the products on sale. ZZER, which started as an online app, allows sellers to list goods at prices they select and has its own authentication process. The company declined to comment.

For Li, it was her first time in a second-hand store, which she discovered on the Chinese social media app Xiaohongshu. “It’s not that I can’t afford luxury goods, but I think the value for money here is very high,” she said. “If such a store opened in Xi’an, I’d probably go after work.”

Li added: “They did not have this kind of business model before the pandemic.”

The second-hand market “saps demand” from new products, Cooke suggested, and could “hurt brand equity”.

But it at least attracts customers who might never have made luxury purchases, said Federica Levato, a partner at Bain who leads the consultancy’s global luxury and fashion practice. “[It shows] that a big chunk of the population has the willingness to buy these products,” she said.

Deep in the heart of the Shanghai store, next to handbags branded as Hermès and Chanel, one woman said she heard about the store after her friend sold items there.

One shop assistant, gesturing to a T-shirt, said some of the goods had “never been worn”. The company declined to comment.

ZZER’s Shanghai store has also attracted international customers hunting for bargains. “There’s nothing like this where we are . . . nothing to this scale,” said Conor McLernin, 27, who was visiting Shanghai from Australia.