What Is The Future Direction Of The Luxury Goods Business?

The Real Real, a second-hand luxury consignment site in the US, has run to the door of NASDAQ.

At the beginning of this month, The RealReal Inc. applied for listing on the NASDAQ Exchange and disclosed its performance for the first time in the S-1 document submitted to the SEC. The result is not good: the adjusted EBITDA (loss before depreciation and amortization) is a loss of $58 million 860 thousand, an increase of 32.9% over the same period last year of $44 million 300 thousand. In the first quarter of fiscal year 2019, the growth of The RealReal began to slow down and its losses intensified.

But in its prospectus, the market for second-hand luxury goods is still huge: the personal luxury market is expected to grow to 362 billion to 412 billion dollars by 2025. As a result, despite the loss, foreign and domestic idle luxury goods markets are still running on their own.

The RealReal, which is the benchmarking of many domestic high-end idle goods trading platform, but obviously, the domestic idle goods trading platform is far from the day that can be listed. At the very least, it has not been written on the timetable of Dong Bowen, the founder of "heart".

Always on the eve of the outbreak?

Compared to the The RealReal's US market, Dong Bowen is confident that "the Chinese market should be twice as big as two times more."

"Americans are much less enthusiastic about luxury than Chinese. Chinese, or Asian, have the highest purchasing power of luxury goods. For the listing of The RealReal, Dong Bowen said in an exclusive interview with tiger sniffer.

According to McKinsey's China luxury goods report 2019, in 2018, Chinese luxury goods consumption at home and abroad reached 770 billion yuan (US $115 billion), accounting for 1/3 of global luxury consumption. If households were calculated as household units, the average household expenditure of luxury goods per household spent 80 thousand yuan to buy luxury goods. By 2025, the total consumption of luxury goods in China and abroad will almost double to 1 trillion and 200 billion yuan, which will contribute to 40% of global luxury consumption.

Before setting up his mind, Dong Bowen was doing the luxury goods collection business under the line of luxury goods, and the basic logic of his mind came along: there are always some customers who sell the old and new demand.

No need for so-called Internet thinking, no financing, no need to sit on the opposite side of the investor to write down the business mode and profit time. This is different from doing offline and doing things differently.

In early 2018, Dong Bowen got the C round financing of GGV Ji Yuan capital and pleasure capital investment. This is the latest round of financing that has been completed recently. After the rhythm, Dong Bowen wanted to be slower: "generally, it will not be so fast after the game, and the capital is in good shape. When we get higher grades, we will go to a new round of financing."

It has been more than ten years since the story of second-hand luxury electric business has been talked about. It is a little more commonplace: the rhythm of financing is stable, and the slaughter and blood smell of other air outlet industries are less. It can be said that the idle luxury market has been on the eve of the outbreak, but has not erupted. But Dong Bowen felt that the outbreak was fast.

Reflected in the data, "explosion" is the permeability of the primary market to the two tier market will become higher. "The United States and Japan (penetration rate) are 25% to 28%, and China may be only 2% to 3% now. We believe that with the downward trend of the economy, the permeability will increase. This is the usual situation. China's stock is very large. " Dong Bowen said.

So where is the future direction?

1. leasing mode still under exploration

What is the logic of the "luxury" transaction on the "heart"? "Dong Bowen said that the mind should do the leasing transaction of idle goods. Leasing is not the point at the beginning of the heart. After all, the wind of sharing and leasing hasn't blown up in 2015.

This time, Dong Bowen told tiger sniffer that at present, the leasing business is still at the stage of adjusting the commodities, that is to say, it has not become one of the main business models in the heart. In the planned leasing mode, there are quite a few ways to subscribe to the electricity supplier: rent the self owned goods to others and rent them in weeks.

In recent years, the domestic subscription providers have not been able to get along smoothly. The women's clothing subscription platform Abox one box has been terminated several months ago. Subscription bonus comes from users' early novelty, but they will soon be tired of overly complex play.

It can be understood that different business models can not find a niche market with clear profit models, and ultimately it is difficult to form a stable business mode closed loop. Especially in China, the cost of leasing mode to users is still very high.

"It will play a catalytic role in the use of luxury goods by people, but if it is aimed at users who have not used (luxury) before, it will not contribute to the overall industrial efficiency and the contribution to the GMV and revenue of the entire company." Dong Bowen said.

Although it is the closest business to money, The RealReal is still losing money. It has its own plan for how to perform the contract.

2., do we have to do self employment?

The idle goods electronic business platform will adopt the consignment mode at present. There are two modes of consignment and C2B2C self-help release. The proportion of self-service publishing mode is six to 70%, and the remaining space is consignment. Because of the changes in the nature of the supply chain businesses, Dong Bowen said that in the future, there will be more and more consignments on the heart. "Since there are more and more personal sellers, the way of consignment will become more and more important. I personally feel that the two modes will be evenly distributed in the near future." Dong Bowen said.

In addition to these two things, Dong Bowen hopes that there are still proprietary commodities.

"What you do in your heart is a relatively high margin. The valuation system we build is to prepare for some of the proprietary goods in the future. For self run, the core and bottom line logic is to have an appraisal system, and no valuation system can't do self employment. Dong Bowen said.

The development of the valuation system and pricing model in the implementation process is the focus of the current round of financing. Technology has become the key word in the mind -- starting with two aspects: enhancing the pricing model and implementing efficiency. What it is building is the SOP and SLA (Service Level Agreement) system in the implementation process SOP is the transaction process, and SLA is the performance standard under each fulfillment process.

"The whole dynamic pricing model is a very technical thing. It will give price recommendations to sellers according to the clicks of a package. For example, if the heat is high (package), there is no deal. We will suggest that you sell the price down." Dong Bowen said.

Another important node in the performance process is identification. At present, luxury or footwear trading platform is still dominated by artificial appraisers, which makes the identification results are always blurred. As we all know, manual identification and inspection are often the most important but easiest part of the problem, and the cost of manual identification is also very high. Different appraisers may produce different identification results under the same identification procedure.

At the end of last year, luxury brand Chanel had accused The RealReal of trademark infringement and counterfeit products: Chanel questioned the identification system of The RealReal, which said The RealReal was not trusted by professional training experts, because only Chanel really solved the problem of genuine bags. Of course, the response of The RealReal is that it can guarantee the authenticity of the products. The result of this lawsuit is also indistinct and there is no final conclusion.

From manpower to technology, the bug of luxury appraisal can not be solved yet. But in Dong Bowen's view, he has given another solution in the industry.

3. do we need offline?

In luxury stores, the exclusive shopping guide, a cup of coffee or tea already made for you, and a card that spilled your perfume on your own perfume is one of the reasons why people enjoy luxuries.

In 2018, The RealReal opened an experience store in New York, and opened a more than 1000 square meter shop in Melrose street, Losangeles. "For those who are not accustomed to buying high priced goods online, it is a good way to promote personal experience and enjoy the one to one service of professionals." Lathi Levesque, director of marketing at The RealReal, said so.

Domestic, idle goods e-commerce platform, such as the fat tiger, has also opened a line shop in different cities. The McKinsey report also shows that in the data source and purchase channel of the last purchase of luxury goods, 92% of the consumers were purchased offline, and only 8% of consumers purchased online. Offline stores are still the most important way of luxury consumers.

But offline stores are not the promised land for Dong Bowen's idle luxury deals.

"According to the data I have obtained, the sales under the line are also growing. Only that the physical attributes of offline stores will be limited to the fact that customers can pick more things, so it can not be compared with online trading platforms." Dong Bowen said, "second hand luxury goods are all solitary goods, and a shop can display very few orphan products. This is different from the logo, such as displaying ten items, and there are ten thousand SKU behind each item. So its marginal efficiency is very low. "

The role of offline channels should be stronger than that of experience and brand building. Dong Bowen thinks so.

"Besides, offline is a very complex transaction model. Looking for salespersons, exhibitions and so on is not an easy business. At present, we do not plan to do both online and offline. Dong Bowen said, "we will have some plans, such as when online growth and brand trust are not enough to bring more trading volume, but not now."

Compared to other draught, the high-end idle goods transaction is obviously low key, but competition and shuffling are also inadvertently happening. In Dong Bowen's view, the pattern of this track has already formed.

"The head is already quite obvious. This project is not a project that can be completely blown up by capital. It requires data accumulation, improvement of the ability to perform, and standardization. So I don't think it is a project that can go up and down quickly. It is progressing step by step. In this industry, a good enough platform should be able to carry most of the functional requirements of the customers. Although there is no monopoly, most transactions in the future will be done on a platform. Dong Bowen said. Author: Liu Ran