There's very little that can come between Melanie Fascitelli and designer labels like Missoni and Jimmy Choo. The successful 32-year-old New Yorker—like many of the ultrawealthy clients she assists through her custom-closet and stylist firm—doesn't mind spending $3,200 on a Gucci bag or $6,800 on a Cartier watch. But just as the current financial chaos has crippled the U.S. and world markets, it's also made even the most extravagant of consumers more cash-conscious. People who once collected Dior the way art dealers collect Degas are now selling off valuable pieces through high-end consignment stores and online sites. "It's a way to get some money out of it," says Fascitelli, an avid consigner who encourages her clients to do the same.
In recent months, the high-end resale sector has been flooded with luxury items, thanks to the uncertain economy. According to a member survey by the National Association of Resale & Thrift Shops (NARTS), 75 percent of stores have reported an increase in new suppliers and 66 percent had an average increase in sales of 35 percent when comparing the first eight months of this year with the same period in 2007. "Even people whose shopping habits aren't really affected by what's going on look in their closet and think, 'Do I need 10 pairs of designer shoes that look similar?' " says Adele Meyer, executive director of NARTS.
Part of the uptick does come from mass collectors who, in dicey times, have opted for cash over, say, owning three Hermès Birkin bags. For others, consignment has simply become a way to justify new trinkets. "It's like, 'If I get rid of this item, then I don't feel bad about buying that one'," says Fascitelli, who recently bought herself a $1,200 Pucci dress with the money she got from pieces she consigned at Designer Resale, a shop in New York City that's doing 20 percent more in sales over last year.
Consignment policies tend to vary among stores and online sites, but most will take items they like and then divvy up profits with the seller, who can get as much as 70 percent of a sale. On the buying end, consumers are paying less than 50 percent of the retail cost for many items. Alice Reid, a 56-year-old salesperson from suburban New York, recently bought a Cartier watch for $9,135 from Portero.com, a luxury-goods consignment Web site. The timepiece's retail price: $23,000. "It's so much more advantageous than going into a retail boutique," Reid says. "When you consider the caliber of what you're getting, it's a no-brainer." The luxury-resale boon may be expanding into other areas like vintage wines and upscale furniture as well. Melanie Dunaway, owner of a high-end furniture consignment shop in Millersville, Md., says her sales are up 50 percent since January.
The unloading of luxury goods and the increased number of bargain hunters has created good times for the resale sector. Profits have leaped, with some shops saying their sales have doubled and tripled. At the Daisy Shop on Oak Street in Chicago, sales have increased 22 percent over this time last year. Michael Sheldon, founder and CEO of Portero.com, says sales on his site are three times greater than last year. "Things have improved for us remarkably since the economic downturn, both from a seller and buyer point of view." The numbers are especially striking given that high-end retail shops reported double-digit declines in same-store sales last month. Among the worst hit were Bergdorf Goodman and Neiman Marcus, which posted a 16 percent drop. Saks was down by 11 percent. The National Retail Federation also predicts that overall retail sales this holiday season will grow a mere 2 percent, the weakest pace in six years.
None of this paints a pretty picture for the worldwide luxury market, which conventional wisdom suggested was recession-proof. It's true that the $270 billion segment is still expected to grow about 2 percent this year once exchange rates are factored in, according to Bain & Co. But that's not nearly as good as the 6.5 percent growth in 2007. "Few luxury brands are going to weather this global economic crisis with impunity," says Pam Danziger, president of Unity Marketing, a firm that specializes in affluent consumer insights. In a new Unity survey, half the respondents said they are spending less on luxury items now compared to a year ago. About 55 percent also expect to spend less in the next 12 months. To Danziger, that marks a shift in consumer behavior among the wealthy. Options like consigning, which may have seemed foreign in the past, may now become a part of cutting their expenditures. Fascitelli, whose own business falls into the luxury category, believes the luxury market will bounce back, but shares Danziger's view that the consumer will be different. "There will be a smarter consumer, and maybe not as many mass collectors. This smarter consumer will consign items." So even when the global economy stabilizes, there's a good chance the rich will learn to muddle through with a little less bling if it means a few more dollars in their pockets.