Companies like Rebag and Fashionphile use a combination of artificial and human intelligence to price items in a category that’s always changing.
In the early days of online luxury resale, the big story was authentication: After that quaint era of buying designer handbags off Ebay on a wing and a prayer, resale platforms intervened with sophisticated tools to determine a product’s legitimacy. As a result, ending up with a fake is now less of a concern for shoppers (though not impossible).
Today, perhaps, as resale has gone mainstream, the story is about price and value. For high-end accessories especially, resale price is a moving target based on an increasingly complex web of factors.
A growing cohort of enterprising millennial and Gen-Z luxury buyers and sellers are getting savvier when it comes to understanding what pieces are worth and treating handbags as financial investments, following trends we’ve seen in the sneaker market. And with numerous platforms — Rebag, Fashionphile, Vestiaire, The Real Real (and, increasingly, the brands themselves) — competing for our business, ensuring that the price is right has never been more important.
Unlike traditional brands and wholesale retailers, resale sites have the freedom to decide how much they want to offer sellers for their goods, and to adjust the prices of their inventory in real time — even if that means some items are priced 200% above retail. But with great power comes great responsibility.
“Our customers are very sophisticated,” explains Sarah Davis, founder and president of Fashionphile, which focuses on accessories from big luxury houses. “If they don’t like our offer, they’re gonna shop it around. And guess what? They’ve got places to go.”
One of those places is Rebag, a slightly newer platform that also focuses on designer accessories. It made pricing transparency a central part of its offer when it launched Clair (Comprehensive Luxury Appraisal Index for Resale), a digital tool anyone can use to instantly check the current and historic resale value of a specific luxury handbag. Rebag backs this up with a real offer to pay you the quoted amount then and there, if you decide to sell.
The stakes are particularly high for sites like Fashionphile and Rebag that pay sellers upfront, as opposed to those operating on a consignment or peer-to-peer model. If a bag doesn’t sell at the initial price, they discount it until it does, and if that final sale price is less than they paid for it, they eat the loss. “We’ve got to get that price as right as possible or we’re out of business,” says Davis, noting that Fashionphile has “always been profitable,” suggesting they get it right pretty often.
But how? What factors go into setting — and adjusting — these prices? Is it done by humans or robots? How do they get away with pricing certain items well above retail even when they’re used? How do they keep up with the constant influx of new items — not to mention this wacky, turbulent industry? Designers are putting out new collections at a breakneck pace, while exacting tighter control over how their goods are merchandised and sold. Thanks to social media, trends emerge and flame out faster than ever. Plus, Covid-19 has led to supply chain disruptions that are still being felt.
All of this contributes to the prices you see on resale sites, and the very different prices you might see just a few months later. Read on for closer look at how these decisions are made, imbued with some tips for the handbag investors among you.
Data and algorithms
The prices presented by Rebag’s Clair tool or Fashionphile’s Luxury Pricing Index (a similar pricing tool that just isn’t public-facing) are based on data culled from its years in business, as well as the overall market, which these companies use to build and improve their proprietary algorithms. So when someone enters information like brand, style, size, color, material and condition, a price is automatically generated. There are also now image recognition tools that can pretty accurately determine a bag’s style and condition.
As these companies are in business longer and gain more buyers and sellers, they collect more data points, which in turn make those algorithms smarter and more accurate. This is an added function of Clair: It allows Rebag to collect data from more people, including those who may not end up buying or selling anything.
“We look at the market holistically — primary and secondary market — but we have so much of our own data now because people sell to us, try to get quotes from us, as opposed to a consignment or peer-to-peer model,” says Rebag CEO Elizabeth Layne.
Supply and demand
Of course, there’s more to a bag’s resale value than its most obvious features. That’s where things get complicated.
“It’s supply and demand,” says Layne. And yes, machines have ways of assessing that as well, by monitoring behavior and patterns on e-commerce: Upticks in “searching, buying, favoriting and adding to cart” signal that an item’s demand is increasing and should be priced accordingly, according to Layne.
Fashionphile’s algorithm looks at a bag’s price evolution over time, the quantity listed on the site (or ready to be listed in that moment) and “velocity of sale,” as in the number of days a style tends to last on the site before it’s sold. As that number trends downward, the computer knows to automatically raise the price — meaning the offer to sellers goes up, as does the listing price, which is typically around 30% higher.
Price also has to reflect an individual item’s condition. Someone may have owned their Louis Vuitton Speedy for years, even decades, without being precious about keeping it pristine. Fashionphile uses the descriptors “Good,” “Very Good,” “Excellent” and “New” to label its products, and those are limiting — “Very Good” could refer to a Prada Tessuto with subtle, but visible external signs of wear, or one that’s pristine externally but has a big sharpie stain on the inside. The bag whose flaws are internal, rather than external, has more value. (Insert metaphor about life here.)
Fashionphile listings usually include details on and photos of any visible wear, but Davis advises: “The true indicator when you’re looking at any style we’re selling is the price — this bag has got some issues if it’s 80% off retail; you can tell a bag is in good condition as it gets closer and closer to retail.”
The human touch
Computers do have their limits when it comes to evaluating a bag’s condition and other subjective features. According to Davis, Fashionphile’s technology can register a flaw, but not necessarily its permanence (like whether or not it could just wipe off) or how much a typical shopper would be bothered by it.
“We believe in a combination of human intelligence and artificial intelligence,” she says, estimating that 70% of Fashionphile’s pricing decisions are based on algorithms and machine learning, and the other 30% on human expertise and research. “If the machine is saying to price it at X dollars and you look and say, ‘This bag looks brand new except for that mark on the inside, it’s not that bad,’ we give our experts the freedom to be able to say, ‘I’m gonna bump the price a little bit.'”
Similarly, after a price is determined by Rebag’s algorithm, “everything is reviewed and vetted by our team internally,” says Layne.
Another affront to algorithms is brand-new, seasonal styles. “Every season we’re getting items in that we’ve never seen before, and they’re not in the system,” says Davis. In that case, it’s up to human research: “The day the new Bottega [Veneta] pouch comes out in a new size or with a new feature, it’s all new; your machine is now useless. That’s why it’s important to have a team who’s able to use historical data and say, ‘This is how similar pouches have gone in the past.'”
Humans can also consider the impact a new creative director has on brand value. As Daniel Lee’s designs began hitting the market, it lifted the resale value of all of Bottega Veneta bags, old and new. (Though, new ones are going for much closer to retail.) The same happened after Alessandro Michele’s Gucci refresh.
Computers also aren’t observing broader market changes that could cause demand for a style to suddenly skyrocket — or plummet.
Brand control and scheduled price increases
Resale value is also impacted by the availability and price of items on the primary market, over which luxury brands like to have tight control.
Houses like Hermès, Louis Vuitton and Chanel like to command brand image and cultivate exclusivity — especially around hot-ticket leather goods — by using tactics like raising prices annually or even biannually (and not only to account for inflation), intentionally producing smaller quantities and limiting clients to purchasing only one or two of a certain style per year. That said, scarcity is not always in the brand’s control: Covid-19, for instance, has caused unprecedented supply chain issues that have contributed to that as well.
Regardless of the cause, scarcity drives up resale value, even to above-retail levels; plus, when sellers learn that a brand like Chanel raised its prices, they expect to be paid accordingly. Resellers factor these things into their pricing, which is why these brands’ classic styles are considered particularly good investments. Not only do they retain their value, but they also go up in value every year.
Conversely, a brand could suddenly decide to actually meet demand and produce large quantities of a popular item, which would force the resale value back down.
The resurgence of vintage styles and trends
The 2000s resurgence has carried the Dior Saddle Bag, Fendi Baguette, Louis Vuitton Pochette, Prada Tessuto and Balenciaga City bag out of obscurity and back into the zeitgeist. When the brand itself is no longer producing that style, or has yet to reissue it, the resale market is a trend-hungry shopper’s only resource, and it’s not long before the algorithm notices the change in sale velocity and hikes up the price. As this phenomenon happens more and more, the algorithms get smarter and the prices shoot up faster, meaning you’d practically have to be clairvoyant to get in on the ground floor, so to speak.
I asked Rebag’s Layne how savvy one would have to be to get their hands on something before that upswing.
“It’s the smart, trend-driven investor [who could do it],” she says. “With the Balenciaga City, it’s probably still okay to be buying it now. I would imagine in three-to-six months it will be a lot more expensive, but if you were looking a year ago, you would’ve gotten a steal.”
If returns are your goal, you also want to sell at the right time — trends don’t last forever. “It’s important our system is also paying attention to prices as they’re going out of style,” Davis says. She brings up 2017’s Louis Vuitton x Supreme collaboration. Expecting consistently high demand, the site priced everything at three-to-four times above retail, but the hype died down and certain pieces didn’t hold that value, so Fashionphile lost money on them. Humans also make mistakes, just like computers.
“We get it wrong,” Davis says. “But for us, that’s not a total loss, because we learned something. That’s a piece of data that’s gonna help us next time.” And at least the overpaid seller is happy.
The limit does not exist (for pricing used bags above retail)
An increasingly common — and sometimes controversial — occurrence in luxury handbag resale is items being priced above what they would cost at retail. This is expected in the world of sneaker reselling, where releases are limited-edition and the inventory is typically pristine, without so much as a speck of dust on the box. Paying well above retail for something used, however, can feel odd. But when availability or access is limited, it happens frequently.
“Think of the art world or the auction world,” says Layne. That’s a fair comparison when talking about a bag that’s truly rare or special, but what about items that don’t seem that remarkable?
The classic example — Davis and Layne both brought it up — is the curious case of the Louis Vuitton monogram key pouch, which today can go for anywhere between $300 and $450 on the resale market, despite the brand itself selling brand new ones for only $270. That means if you had one in decent condition, you could actually sell it at a profit. As for what’s driving the demand, the style hasn’t been discontinued, and Bella Hadid wasn’t photographed showing one off on the streets of Soho causing a shopping frenzy; it just sells out a lot on the Louis Vuitton website and is likely popular because of its entry-level price point.
“It’s embarrassing how high above retail it is for something that’s truly not special,” Davis says plainly, recalling a thread on Purse Forum literally titled “What is Fashionphile smoking?” about that very item’s illogical resale price. She shares this to illustrate the fact that there’s no limit to how high above retail a secondhand item might go for if that’s what the market is dictating — even if it seems absurd.