Re-commerce channels insulate designer products from 'irrational price hikes': Fashionphile CEO

Fashionphile CEO Ben Hemminger joins Yahoo Finance Live to discuss how it's becoming more common to re-sell luxury accessories and the company opening a new showroom in New York City.

Video transcript

AKIKO FUJITA: Well, the fashion world is still contending with impacts of the pandemic. But as the world returns to normal, shoppers are finding the items and the price points they need in the secondhand space. Fashionphile CEO Ben Hemminger joins us with more on that. Ben, we were talking about this today-- that in the secondhand market, in many ways, you're kind of seeing a bump from both ends.

I imagine consumers are seeking out more discounted items. But if you want to part with something to make a little extra cash, you've got the platform to do it. What kind of gains are you seeing on the back of these macro factors we've been talking about?

BEN HEMMINGER: Yeah, recommerce is definitely in a good spot in an economy like this, where there's some people needing to free up some cash and some people looking for a little bit better of a bargain. What we're seeing is an increase in engagement, an increase in desire coming into the recommerce market, perhaps from the traditional retailers who sell similar luxury products. And the reason primarily-- there's a few reasons, but right now, most interestingly, it's the cost insulation.

The things that are driving prices on the primary market for luxury fashion are mostly supply chain-driven-- increased international fuel prices, labor shortages, bottlenecks here and there. And when you have recommerce, these items are already in the States. They're already here. They're already made.

And you take out all of that other cost pressures that the supply chain provides, and you just have basic supply and demand economics that dictate the price, which makes this a great place and we're really well insulated from some of the irrational, I guess, price hikes that are happening that don't have anything to do with the actual desire for the product.

RACHELLE AKUFFO: So, Ben, are you seeing stronger growth on the buying side or the selling side for your business?

BEN HEMMINGER: I mean, it really is both, not to make an easy answer, but it's both. We're not seeing any real cooling off from the level of buying excitement that we had last year. Last year was 100% growth year for us. We've been around for 20 years, and last year was our biggest growth year ever-- $430 million in GMV.

And that same level of volume is sustaining today. So we're seeing a lot of that-- a lot more engagement from customers than ever before. But also the demand to sell product to us is increasing beyond even last year as well. We're seeing no slowdown there.

AKIKO FUJITA: On that front, you recently made an announcement that you're setting up a 60,000-square foot authentication center and showroom. I mean, that's a pretty bold move at a time when we're moving more and more things online. Is that a bet on the secondhand market growing even more? I mean, talk to me about that thought process-- on why you decide to double down on a physical space?

BEN HEMMINGER: Yeah. Well, yes, the 60,000-square foot space is in Chelsea in New York City. And it combines, like, an authentication center where we process the goods for-- we authenticate them, we photograph them there, we store them there, and we ship them there. But what's the double down and the bet there is that we've seen a really high engagement level with a physical product.

When we allow a customer to come in and look at it-- and when they go to New York and they see the space, in the video showing, it's similar to that. But you'll be able to see the 30,000 different items that we have with your own eyes. And you'll be able to buy them in-person.

And I think it's that personal engagement with the product that customers are craving right now. And we've got good evidence from our other location in Carlsbad, California that when people come in and engage in-person, conversion's higher, the sale prices are higher, and the enthusiasm and the retention is much higher.

So if that's happening in Carlsbad on a great way, that was enough proof to say, if you put this in New York City, how could it not be a great experience for our East Coast customers? And so far, that's proving out. And it's open for the public today to come in. And it's a fantastic space.

RACHELLE AKUFFO: And, obviously, there are a lot of recommerce companies out there. You have Real Reel, you have Poshmark, where it's sort of consumer to consumer without a middleman. But then, as you mentioned, this issue when it comes to authenticating some of these goods-- so how does Fashionphile plan to differentiate itself from the competition?

BEN HEMMINGER: Well, being an expert-- when you're in the industry of ultra luxury fashion-- because we only take things that are handbags, accessories, jewelry, and watches. And we're experts in those things and we can authenticate them. So that's a differentiator right now that you have the true confidence and a lifetime guarantee on authenticity and quality that we stand behind.

But the other big differentiator is that we do a buyout model. So you come to us, and you can get paid the same day if you come in to one of our locations-- or if you go online, you get paid as soon as we get the item and authenticate it. So the direct buyout model, I think, has been a differentiator.

It's been really good, allows us to curate some of the best inventory in the industry. That's been a big one. Plus, the fact that we curate kind of the high price point allows us to have a high enough average sale price and unit economics to make recommerce profitable, which has been hard for other, I think, people in the space to try and make it profitable.

It's very costly to do recommerce. You got to take each item in, you've got to look at it, you got to inspect it, you've got to clean it. And that cost needs to be made up for in a fairly high gross margin. And the only way to do that we've seen is to stay in the higher sector of retail. So that's working well for us. Those are some of the differentiators.