Rebag, which resells second-hand luxury purses, is a on a path to open 25 stores and hire 200 employees in the next three years. Rebag buys its merchandise from shoppers, authenticates it and then resells it.

Rebag is grabbing its piece of the luxury resale market.

This month, the pre-owned luxury handbags retailer raised $25 million in a Series C round of venture capital, bringing its total funding to $52 million. Rebag launched in 2014 as an online-only retailer. After its Series B funding round in July 2017, it has since opened five stores. In the last 18 months, overall sales have tripled, founder and CEO Charles Gorra tells Internet Retailer without revealing more. About 80% of Rebag’s sales are online and 20% are in stores, he says.

Rebag has outlined its growth plan: In the next two to three years it wants to open 25 more stores, bringing its total to 30, triple its employee size to 300 from 100 and invest in its backend technology that helps it price its bags, Gorra says.

Rebag’s business model

Rebag.com allows shoppers to purchase pre-owned luxury handbags. Rebag purchases the second-hand merchandise from consumers, ensures the bags are authentic and then resells them. Since it owns the merchandise—Rebag pays sellers for their bags before it re-sells them—it is not a peer-to-peer marketplace nor a consignment retailer.

Rebag purchases and sells the bags for, on average, 50% off the retail price, but that varies widely based on the condition of the bag, the model, if it’s rare or collectible and its demand in the secondary market, Gorra says. He would not disclose Rebag’s commission. Rebag.com has about 5,000 handbags for sale at any time.

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Operating as a web-only merchant at the start is helpful to work “very lean” and not have the overhead costs of store leases in high-demand areas, he says. However, the large majority of the luxury retail market is offline, and Rebag wanted in, Gorra says. Rebag has strategically opened stores based on where it had online demand of its products—New York City and Los Angeles. It plans to further open stores in markets where there is demand for luxury goods, such as Chicago, San Francisco, Florida and Texas, he says.

The stores, which are called Rebag, but nicknamed “Handbag Heaven,” work as customer acquisition tools and help to drive online sales too, Gorra says without providing specifics. “We think about this holistically,” he says. “The store is the gateway to the website.”

Plus, stores help create a positive “brand experience” for Rebag. For example, when many consumers thinks of consignment, pre-owned or second-hand shops, they think of disorganization and other negative words that are not synonymous with luxury. At Rebag’s Handbag Heaven stores, it strives to give shoppers a luxury experience with good customer service and a “magical experience,” Gorra says.

“Over the past year and half, to open stores, that has been a pretty big landmark,” he says. “As we open the stores, we got awareness of the company.”

Rebag’s inventory supply

Typically, when a shopper sells her bag to Rebag, she first uploads photos of her bag. Rebag provides a tutorial of the condition and quality it is looking for, and what the pictures need to contain. Rebag then provides an estimate of what it would pay to buy the bag and provides a pre-paid shipping label to send the bag to Rebag. Once Rebag receives the item and authenticates it, it will then send the seller money. Rebag “occasionally” declines merchandise if it doesn’t meet its standards, Gorra says without providing specifics.

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The stores also help Rebag bolster its inventory, as shoppers can sell their handbags at its stores. There, employees can authenticate bags on the spot and immediately purchase the bags from shoppers.

In its first few years of existence, gathering inventory was a challenge, as the second-hand luxury market is still growing. “In this market, the bottle neck is always on supply,” he says.

A lot of Rebag’s marketing efforts are focused on education and letting shoppers know that selling their bags is an option.

Many shoppers who own new luxury handbags don’t need to sell their bags for the money, Gorra says. But, this type of shopper likely wants to continue to purchase new, in-season bags. Rebag markets to these shoppers with messaging that she can use the funds from her sold bag to reinvest in a newer bag. It also tries other types of messages that appeal to a shopper that doesn’t need the money, such as the sustainability of recycling bags and reducing her carbon footprint.

While there is some overlap between buyers and sellers, most of Rebag’s buyers are younger than its sellers, in their late 20s or early 30s. Rebag buyers have spending power but not completely, and these are aspirational luxury brands for these shoppers, Gorra says.

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Path for growth

Rebag is not profitable yet, but is “very close” and has a “very clear path to do that on this latest round of funding,” Gorra says. He would not comment on if the stores are profitable, only that store profitability is challenging when considering rent rates in prime markets, he says.

Rebag wants to use its new funds in part to invest in its backend technology that helps it price its handbags. For example, determining the demand for a particular handbag on the resale market factors in multiple data points, including the desirability of the brand, the bags original price and what other re-sellers, such as competitors, are selling it for. Gorra describes it like the stock market with supply and demand continually changing, he says.

In the future, Rebag is considering a direct relationship with the brands it sells. For example, Gucci can refer a shopper to resell her last-season bag at Rebag, then buy new in-season merchandise with Gucci. Rebag can supply brands with data on how much their bags are re-selling for in the second-hand market and how often.

While the ecommerce resale market is still in its early days, Gorra believes it is poised to grow this year. “We’ve seen some good growth in the last few years, and 2019 is the time resale basically becomes a mainstream behavior,” Gorra says.

Second-hand luxury goods is a growing ecommerce segment. Internet Retailer tracks 12 pre-owned luxury brands, five of which generated enough online sales to be in the Top 1000 online merchants in North America in 2017. The 12 luxury goods resale sites posted a median growth rate of 20.9% in 2017 and had average sales of $107.5 million in 2017, according to Internet Retailer estimates.

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