The market for secondhand, high-end goods is exploding, and Neiman Marcus wants in on it.
The tony department store chain on Wednesday announced an investment and partnership with Fashionphile, an e-commerce company that sells secondhand, or—to use an industry euphemism—pre-owned luxury handbags, jewelry, and other leather accessories.
Neiman, which didn’t disclose the size of its minority stake, will create space for Fashionphile at some of its stores where shoppers can drop off items, get an assessment on their value, and get paid.
The idea is for Neiman, whose clientele tends to be older with shoppers typically in their 50s, to attract new shoppers by getting a toehold in a fast-growing area of high-end retail, while drumming up more store visits.
“There is a customer who enters the luxury market through re-commerce who one day will graduate into buying products of the season,” Neiman Marcus Group CEO Geoffroy van Raemdonck tells Fortune. “We see a recruitment vehicle of the younger customers.” What’s more, he says, there is little overlap between Neiman’s core customer and those who buy secondhand.
At the same time, van Raemdonck waves away the idea that getting involved in the secondhand market could hurt Neiman’s luxury glow and business, and instead sees in the partnership a pragmatic move in step with the times. Neiman’s research has found that about half its shoppers are in the secondhand luxury market. “The idea is to serve customers better,” he says.
According to a GlobalData report prepared for secondhand marketplace ThredUp and published last month, the broad pre-owned apparel market in the United States, excluding thrift stores, was $5 billion last year, on its way to $23 billion in four years time. Indeed, a leader in the market for secondhand luxury products, The RealReal Inc., is reportedly looking into listing shares on the stock market. Other big players include Poshmark.
The importance of winning new shoppers is all the more crucial since Neiman’s sales increases have slowed—during the holiday season quarter they rose a modest 0.7%. The company, laboring under an astronomical debt load, also is in talks with lenders who want to see a path to more robust growth. Last month, Neiman opened its first-ever Manhattan store, in Hudson Yards, as a centerpiece of its efforts to reinvent itself.
This isn’t the first time Neiman has teamed up with a rising digital star to win new shoppers. A couple of years ago at one store, it tested a 3,000 square-foot location for Rent-the-Runway, which offered a rotating assortment of clothing and accessories that customers could rent. But in the case of Fashionphile, the products are ultra high-end (the Wall Street Journal reported the average handbag sells for $1,400). Neiman also is investing in the company.
In 2016, Neiman gave the resale market a try with TheRealReal, dropping the partnership about a year later because of what several media reports said was Chanel’s objections.
Still, the Fashionphile partnership won’t move Neiman’s sales needle anytime soon. For one thing, Fashionphile is a small company, expected to sell $200 million worth of goods this year, according to the WSJ. What’s more, by fall Fashionphile locations will only be in five to seven Neiman stores, although that will likely expand. (Neiman will not be selling any used products in its stores, but merely providing a service counter.)
Ultimately, this is about something larger than a quick boost to the top line: it’s a step in modernizing Neiman Marcus bit by bit. “We have a very loyal luxury customer today,” says van Raemdonck. “Now we are set to acquire more customers, young customers.”