The origin of the Chinese second-hand luxury goods market dates back to the 1980s. During the eighties, entrepreneurs resorted to importing used products, such as clothes and computers, from already developed countries to meet the large demand for them in the country. However, the market soon began declining due to two main factors. Firstly, the Chinese government restricted the importation of second-hand luxury goods to boost the local manufacturers. Secondly, the incomes of people grew significantly and they shifted from purchasing second-hand products to buying new ones. China’s second-hand goods market has great potential to become a leading sector in the country and steer the country towards economic growth and sustainable development.
Future Possibilities of China’s Second-hand Market
Consumers in China are slowly beginning to embrace the second-hand luxury market in the country. In the first quarter of 2019, the volume of sales in China in the second-hand market was approximately 202.54 billion yuan ($29.5 billion) (Yu). Moreover, according to the statistics by China Center for Internet Economy Research, sales of used products in the county are expected to exceed $145 billion by 2020 (“Second-hand Market Comes in from the Cold in China”). The growth of China’s second-hand luxury market has attracted investment from technological giants, such as Alibaba, due to its huge growth potential (Ryding et al. 12). The coming up of companies, such as Zhuanzhuan and Idle Fish, dealing primarily in second-hand luxury goods has led to the growth of the second-hand market. These companies facilitate easier, convenient, and efficient transactions between buyers and sellers leading to the overall growth in popularity of the second-hand market among citizens of China.
The Chinese second-hand luxury market is slowly becoming a favorite shopping market mostly for the youth aged less than 35years. Most sales are carried out online, meaning that the development of online marketing, e-commerce, and e-commerce has also been a huge factor in the growth of the Chinese second-hand market. The second-hand luxury market in China is yet to be fully exploited and the future looks very promising for the second-hand economy in China. It is estimated that the second-hand luxury market in China grows by approximately 5.5% annually (Yu). Therefore, the prospects of the second-hand economy are high.
Second-hand fashion accessories have become one of the most popular commodities in the second-hand luxury market in China. This used fashion accessories industry covers about 10% of the total secondhand luxury industry in China (“Second-hand Market Comes in from the Cold in China”). Given the ever-changing and evolving nature of fashion clothing and accessories, the quantity of available used fashion accessories and clothing is expected to double over the next few years (Minter). The fashion industry has recorded a gradual growth in the number of second-hand fashion accessories and clothing bought annually (Minter). As more young people open up to the idea of using used products, the figure is expected to grow.
The large income gap between the rich, the middle, and the poor classes has been a great factor in promoting the growth of the second-hand market. The number of people falling under the middle and poor classes greatly exceeds those under the rich class. Those in the middle and poor classes provide a readily available market for the used products from the rich because they lack enough financial resources to purchase new products in the markets. Additionally, the youth aged above 18years and less than 35years also tend to consume used products due to financial constraints (Minter). Those aged between 18 and 24 years come in as the second-largest group consuming used products (see Fig. 1). The desire of the youth to own fashion clothing and accessories yet they cannot afford these items when new has caused many of them to purchase used products, which are within their means. The large demand for used fashion products has also encouraged the coming up of firms that facilitate transactions in used products to cater to the ever-growing market. However, there still exists excess demand in the second-hand luxury market indicating the large growth potential of the second-hand economy.
Fig. 1. Diagram Showing the Share of Different Age Groups in the Chinese Second-Hand Fashion Market.
Youth aged between 24 years to 35 years tend to and those aged between 18 and 24 years together form the largest consumers of fashion products from the second-hand market. Since the population of the youth in China exceeds that of the old, the second-hand market is expected to cater to a large percentage of the total population in China.
The implementation of the Circular Economy Promotion Law by the Chinese government has greatly boosted the recycling and second-hand luxury industry. Emphasis placed by the government on achieving sustainable development has encouraged citizens to purchase from second-hand markets. Approximately 15% of the consumers in China pass on used fashion goods to second-hand markets for resale and about 55% of consumers pass on their used goods to collectors (Veenstra 452). Out of the 55% of goods passed to collectors, 72.1% of them are traded in the second-hand market (452). Though a large number of used products end up in the second-hand luxury market, the supply is still not enough to meet the demand (453). Therefore, with the Circular Economy Promotion Law in place, the second-hand luxury markets stand to gain more consumers.
The recent emergence of the COVID-19 pandemic has led to a large growth in the second-hand fashion industry in China. The difficult economic times caused by the pandemic have led people in need of cash to sell their fashion items in the second-hand market. This move has increased the supply of second-hand fashion items. Additionally, those in need of clothes have resorted to purchasing them from the second-hand market due to their cheap prices. The hard economic times have also made many consumers unwilling to spend huge amounts of money on fashion clothing. Instead, consumers choose to purchase from the second-hand markets for them to spend a limited amount of money. Therefore, the pandemic has helped to propel the second-hand fashion industry in China.
Obstacles Facing the Second-hand Industry in China
The major obstacle to the second-hand luxury industry in China is the people’s negative beliefs about second-hand clothes. The Chinese second-hand luxury industry only accounts for a small portion of the country’s total sales and GDP of China. Over the years, the Chinese population has shied away from the purchase and consumption of second-hand fashion clothing and accessories due to the notion that only the poor are unable to afford new products and thus settle for used products. Additionally, the Chinese believe that used products are of low quality and they tend to look down on the second-hand market. As such, most of the population prefer to purchase new fashion clothing and accessories if they can afford them. Though the population is slowly moving away from this belief, it will take a long time for them to fully embrace the idea of purchasing and using second-hand luxury commodities. The old population in China is especially yet to open up to the idea as very few of them purchase used products. Only time will tell if and when the entire Chinese will completely abandon their negative beliefs about the second-hand luxury market and invest in it.
Another major obstacle is the production of counterfeit commodities sold in the second-hand luxury market. Even though consumers are gradually shifting to the purchase of second-hand commodities, the presence of fake fashion accessories and clothing in the market has slowed down the growth of the sector. Since most consumers value the quality of the products they purchase and consume, counterfeit luxury products in the second-hand luxury market have encouraged consumers to keep buying new products. Various online platforms in China, such as Yishepai, that authenticate used luxury goods have observed a large number of counterfeit luxury products that exceed the number of authentic ones in the second-hand luxury market. Since no laws have been put in place to govern the second-hand luxury industry, it is extremely difficult to weed out producers producing counterfeit products for sale in the second-hand market and assure consumers of durable and good-quality used products.
The lack of reliable and readily available platforms to facilitate the distribution of second-hand luxury products is also an obstacle to the sector’s development. There exists excess demand for used fashion products in China as many people strive to get luxury fashion items. Though used products are available, lack of distribution and supply chains to get the products from sellers to buyers have hindered their sale. Very few firms and fashion brands initially wanted to invest in the second-hand luxury market causing a huge deficiency gap between demand and supply. Currently, the second-hand luxury market in China only has a few firms, such as Zhuanzhuan and Idle Fish, and a few brands such as H&M work together to facilitate faster and convenient transactions between buyers and sellers. Therefore, the growth of the second-hand luxury industry has been limited due to insufficient supply chains and firms investing in the market.
The lack of physical contact between buyers and sellers of second-hand luxury goods has also proved to be an impediment to the growth of the sector. Since most of the transactions in used commodities between consumers and buyers are done online, the two groups involved lack any physical contact. This method of carrying out transactions in second-hand goods online has also kept many old-aged consumers at bay since they insist on carrying out their transactions when both parties are physically present. Therefore, the online mode of transacting used in the second-hand market has limited the growth of the industry.
Part of the population in China avoids the purchase of commodities from the second-hand market because of the belief that these goods are unsanitary. Since clothing comes into direct contact with a person’s skin, the use of second-hand fashion clothing means that a single piece of clothing comes into contact with many people’s skin, which is considered very unhygienic. Additionally, there is widespread fear in China of contracting skin diseases, such as fungal infections and ringworms, which can be spread by using clothing items previously owned be a person with these conditions (University of Wisconsin Hospitals and Clinics Authority). Therefore some consumers have chosen to avoid the purchase of second-hand fashion clothing as a prevention measure against skin diseases. For these reasons, the second-hand luxury market has had a limited number of consumers.
Potential for Sustainable Development
One of the goals of sustainable development of any industry is the conservation of natural resources. The development of the second-hand luxury industry in China has led to a reduction in the number of natural resources, such as water and plants, which are used in the manufacture of new fashion clothing and accessories. Since fashion is dynamic in nature, there is a constant need to manufacture new fashion items leading to the depletion of natural resources. Therefore, the second-hand fashion industry has an enormous capacity for sustainable development since it helps in the conservation of natural resources. Besides, the industry is attracting a large number of consumers globally who are aware of the benefits of a sustainable fashion industry thus it is in its best interests to adopt sustainability.
The second-hand fashion industry has demonstrated a high capacity for sustainable development by reducing the amount of solid and liquid wastes produced during and after the manufacture of fashion items. Most consumers today are aware of the importance of conserving the environment and tailor their consumption in a way that promotes environmental conservation (Celik). Moreover, there has been an ongoing campaign of sustainable lifestyles among the population in China and globally. As a result, many consumers choose to consume environmental-friendly products such as those from the second-hand fashion industry. Therefore, the expansion of the industry directly goes hand in hand with environmental conservation making it an industry with great potential for sustainable development.
The Chinese government has also put in place measures that encourage the development of the sustainable fashion industry. It has set out to recycle and reuse approximately 4.5 million tonnes of produced textiles. This measure has encouraged the consumption of second-hand fashion clothing and accessories due to the sustainable nature of the industry. The second-hand fashion industry is one of the key sectors that the government can use to transform the country’s fashion industry into a sustainable industry because of its great potential for sustainable development.
Selected fashion brands in China have also begun investing in the second-hand industry citing its enormous potential for sustainable development. For example, fashion brands such as H&M have partnered with the distribution company Idle Fish to avail second-hand fashion commodities to consumers. Since sustainable development in the fashion industry has become an issue of huge concern, the best way to achieve it has been to invest in the secondhand fashion industry, which has potential for sustainable development.
Competitiveness of the Chinese Second-hand Market in the World
The growth of the Chinese second-hand luxury market has brought healthy competition in both the Chinese markets and globally. Given the increase in demand for cheap used products, China has focused on supplying these used products to cater to the demand. Therefore, the supply of used products by China has boosted its competitive power in the global market. The cheap, affordable, and durable nature of the used products has increased their consumption in other countries as well as in China.
The availability of used fashion clothing and accessories has promoted their exportation in the global market. Exports of second-hand fashion goods from China to other countries boosted the country’s fashion industry and have led to an increase in the GDP of China. The high demand for fashion products has also encouraged the starting up of fashion-related businesses, which promote healthy competition both in the local and global market. The clothing industry in China has heavily benefited from the development of the second-hand clothing industry. The cheap prices of these used fashion clothing have also attracted global demand leading to the enormous growth of the industry and increasing the competitive position of China in the global fashion clothing market. Global demand for fashion accessories has also increased leading to the development of the second-hand market availing cheap and durable fashion accessories goods.
In conclusion, the second-hand luxury market in China has enormous potential for growth. Though it is facing several obstacles, it has been experiencing steady annual growth in recent years and its share in GDP has constantly been increasing. The second-hand luxury industry demonstrates a large potential for sustainable development and has also helped China move towards a major goal of sustainable development in the fashion industry. China still has a long way to go in fully realizing the potential capacity of its second-hand luxury market.
Celik, G. “Sustainable Fashion: Is China’s Fashion Industry Going Green?” EqualOcean, 16 Feb. 2020, equalocean.com/analysis/2020021613591.
Minter, A. “Bloomberg.” Bloomberg Opinion, 16 Sept. 2019, www.bloomberg.com/opinion/articles/2019-09-15/china-learns-to-love-secondhand-goods.
Ryding, Daniella, Claudia E. Henninger, and Marta Blazquez Cano, eds. Vintage Luxury Fashion: Exploring the Rise of the Secondhand Clothing Trade. Springer, 2018.
“Second-hand Market Comes in from the Cold in China.” Financial Times, 30 July 2019, www.ft.com/content/a5701798-ad1f-11e9-8030-530adfa879c2.
University of Wisconsin Hospitals and Clinics Authority. “Ringworm of the skin.” UW Health, 31 Oct. 2019, www.uwhealth.org/health/topic/major/ringworm-of-the-skin/hw65253.html.
Veenstra, A., et al. Springer, link.springer.com/content/pdf/10.1007/s00170-009-2356-5.pdf. Accessed 20 Oct. 2009.
Yu, C. “High-tech Spurs Growth of Secondhand Goods Market – Chinadaily.com.cn.” Global Edition, 30 July 2019, www.chinadaily.com.cn/a/201907/30/WS5d3f9d96a310d83056401b18.html.