The role of auction platforms & price discovery in digital luxury resale
Auction platforms represent the intersection of ecommerce and price discovery. Dynamic bidding mechanisms increase engagement with buyers and offer a global pricing alternative to traditional ecommerce sites. The global reach of auction platforms extends a virtual hand to international buyers, cultivating a diverse customer base that luxury retailers might not otherwise access. In 2021, Heritage Auctions reported a 48% increase in the sale of luxury accessories in 2021, showcasing the strong appetite for luxury items on auction platforms.
The ascent of auction platforms introduces a transformative paradigm shift for luxury retailers. Brands can continue to extend their influence into the digital realm. This transition bridges the gap between classical luxury and contemporary convenience. Beyond this, maximising auction platforms can support luxury brands in the following ways:
Expanding Revenue Streams Beyond the New
Luxury retailers traditionally rely on new product sales. However, the luxury resale market offers a significant opportunity to generate revenue from pre-owned items. Auction platforms magnify this potential by placing items in the spotlight of enthusiastic bidders.
The Allure of Limited Editions and Collectibles
Collectors and aficionados are drawn to auction platforms in pursuit of limited editions and rare treasures. Luxury brands can capitalise on this allure by showcasing exclusive items that resonate deeply with this audience, simultaneously enhancing brand desirability.
Data Goldmine: Insights for Informed Business Decisions
Auction platforms provide a treasure trove of data. Analysing bidding patterns, demand trends, and pricing dynamics offers a panoramic view of consumer preferences. Luxury retailers can harness these insights to refine inventory strategies, tailor marketing efforts, and bolster their competitive edge.
Crafting a Seamless Brand Extension: Curated Second-Hand Selections of Optimised Pricing
Embracing the resale market doesn't require a departure from brand identity. Luxury retailers can curate and verify second-hand selections to augment their newly released range of products. This approach fuses the allure of luxury with the appeal of sustainability.
Price transparency is difficult to achieve in the second-hand market due to a number of factors including product availability, geographic spread and rapid changes in consumer taste. This leads to fixed price marketplaces or ecommerce retailers either under or over pricing products due to sellers who lack accurate data to price their second-hand products efficiently, which are all addressed by an auction platform.
Part of what attracts buyers is access to rare and exclusive products-a primary draw for 41% of respondents. A similar number wish to contribute to greater sustainability in the industry. Somewhat fewer, 35%, prioritise affordability: buying pre-owned helps them save money and obtain desirable products.
The watch market, as well as other luxury goods markets, has seen a surge in customer interest, driven by various factors, such as the resale value, trends in fashions and market opportunities. This presents a clear opportunity for luxury retailers and brands to use auctions and trading platforms to ensure a secure environment to trade these items on their own platform, generating value, achieving global reach, and collecting valuable data from their customers that can help them develop unique user experiences.
Customer Excitement Around Trading - The Watch Market as Use Case
According to research conducted by McKinsey & Co., 75-80% of luxury consumers are still strictly new-product buyers. In the watch market, for example, by 2025, they expect that resale will comprise a full third of the total market.
These patterns have been accelerated by the pandemic, digitisation, and the so called "generational headwind": younger buyers (Generation Z and Millennials) are significantly more willing than Generation X and older to purchase pre-owned products.
Around half the luxury resale trade currently consists of jewellery and watches, with handbags and shoes comprising just over a third, mainly oriented towards women's fashion. The market is primarily in the European Union, followed by the US, with 10% of the market in China. Although trade is still predominantly offline, online platforms are growing faster. Specialised digital platforms for trading pre owned luxury goods currently have a 25-30% market share and are driving much of the sector's growth, with an expected annual expansion of 20-30%. Buyers and sellers flock to these digital marketplaces, attracted by the range of unique products and services offered, from authentication and user experience to product recommendations.
Finding the right technology provider is crucial when implementing auction and trading systems on your marketplace. The choice of a technology provider can significantly impact the scalability and efficiency of your platform. At NovaFori, we bend auction and trading technology with the power of data science. Our modular platform software provides businesses with the flexibility and agility required to thrive in a dynamic commerce environment.
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