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Chinese Shoppers Resort to Hand-Me-Down Hermes

Patti Waldmeir, Financial Times
Thursday, 1 Nov 2012 | 11:21 AM ET
Source: Hermes

Until very recently, nouveau riche Chinese would not have been caught dead buying someone else's cast-offs – even if they were Hermès.

But as the Chinese market, which many luxury goods companies have come to rely on for growth in recent years, matures, a new brand of luxury shopper is emerging in China: the kind that loves a bargain more than a logo.

Shops selling, renting and repairing second-hand luxury goods are springing up across China, along with branches of high-end consignment shops from Japan and Hong Kong that buy and sell second-hand goods, paying the seller a commission.

Milan Court was one of the first pre-owned luxury stores in Shanghai when it opened eight years ago. But its owner Liu Lian says she only recently started putting her logo on the store's shopping bags because consumers used to be ashamed to be caught buying used goods.

There are now signs that the stigma is melting away. Since 2009, Milan Court has posted double-digit annual sales growth, and the shop has hundreds of bags for sale, many on consignment from individuals. Ms. Liu has opened six shops in Shanghai and plans to expand to other provinces.

Nidia Yuan, a regular customer of Milan Court, likes the fact she can purchase unused bags at the shop for 20-30 percent less than retail.

"I don't mind people knowing that I carry second-hand bags," Ms Yuan says. "I think it is worth it to buy at those prices".

The second-hand shops should not be confused with the kind of high street thrift shops found in London or New York.

Ju Geng, a second-hand shop in Shanghai's chic French concession, has shelves packed with new or barely used Gucci, Louis Vuitton and Hermès bags. They range in price from Rmb2,000 ($320) for the cheapest Gucci to Rmb400,000 for a crocodile Birkin from Hermès.

Just down the road at Ms. Liu's Milan Court – housed in a European-style villa with a sun-filled garden – the crocodile Birkin is still top of the price chain at Rmb300,000.

At one branch of Japanese second-hand chain Brand Off in Shanghai's French concession, a Hermès Birkin with a child's drawing in black marker filling one entire side was priced at Rmb90,000.

Ms. Liu and her competitors say the people selling them handbags are not in it for the money, unlike in the west where consumers liquidate luxury items in times of economic distress.

Even now, when economic growth on the mainland has slowed to 7.4 percent, no one is emptying their closets of Gucci to feed the children.

Jo Zhou, manager of Ju Geng, says the popularity of luxury thrift stores has more to do with growing sophistication than with desperation. As Chinese consumers who once thought they were too rich to buy used goods travel more, they become familiar with foreign concepts such as second-hand shops.

The rise of the second-hand stores also reflects a profound shift in the taste of mainland luxury consumers.

Ms Zhou says shoppers from less developed fashion markets outside Shanghai still come to her shop looking for logo-heavy products such as Gucci or Louis Vuitton. But Shanghai shoppers "prefer to be more low profile," she says, noting that their favourite brands are Bottega Veneta, Prada, Céline and Hermès.

The buyers are getting younger too: many are students, white collar workers at the start of their careers, or even younger, says Ms. Liu of Milan Court.

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  • A reporter and editor, Robert Frank is a leading authority on the American wealthy for CNBC.