Embattled luxury goods sellers claim ‘worst market since 2008’

After a global impulse buying spree sparked by the COVID-19 pandemic, the luxury retail market appears to be getting a reality check.

MyTheresa, a designer goods resale merchant, told the Wall Street Journal that the company is experiencing “the worst market conditions since 2008,” with 44% more inventory left on shelves at the close of last quarter, versus last year.

According to The Journal, the 2023 industry growth rate is expected to be about half as much as what was seen in 2022.

The market falling out of love with luxe follows a report from Forbes last month, which predicted a downwards trend for the industry, citing an analysis from RBC Capital Markets that blamed inflation, unsustainable growth trends and hiked prices too far out of the reach of aspirational shoppers as reasons for a possible decline.

As a result, online vendors — such as MyTheresa — and independent boutiques alike have been left with excess back stock they can’t get rid of, according to The Journal.

Brand optics don’t allow for hefty discounts, or bargains at all, for that matter. While Prada and Gucci no longer offer discounted items in their boutiques, Burberry even bought back its product from department stores that might be tempted to slash prices.

According to The Journal, major vendors like Saks Fifth Avenue can discount by as much as 60%, which is one reason why fashion houses maintain concessions within department stores that are operated by the brand — this way, they can continue to control pricing.

At one time, brands would even resort to burning their unsold product to maintain the scarcity and exclusivity factor of their image. Under pressure from eco groups and European regulatory agencies, Burberry became one of the first labels to publicly vow to stop the destruction of goods in 2018.

There’s also the option of outlet stores, which sell items at a discreet discount completely offline, The Journal reports.

Resellers also purchase luxury goods — sometimes at the end of a season when stores are eager to get product off their hands — from retailers to sell at a bargain, a trend that labels have attempted to snuff out.

“They are not happy about it, as their own inventory comes back to haunt them at a big discount,” Luca Solca, a luxury analyst at Bernstein, told The Journal.

However, one trader tells the outlet that resellers have recently been contacted by brands directly with offers for their excess stock.

The report comes amid a luxury resale boom, with the rise of second-hand vendors like The RealReal, Fashionphile and Vestiaire Collective driven by an eco-conscious Gen Z.

The growing segment boasts a predicted market value of more than $51 billion by 2026.