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- [00:00]
A
Foreign. Hello and welcome to the luxury episode of Slate Money Swag, our mini season where we talk about silver, wine, art, gold and all manner of asset classes we which don't have cash flows but can still rise in value. Today I'm quite excited that we're going to finally talk about luxury goods. We're going to talk about handbags and watches and sneakers and all those things where people are like, you know, those things can be an investment. And I am joined by Max Bittner. Hi, Max.
- [00:45]
B
Thank you very much for having me.
- [00:47]
A
You are the CEO of Vestier Collective, is that right? Correct. This is a platform. We will talk about this in a minute. Where people can buy and sell such things and we are going to talk about how much you really need to spend in order to have an investment grade handbag. Spoiler alert. It's actually lower than the amount you need to spend to have an investment grade work of art. So that's exciting if you want to get into the handbag market. All that coming up on Slate Money Swag. So, Max, so far on this show we have talked about gold, we have talked about bitcoin, we have talked about all of these things are things that on some level people think of as an investment. And you're here and you're going to talk to me about luxury goods. And I always historically have thought of luxury goods as consumption goods. If you have too much money, one of the signs that you have too much money is you go out and spend thousands of dollars on objects just because you can. And you have a company called Vessier Collective.
- [01:55]
B
Yeah.
- [01:55]
A
And I guess one of the ideas there is that if you consume goods by going out and buying them, that like, you haven't completely just set your money on fire.
- [02:06]
B
Yes.
- [02:07]
A
So explain that to me and explain the idea of the mechanism by which luxury goods and things that I buy in stores can in some way, like, retain their value.
- [02:18]
B
Sure. So I think just step one step back. You know what it is we do, We're a platform where individuals, on a C2C basis, sell the items that they own to other people within our bigger community. We act as a middleman, as in, we check the authenticity of the products, we curate the products that get onto our platform. But in the end, it's a platform where people buy and sell luxury and affordable fashion. And, you know, the idea behind it is that any product on our platform has a value. And that value is different to different people at different times of the life cycle of the product. So compare it to flying from new York or London. And you equate that to an Hermes bag. The person who has an Hermes bag which is uniquely made for just them is the person flying on a private jet. The person who buys an Hermes bag directly into the store without having to wait is the person flying first class. The person having Hermes bag and has to wait for 9 12, 18 months to get the bag is flying business class. And you basically go down the aisle.
- [03:33]
A
And the person who buys knockoff on.
- [03:34]
B
Canal street is flying Norwegian. And in the end, it's the utility of the product is the same one. Everyone is crossing the Atlantic in some sort of way, but we basically find the right time and the right ownership at the right time of the life cycle of that product.
- [03:53]
A
Now, in terms of the product, the custom bag to one side, but clearly, if I walk into a store and buy an Hermes bag versus if I walk into a store and put my name on a waiting list and then get it 18 months later, the bag is the same. And the value of the bag, the secondary market value of the bag is the same in both cases, right?
- [04:14]
B
Yes. But you have probably spent much more money in Ms. Previously to just walk in and get a bag.
- [04:20]
A
Exactly. So the value of the bag is not really or not mainly a function of how much it cost in the first place. It's the availability also what drives the secondary market value. And is there any relation to the primary market value?
- [04:39]
B
For instance, I think the value of a secondhand good is driven by two major, you know, fundamentals. The first one is the depreciation of the item. You know, how old is the item, how much has been used. So the value of the item is defined by some sort of mechanism where you say the product is worth 60, 70, 80% or potentially north of 100% after 6, 9, 12 months of like the original retail of the original retail price. The other big fundamental is how hot or exclusive or unique that item is. You know, that's driven by the trends that driven by the rarity of the product. And that's basically an axis where you think, okay, the value can go up or down based on these two major fundamentals.
- [05:24]
A
And in terms of the luxury world in general, if I go to a, you know, a major shopping district in New York or Paris or any other rich city, if I buy an item, I don't normally, I mean, I'm not really in that world, but like, normally if I just walk into a store and buy an item, it doesn't occur to me that that is some kind of a scarce product. That like, if I buy it and I like it and I say this is really cool and I got my friend and say, hey, you should buy one of these. It's really cool. It doesn't occur to me that I bought like the last one and they're not going to be able to. On some level, what you're saying is that the value of these objects is driven by the fact that the manufacturers just stopped making them at some point.
- [06:08]
B
Well, I think if you look at certain brands, they've made a whole business out of made in the item that they sell scarce. So you can't just walk into any Ms. Store, you can't walk into Patek Philippe store and buy any watch that you want. Certain bags or certain watches are not available. So there is a scarcity, I think.
- [06:26]
A
Maybe why do they do they do that? Because they want to these items to retain the secondary market value because they want people to think this on some level is an investment or is that not the primary reason why they do that?
- [06:39]
B
No, I think the primary reason to do is to charge a very high primary price in the initial sale. And if you look at the luxury industry over the last 10, 20 years, what has happened is the dramatic inflation of the prices at which products get sold. I'll give you the example. You know, I used to be a junior consultant and back then consultants had to wear suits and I had the option to buy, you know, 250, €300 Hugo Boss suit. I'm German, so Hugo Boss. The only reason I would wear Hugo Boss and you know, a Zegna suit at the time would cost €850, €900, which I couldn't afford at the time. Now, fast forward 10, 15 years, that same Zegna suit is costing $2,500. The suit is the same, the quality is the same. That's not the inflation of the prices of the material that is being made of that is purely, you know, the ability of these luxury brands to charge a premium. And one of the reasons you can charge a premium is, is of course that sense of exclusivity, that sense of uniqueness that the owner of that product in some sort of way wants to show off.
- [07:45]
A
And how does that play into the. I mean, presumably suits are never going to be a very good investment because they're literally tailored. Yes, but things like handbags, not literally tailored, are more likely to be able to rise in value.
- [08:00]
B
Do you.
- [08:00]
A
Is there a syndrome where people either buy pieces on the primary market because they think that they will hold their value or buy pieces on the secondary market because they think they are going to rise in value. Does that happen?
- [08:14]
B
I think there's absolutely that kind of speculation that is growing. I think you see that especially happening in the sneaker market right now. You have platforms out there like StockX where people buy items and they never actually own it, they store it at Sockx and then resell it and they never actually have the item in their own possession. But I think a big lion's share of consumption, it's still people buying something for themselves. And I think what we're trying to educate consumers about, that they're not buying consumables but assets, is that they think about the initial purchase price not on its own, but also think about the fact that they can sell this again. And Vestia Collective is not just about educating people that people are buying assets versus consumables. Vestier is really there to promote circularity in some sort of way. And in the bigger kind of zeitgeist shift that we're seeing where sustainability is playing a much bigger role in people's decision making process when they acquire something. We try to educate people in saying that there are certain products and luxury products are the best example for that. Where by educating consumers that these are assets which have a resale value, they might change their decision making away from buying cheap, fast fashion and trade up. Instead of buying, let's say a firsthand Michael Kors bag, they buy a second hand Gucci bag. And the idea behind that is that the longer every item is worn, you know, every two, three months, you extend the life cycle of a product, you dramatically reduce the emission which then has an impact, you know, on the planet in some sort of way. And by finding the right owner for the right product at the right time, you promote what is a more sustainable consumer behavior.
- [10:10]
A
One of the questions I had about gold coins was like, what is the round trip cost of buying a gold coin and selling it? Or to put it a different way, how much does the value of a gold coin need to rise in order for me to break even on buying it and then selling it? And the answer There was about 5% in the case of Gucci handbag. What's the answer to that question? If I go onto your website and I buy a bag and then I immediately turn around and sell it like the following day and it hasn't changed in value, like how much of a haircut am I going to take there?
- [10:48]
B
You know, I think the average logistics cost of shipping the item from the seller to us for us to authenticate it and from us to the buyer. Depending of course, how big the shipping route is. Let's say you're sending something from London to Paris would be, let's call it 40, 50 US dollars. So depending on the primary price of the item that you're selling, that's where you get your percentage on how much it costs.
- [11:17]
A
And when we were talking about art, Julia Halperin told me that art only really becomes an investment good as opposed to a consumption good when it starts costing more than about half a million dollars. Is there a similar price point in luxury? Whereas when it's cheap, it's just something you buy and consume, but above a certain level it becomes something you can start reselling. And that might conceivably go up in value?
- [11:44]
B
Yes and no. I think that's really much tied to the sparsity of that product. So things can go up in value even at a much lower price point. You look at some of those, you know, unique Air Jordans that are out there, sneakers or, or very rare, you know, other pieces of fashion. It, you know, the whole idea of a drop and the concept of keeping that supply limited and creating a frenzy about getting that item at that first drop results in the immediate appreciation for people who don't have the time to stand on the computer or stand outside a shop and wait for that item to come. So that investment is, is not just for really expensive items.
- [12:24]
A
So that, I mean that, but that.
- [12:25]
B
Is in some sort of way also a speculation kind of effect that that will have an appreciation.
- [12:30]
A
Right. So I can, I can make an almost guaranteed profit if I stand in line outside supreme waiting for a drop, buy a hoodie and then sell it on ebay. Like that's, I mean, at the moment.
- [12:42]
B
I mean, considering the hotness of these kind of products, you can probably assume that. Yes, and there's, there's students and you know, even high school students who make, you know, killing out of that. Yes, but, but it's, I mean, I would not say that this is long term investment strategy. And I don't think you will have hedge funds being formed around this individual thesis. Yeah, no.
- [13:00]
A
Do you know anyone who considers any kind of luxury good to be an investment?
- [13:06]
B
Yes and no. I think the main thing, what we're trying to say when we're saying these are assets is that in comparison to consumable, the item is not worth nothing after you're done wearing it. However many times you like wearing an item. And that by being able to sell it in a second market and us, you know, empowering you through our community to find a buyer for that. It is not lost money. And it basically helps you to change your perspective on how much you're willing to spend a bit more on high quality products which have a longer lifetime than items which, you know, have a, you know, fall apart after Washington five, six times.
- [13:45]
A
Give me some price points here. Like so if I, if I go along to your platform and I want to buy investment grade handbag, say that will maybe not retain its value, but at least not like just evaporate in value. How much will I need to spend?
- [14:06]
B
I think most of if you look at these, these you know, higher price point items such as handbags and watches, you know, which, you know, I would start at €1,2,000 or US dollars. You know, you're talking about your basic Chanel Timeless bag, you know, you're talking about your lower end Hermes bags, your Louis Vuitton bags. Those items, you know, after 12, 24 months can easily, you know, keep the value at 80, 90% of the original purchase. And the higher you go and the rarer the product is. And you talk about your Birkin bags which cost eight, nine, ten plus thousand US dollars or euros. A lot of these actually keep their value or even increase because of the sparsity. And very often this time of year, a lot of our buyers or Hermes bags happen to be men, not women because they realized too short that this time around they felt really guilty and they wanted to give their wife a really expensive present. And they walk into an Hermes door and they realize, oh, I should have done this 612 months ago or even more. So they come on the platform at that point their price sensitivity is, you know, equal to zero because they just need to get that and they need to get it within days or weeks.
- [15:23]
A
So, so there's a seasonality if.
- [15:25]
B
Absolutely.
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A
If I want to sell my Hermes bag, I want to sell it around November time. December, Absolutely, yeah. Does that apply to watches? Well, not so much.
- [15:34]
B
Yeah, I mean, I think again, I think watches are very traditional present that you give someone and you know, when do people give presents? So watches are, you know, definitely. See it's like you know, a cyclicality and luxury goods overall, of course, this time of year, November is a good time for business.
- [15:51]
A
A watch is a separate, like a distinct and separate asset class in their, in their own right. I kind of get the feeling that, you know, there have been watch auctions at Chris Houston's other bids for decades, that somehow it's a more established market than the rest of it.
- [16:06]
B
Yes. And if you look at the second hand market, the size of second hand of the total watch market is much bigger than you would see that in luxury fashion. You know, luxury bags again is higher than let's say ready to wear, which is more difficult to sell because you have the differences in sizes or not. But I think watches is, you know, has absolutely quite an evolved and sophisticated resale market. And the luxury brands, the watchmakers have been quite actively involved in that resale market already with luxury players buying secondhand platforms and working, you know, very much hand in hand know to ensure that the secondhand market is managed in, in some sort of way under their control.
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A
They want the secondary market prices for their goods to be high because it.
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B
Makes, I think they want to ensure that it's a controlled and B, you know, they wanted to limit the, the risks of people, you know, buying fakes or you know, in the case of watches, very often, you know, there needs to be a bit of work done in the watch and, and, and to control the work that is being done in the watch you in the actual mechanism or the wristband. You know, I think is also an opportunity for them to ensure that the promise they make to the consumers over the longevity of some of these very high priced items is fulfilled.
- [17:35]
A
And the fastest growing segment I think surely has to be sort of streetwear and sneakers and like where did that come from? And is it a flash in the pan or is this going to be around for a while?
- [17:50]
B
I mean I think that's, it's a very good question. I think streetwear, the whole overall coolness factor of streetwear has absolutely exploded, you know, over the last three, four, five years. And you know, my hypothesis is that the participants in that industry, you know, supreme and off white have just, you know, hit the nail on the head and targeted in a very sophisticated online audience with millennials and Gen Z. And they've picked up to this whole idea of resale flash sales drops, using social media to create some sort of a frenzy. Much better. While you know, I think your more traditional luxury products and more traditional luxury consumers are by definition probably a bit older and less social media forensic, you know, then, then you're Gen Z. But in many ways we're now seeing an adoption of, you know, what the luxury players have seen happening with these younger off white supreme like brands and trying to bring that same uniqueness, spareness, sparseness and social media frenzy to other products. So I think they've just been very good at innovating around that and they have a very receptive customer base. But the luxury industry has been very smart to catch up on that and communicate that to their consumers. And I think what we've done in Vestier, especially since I've joined in my previous role, I ran a company in Southeast Asia which was an e commerce company. And the idea of a flash sale was very common. We had brands like Xiaomi or Motorola, which back in 2013, 2014 were just such hot products. We had flashes where 20, 30, 40,000 people would be on the website and trying to buy it and we would have a limited quantity of 5,10,000 products that we would sell and they would sell out within 30, 40 seconds. So for us that was a very normal concept. And you know, coming to Vestier and explaining to, you know, some of my new colleagues that, you know, the idea of a flash sale could be really exciting. You know, I think the first expression in the eyes was, was pure horror because a flash sale is not something you would do, you know, for, for luxury. Because the whole concept of luxury is that it's luxury is it not has a, you know, frenzy of that sort. But we've started testing with these kind of things and it's, you know, in the end it's nothing different than a drop. And consumers love it. I mean, they love having this ability to get excited about something. It's about engagement. How do we engage with our community, how do we bring people to the belief that that consumption is, is. Can be fun. Yeah. And I think our consumers are buying into that a lot of.
- [20:30]
A
And how do you persuade sellers that they should? I mean, this is a two sided market or three sided market because you're in the middle of it. But I can see how you can get buyers excited about flash sales. How do you get sellers?
- [20:44]
B
The way we convince sellers to, to participate in these, you know, flash sales or campaigns where they potentially drop prices versus the original price that they want to sell at is to mainly create awareness to their store. I mean, every seller on our platform is in some sort of way a micro entrepreneur. And that micro entrepreneur, you know, sits among many other micro entrepreneurs on our platform. And you know, they're all fighting for, you know, what is our currency and that's traffic. And how can you get people to follow your store is by creating awareness and participating occasionally in one of these flash sales or, or campaigns. And once they create a followership of people onto their store that they can then directly communicate with sellers on the rest of their assortment that they're selling.
- [21:31]
A
One of the things that we've seen in live music is the way that the official selling tickets at the box office accounts for like 10% of the tickets now. And that really what all the bands and the venues do is they have an official face value which they sell 10% of the tickets at, and then they sell the rest of them on, you know, StubHub or some other secondary market venue and they get much more control over pricing and targeting and that kind of thing you do you see a future where luxury brands increasingly sell directly into the platforms like yours, rather than it at their own retail outlets?
- [22:15]
B
Yes, absolutely. I think there's a lot of opportunities for the brands and the luxury groups to interact with their consumers in different formats than what they've experienced so far. You know, I think the name of a game is always about participating in the community, engaging with their community, not just, you know, at the primary sale. And if you think about basic customer acquisition for these brands, having a store in Avenue Montan or in fifth Avenue is quite expensive, you know, hoping that someone will walk past. Of course, you have the loyal customers who come, you know, buy these stores every time they visit the city or, you know, travel to New York or Paris or London. But the customer acquisitions are quite high. So I think these brands are constantly thinking about how they can expand their potential customer set. And if you look at Vestiere, and we've done a lot of work on that, we just brought out a study with bcg, A lot of consumers on Vestier buy products and brands that they love for the first time secondhand, because it is more accessible, it is slightly cheaper, and afterwards they trade up in some sort of way to go to the primary sale. So for the brands to interact directly with consumers on our platform, I think is a win, win situation for us, for them and for the consumer.
- [23:32]
A
Thank you very much. This has been very illuminating, fantastic.