Rue Cambon v. Resale

The Ongoing Fight Between Chanel and TRR Highlights Questions of Exclusivity, Ubiquity, and the Future of Resale.

In November of 2018, iconic French fashion house Chanel filed suit against New York-based luxury resale company The RealReal (TRR), claiming that TRR was not only selling counterfeit goods, but that it was manipulating the price of Chanel goods; specifically, its handbags and accessories. This claim was based largely on the fact that TRR boasts the largest pre-owned Chanel collection of any second-hand vendor, often at 70% less than the retail price. Recently, TRR fired back, filing a counterclaim stating that TRR does not in any way manipulate the price of Chanel goods on the luxury market, noting that products from secondhand luxury resalers like TRR are not in the same consumer marketplace as new luxury goods from houses like Chanel.

As the legal battle between the two entities continues to roll on, captivating the fashion law media, it raises myriad questions about luxury resale, and what its roll is in the luxury goods marketplace. Are TRR’s prices actually driving down the value of Chanel’s products, or do Chanel’s competition claims indicate a growing fear of resale’s share of the luxury market?

Let’s break it down.

First, let’s start with the product in question. Take a brand new, medium Chanel Classic Flap Bag. This bag retails from between $4000 and $6000 on average, depending upon its material and finishes, such as embellishments and hardware. Even for the average luxury consumer, this is a big purchase; for reference, other luxury bags that are comparable in style, size, material, and brand name, such as Louis Vuitton or Prada, retail between $1400 and $2500. Because of this steep upfront price and the fact that pre-owned Chanel bags hold their value better than any other luxury brand, most shoppers, whether new to luxury or not, are more likely to buy vintage Chanel rather than new.

Now, to the question at hand: Is TRR driving down the value of Chanel’s beloved bags? In short, yes. As I mentioned above, TRR offers its pre-owned goods at a fraction of the price of traditional luxury retail. That same $4000 medium classic Chanel flap bag, even if it is brand new, would likely retail for around $3200 on TRR. And, while that may seem like a small drop in price, it equates to a massive drop in value. As with most luxury houses, Chanel thrives on its exclusivity, which it cultivates through its high prices, low production, and unique boutique experience. Thus, that $800 that you saved in buying from TRR is taking Chanel’s “boutique fee” away. Essentially, this means that a fifth of the price of a Chanel purse is just the “Chanel experience.”

A brand new Chanel large classic bag on Chanel.com

Now, let’s look at a truly vintage bag. Take another classic medium Chanel flap, but one that is five years old and has light wear consistent with its age (a few marks

A mint-condition Chanel Jumbo Flap Bag on TRR

to the lining, maybe a bit of scratching on the hardware, but nothing of note). This one retails for $2000. Bear in mind, a new Chanel medium classic flap retails for $4000. This is a 50% discount on a bag that, given its condition, is virtually new. Now, in taking away half of the bag’s value, not only has TRR taken away the “Chanel experience” fee, but it has also neutralized the exclusivity fee. Now, this lightly-worn Chanel bag is comparable to other, new luxury bags that are more approachable in price. As such, the shopper now has a tougher decision to make than they did before: Do they buy a new Prada double tote, or do they capitalize on this Chanel “deal” and get the clout of having a vintage Chanel bag?

This is where Chanel’s competition claims against TRR find merit. The undying fervor for vintage Chanel coupled with TRR’s massive markdowns makes Chanel’s battle for exclusivity almost unwinnable. Not only is the average shopper willing to forgo the boutique experience for a lower price, but luxury consumers are also more likely to buy vintage Chanel than new Chanel purely because of the clout that comes with it—a strange and inexplicable phenomenon that continues to puzzle the fashion community. As a result, through its monopoly on the pre-owned Chanel market, TRR has also put itself in a position to fix the prices of the entire Chanel market, vintage or new. By this logic, Chanel’s competition claims are more than justified, as TRR is taking away the brand’s exclusivity, threatening to make Chanel’s accessories ubiquitous rather than elusive, a battle luxury houses have been fighting since the dawn of online retail.

Contrastingly, Chanel’s claims also demonstrate luxury’s growing fear of resale; particularly, its growing share of the market. With sustainability initiatives continuing to drive the fashion industry, resale has gained support from industry executives and consumers alike. TRR has done especially well, continuing to increase both its number of customers and consigners month-over-month as well as expanding its stock, even amid the COVID-19 crisis.

Ultimately, luxury resalers only stand to increase their stake in the luxury market, putting them in a position that will allow them to set prices and bust exclusivity, but will also leave them fighting anti-competition suits for years to come.