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Resale Disruptor The RealReal Could Hurt Affordable Luxury Players

As luxury resale marketplace The RealReal prepares to go public this week, its ability to grow could provide some insights on the consumer mindset toward affordable luxury brands, not to mention set the stage for other fashion companies–like Poshmark–to take their turn at the IPO gate.

The RealReal has been able to gain traction as more consumers partake in what has been dubbed the shared economy. According to a BCG-Altagamma report, Gen Z is the most active consumer generation that trades second-hand goods, with 54 percent engaging in the market. Coming in second at 27 percent are millennials, followed by Baby Boomers at 19 percent. Gen Z is also the generation that has taken a stance on sustainability, looking for ways they can more favorably impact the environment.

Data analytics firm Global Data estimates that the resale sector will grow to $51 billion by 2023. That kind of growth even has luxury retailer Neiman Marcus becoming the first in its peer group to invest in resale. In April, the company took a minority stake in pre-owned sales site Fashionphile, which focuses solely on the ultra-luxury handbags and accessories resale market.

The resale sector’s success has been helped by growing consumer interest in luxury and streetwear, merchandise that usually has higher price points but can be found for a far lower price in the second-hand market. And that could have implications for the accessible luxury brands–like Coach, Michael Kors, Kate Spade and Tory Burch.

A report from research firm Jane Hali & Associates noted that as the resale market grows, that could result in accessible luxury brands losing market share.

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“This is because online resale platforms serve up high-end luxury bags and fashion at affordable prices. Those same people who once couldn’t afford to buy, for example, Valentino, may be less inclined to spend their money on entry-level, affordable luxury,” the report noted.

For now, Jane Hali is bullish on The RealReal’s initial public offering slated for this week, mostly due to the growth in the overall resale market.

One company that has been growing rapidly is Rebag, which sells in-demand designer handbags. It’s known for its signature Hermès Birkin Wall, an in-store display featuring all of its Birkin bags. It also has the Rebag Bar, where customers can sell a bag and have it authenticated within 60 minutes. The company earlier this month opened its seventh brick-and-mortar location, this time its first in the Miami Design District. All seven stores have been opened within 18 months of each other.

The expectation is high for a successful IPO for The RealReal, mostly because investors seem to be particularly interested in the fashion sector, as indicated by strong investor reception to the IPOs of Levi Strauss & Co. earlier this year, and more recently the e-commerce platform Revolve.

And if The RealReal leaves the IPO gate trading above the high-end of its pricing range–currently at $18 a share–and closes its opening day trading session even higher, that could bode well for warm receptivity later this year for other fashion firms that have an eye on the public markets.

Fashion marketplace Poshmark is expected to file for an offering later this year, and reseller ThredUp is also said to be looking at the IPO option, too.