At first glance, Charles Gorra, the founder of Rebag, appears to be a bit of an entrepreneurial contradiction.
Gorra worked in finance in Paris and London and eventually came to the States to attend Harvard Business School. But once he earned an MBA, Gorra switched gears and jumped into the world of fashion — specifically secondhand resale — one of the more sustainable, eco-conscious sectors of an industry notorious for encouraging unconscious consumerism.
As such, Gorra launched Rebag in 2014, an online and in-store destination for those who want to buy or sell the poshest purses from Chanelto Louis Vuitton and every luxe label in between, second hand. In June, the company revealed that it would expand its offerings to include a broader range of secondhand luxury accessories from sunglasses, scarves, belts and gloves to small home accessories.
Gorra described his entrance into fashion resale as just one of “life’s coincidences.” But he did point out that he was born and raised in Monaco, the sovereign city-state on the French Riviera that’s smaller than Central Park but nevertheless has enough wealth to have been dubbed the “Billionaire’s Playground” (at last count, 32% of the population are millionaires). “There’s probably more Hermes and Chanel and Louis Vuitton bags than you will see anywhere else in the world,” he quipped, “So, I’ve been exposed to that product indirectly. I’ve been exposed to that customer.” More importantly, Gorra noted, “I certainly have an understanding of psychology and the behaviors of [luxury] customers.”
But when Gorra arrived in the U.S. in 2012, the country was just emerging from the 2008 recession that leveled low blows to the high-end market, decimating its department store sales and proffering a swift kick below the (crocodile leather) belt to luxury brands the world over. Not only did the most affluent customers stop spending, but so did “aspirational” shoppers — those who scrimp in other areas in order to plunk down the necessary dough to score a high-ticket item.
Fashion retail was ripe for disruption, and the downturn spawned a whole new class of entrepreneurs: those who rent the goods instead of sell them. One of them, Rent the Runway, was started by Gorra’s Harvard Business School buddies Jennifer Hyman and Jenny Fleiss while they were all still in school.
Rebag grew from a broader interest in “how you leverage technology to reduce waste across industries,” Gorra said. “It could be reducing time. It could be reducing efforts. It could be reducing fashion waste,” he said. “Then it’s a bit of life’s coincidences that I met Jenn and Jenny, and they got me into the [world of circular fashion]. And I took it from there.”
By reselling its luxury handbags anywhere from 40% to 70% off their original retail price, Rebag aimed to tap into a small but lucrative part of the overall $316 billion global luxury market, which has grown 10% per year since 2015 and reached $29.2 billion in 2019, according to Bain estimates. Although it’s small, Bain predicts the secondhand market will continue to grow far faster than the overall luxury market in the years ahead.
And so far, investors seem convinced that Rebag has a good chance at continued growth, amid consumers’ healthy appetite for sustainable, eco-conscious resale goods. The brand’s expansion into accessories follows Rebag’s $15 million Series D funding, which was sealed at the height of the COVID-19 pandemic in May, bringing the company’s total funding to $68 million.
The problem is a lot of businesses have somehow used that opacity to their advantage, and we’re doing the exact opposite.
Charles Gorra, founder, Rebag
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Remaking resale with instant price quotes and hassle-free authentication
Gorra is bullish on Rebag’s expansion. That’s because while the brand has some stiff competition from the likes of other luxury resellers like The Real Real, ThredUp, Poshmark, and others that exclusively deal in handbags and accessories like Bag Borrow or Steal, it has an edge. That is its proprietary software called Clair (which stands for Comprehensive Luxury Appraisal Index), which allows consumers to generate a highly accurate price quote for their goods instantly online.
Gorra is quick to point out that Rebag is neither a consignment shop, nor a peer-to-peer marketplace, unlike its competitors. Rebag buys the bags (and now accessories) outright from clients who want to sell. The brand then holds the inventory until it’s able to resell it via its online platform or in one of its nine physical locations. “The reason we do that is to create a seamless experience for the customer,” Gorra said.
Rebag’s internal analysis estimates that only one out of 10 owners of luxury merchandise are currently reselling their goods. That’s because resale platforms are time-consuming, and sellers are often confused by how the different platforms work, he said. Some companies require that sellers first mail in their sale items for vetting by on-staff authentication experts before they’re accepted for sale, a process that can take days. Others require that sellers submit multiple photos of an item to vet its authenticity. After all that, there is no guarantee that the item will be accepted, or that it will sell. And if it does, a cut of the proceeds is taken off the price.
Rebag simplified the authentication process — a critical step for the buying and selling of secondhand luxury goods — by removing the multiple steps it takes to get a quote when it launched Clair this year. Gorra likens it to a Kelley Blue Book for bags (instead of cars), because it’s a very similar concept.
Customers often don’t know with certainty the resale value of what they own, according to Gorra. “The problem is a lot of businesses have somehow used that opacity to their advantage, and we’re doing the exact opposite,” he said.
In the years Rebag has operated, the company has collected data on specific brands, what does and does not sell and what people are paying. “Now, [with] Clair, you can get an instant quote on your own on rebag.com or our app, and you can literally … figure out the resale value.”
The process, Gorra noted, is not completely automated. There is a human component, which is why Rebag employs a team of seven experts who are dedicated to overseeing the process to ensure that the items are indeed authentic and the quotes are accurate. Although there is no such a thing as an academic course in authentication studies the way there is for those who work in fine art at Sotheby’sor Christie’s, for example, the experts balance their observational skills and years, sometimes decades, of experience assessing luxury handbags and they’ve picked up patterns. That expertise has generated some of the data Clair uses to speed up that process.
“There’s no commission, there [are] no tricks,” Gorra underscored. “And, by the way, what’s very important is it’s a free quote.” The company makes money on marking up the price they quoted the seller.
Now, with the pandemic and attendant economic fallout, consumers are turning to sites like Rebag even more, according to luxury expert Pam Danziger, founder and president of Unity Marketing. Today, gently used luxe fare is particularly compelling to the younger “HENRYs — high-earners-not-rich-yet — whose appetite for luxury goods doesn’t match their spending power,” she said. “But even the true luxury goods consumer with plenty of money to spend are turning to secondhand purchases for classic, collectible items or styles they may have missed,” Danziger said. “Familiarity in this case builds confidence, not contempt.”
Sales soar amid crisis, as online business offsets brick-and-mortar closures
Despite the pandemic, Rebag’s business continues to thrive. Its online business has made up the difference in sales from its nine brick-and-mortar locations that had to close because of COVID-19. (Some of those stores are just beginning to reopen; but plans for 30 new stores have been shelved).
E-commerce was still 80% of its business at the beginning of March when quarantines were put in place in many cities. “Around mid-April when we did this 15% promotion, it was our biggest week ever. It was bigger than our Black Friday of last November,” Gorra said. Rebag’s sales are up more than 50% year to date versus last year. “So, it’s pretty significant given the current environment,” he said.
The brand’s most recent $15 million infusion has helped Rebag maintain a cash flow, which is crucial for a company that is paying to hold inventory until it sells. “We’re not profitable, but we’re pretty close,” Gorra said. “We’re very financially sound.”
Although it is good to have a cash positive balance sheet when it comes to carrying inventory, a challenge in turning over that inventory comes from carrying classic, pricey pieces — think Hermes’ Birkin bag, one of which sold for $70,000 recently on Rebag, or a Gucci double-G belt. They’re investment pieces meant to be held on to for years and perhaps even handed down to future generations.
Gorra tackled the problem of reselling this inventory with Infinity, a loyalty program that incentivizes future sales. If you buy any Rebag bag online or offline, you can resell within three months and get 80% of the purchase price back. Sell within six months and get 75% back, 12 months 70% — all in Rebag site credits. “That’s why it’s called Infinity, to enable the sort of recurring loop for customers,” he said.
As for further growth, Gorra said Rebag will invest in growth marketing, especially now that the stores, which served as an entree to a customer group who didn’t always shop for luxury online, aren’t open for business. He said the plan is to beef up advertising and social media marketing. Rebag works with both A-lister influencers like Chiara Ferragni and as well as those who have smaller followings, for example. They receive products and showcase them on Instagram on a monthly basis. Rebag’s expansion into accessories will be a natural fit for this type of marketing, he said.
Danziger noted that the accessories category should be just as successful for the brand. “The items that have the most appeal in the secondhand market are watches and jewelry,” she said. “This isn’t surprising because watches and jewelry are highly-collectible categories which hold value, whereas clothing tends to be more time-sensitive,” said Danziger.
Gorra remains cautiously optimistic. “We buy inventory. There’s a lot of risk in what we do,” he said. Despite the complexity of the business and the potential impact of a further economic downturn, Gorra insisted, “We feel like now we are pretty fluent in this sector and we’re definitely looking at adjacent opportunities.”
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Published July 15, 2020