While the COVID pandemic has caused worldwide sales of luxury goods to contract by 25% in the first quarter of 2020, Chinese consumers have gained a key role in the luxury industry following the country’s economic recovery, as they are expected to represent about 50% of the global market by 2025, according to consulting firm Bain & Company.
The luxury industry is expected to recover its growth by 2022, to reach an estimated total value of EUR 330 billion (USD 404 billion) by 2025, of which 28% will be coming from the Chinese mainland, says the report.
With so many luxury goods in the country, the second-hand market for these items, especially designer bags and accessories, is also expected to grow in China, which gives big opportunities to online platforms such as Shejiaoquan, also known as Ti’amoo, founded in 2018 by Wang Lin, a luxury goods lover born in 1984 in Liaoning.
Developing a second-hand luxury network
Wang Lin ventured into the second-hand business in 2010, when one of her friends entrusted Wang to sell her idle designer bags. Wang quickly found buyers for these bags, and realized there could be hefty profits from a trading business of luxury second-hand goods.
She decided to start down an entrepreneurial path and opened two brick-and-mortar stores the same year to collect and sell luxury items, one in Beijing and one in Liaoning. To expand her reach, she also went online to sell her products on Alibaba’s C2C marketplace Taobao in 2013, and then, in 2016, she opened another online store on Alibaba’s second-hand trading platform Idle Fish.
In 2017, she gained a qualification as a certified luxury goods appraiser from state-owned China Certification & Inspection Group, becoming one of the first women in China to hold such recognition, she said to KrASIA.
However, the same year, Alibaba, in a company’s move to fight counterfeits goods on its platform by using big data to crack down suspicious items, decided to shut down both Wang’s stores on Taobao and Idle Fish.
“Taobao and Idle Fish, at that time, did not have the ability to determine whether my products were authentic used items, but could only see that they were much lower-priced than products with the same logo, despite all items being labeled as second-hand from the very beginning,” she explained.
While Wang had always dreamed about scaling her business, that first setback almost dashed her entrepreneurial aspirations. That was until her friend, Liu Jingjie, who worked in the finance sector, came to Wang’s rescue.
After evaluating the pros and cons of both online and offline channels, the two women decided to establish their first company together, setting up Beijing Soso Technology Company Limited in 2018.
The startup introduced a business-to-consumer (B2C) mini program on WeChat called Ti’amoo for the trade of second-hand luxury goods, and opened a flagship store in Beijing with the same name. Previously, Wang shut down her store in Beijing and transferred her other shop in Liaoning to relatives, she explained.
The Ti’amoo platform offers consumers the possibility of buying online original second-hand goods such as bags, accessories, watches, jewelry, shoes, and clothes certified by the company. Customers can also visit the firm’s stores to personally check the items before buying them, Wang said.
The company uses the same mini program to find luxury goods to collect from particular sellers around China. Product owners need to provide key information on the product, along with photos, to be listed on the platform. If approved, they can mail the item to the company’s headquarters in Beijing for an evaluation and final appraisal. Sellers can also visit one of the company’s stores to drop off their goods, which will then be sent to the headquarters for appraising, cleaning, and disinfection.
The firm has a team of about ten appraisers in Beijing who are responsible for checking every product and determining a sale price for the items, Wang explained. She added that previously, the firm tried an automatic appraising and quotation software but decided to close it as it was not accurate as expected. Yet, she mentioned the possibility of using software for appraisal in the future.
Ti’amoo has opened about 100 stores in cities like Beijing, Shanghai, Guangzhou, Shenzhen, and Chongqing. The majority of them are administrated under a franchise model, where affiliated stores earn a portion of the profits on goods collected at the store and later sold online, or through sales of the shop’s online catalog of products.
Sellers can cash in for the product once evaluated and accepted by the firm, or can choose to wait until the platform finds a new buyer for the luxury good. In that case, sellers will receive a premium on the selling price, Wang explained.
Capitalizing on an expanding market
Wang is surely not the first entrepreneur to sense the opportunities of the second-hand luxury market in China. Other founders have formed luxury-focused vertical e-commerce platforms such as Xinshang, Plum, Panghu, and Feiyu in the past decade.
“In the first stage, individual business owners opened brick-and-mortar stores to sell second-hand luxury goods, marking the very beginning of the market, while in the second stage, people started to leverage social platforms such as Weibo, WeChat, and focused second-hand platforms such as Idle Fish and Zhuanzhuan for the trading,” Wang said.
“In the third stage, young entrepreneurs, as well as venture capital started to flow into the sector, resulting in vertical platforms such as Plum, while in the fourth stage, online and offline business are converging to offer all-encompassing services for a better experience,” she added.
Yet, Wang believes the market is large enough to accommodate different players. Used luxury items circulating in China are less than 5% of all items bought in the past two decades, while in other western markets, that number is about 25%, she said.
“It could take years for China to reach that level,” Wang said. In the meantime, Ti’amoo is expanding through more franchise stores around China.
The COVID-19 pandemic has slowed down the firm’s expansion pace, as well as its fundraising plans. However, Ti’amoo is now set to raise a Series A round later in the year. In 2019, the firm collected RMB 10 million (USD 1.5 million) in an angel round from Decent Capital and Qianxing Capital.
“We hope that when people do not need something anymore, they can find the right channel to dispose of these items and use the money from the resale to do something else, not just leaving these luxury goods sleeping at home,” the entrepreneur said.
This article is part of KrASIA’s “Inside China’s Startups” series, where the writers of KrASIA speak with founders of tech companies in the country.