Digital Marketing Redux   //   April 26, 2024

Rebag launches new membership program to grow sales and woo customers

Call it pay now, buy later: Luxury resale retailer Rebag is adopting a new membership model to try and boost sales and bring back dormant customers.

This week, Rebag is rolling out a savings-like program called Rebag+. Members pay $50 a month or $500 a year to join, and Rebag converts that money into credit they can use for a future purchase. It is free to join — and free to cancel — and participants get access to benefits like free shipping, free returns and discounts on merchandise. As an incentive to keep customers in the program, Rebag adds 2% to their balance each month.

Launched in 2014, Rebag is a platform for customers to buy, trade and sell luxury handbags, wallets, shoes and accessories. Although it began as a website, Rebag now has a physical presence via stores in New York, California and Florida. Now in its tenth year, Rebag is growing year-over-year. Still, it’s seen a “deceleration” over the past few years as shoppers pull back on discretionary spending, with its annual growth rate going from some 40% to some 20%, CEO and founder Charles Gorra told Modern Retail. While Rebag has millions of customers, only a few hundred thousand are active, Gorra said. Rebag hopes its new program can shrink that gap by encouraging more customers to shop on the platform.

Rebag+ has a no-fee structure, and customers can leave the program any time and get their money back — although if they do, they forfeit access to the extra benefits. The program “is really about retention,” Gorra said. “By investing in our customers, we think we can increase, essentially, their spend and their behaviors with us.”

“I call it financial planning,” he said. “Typically, because we are at a high price point, people have sort of little recurrence. Maybe they come once or twice a year, and they tend to spend a big amount… [Rebag+] incentivizes people to think about this sooner than later by creating smaller bite-size increments that eventually can get you to that big moment.”

Rebag offers more than 75 luxury brands, including Burberry, Celine and Valentino. While the price of products varies, items span from a $195 Telfar bag to a $35,000 Hermes bag. The most popular bags on Rebag’s site include a $430 Louis Vuitton leather bag in “fair” condition and a $4,290 Chanel flap bag in “great” condition.

Melissa Minkow, director of retail strategy at digital consultancy firm CI&T, told Modern Retail that she thinks Rebag+’s format is genius. “It’s just like a gift card, basically,” she said. “So, Rebag gets the money right away.” And, because customers can get their money back, she said, “it’s so low-risk for the consumer.”

Minkow also said the program’s perks — which include up to 10% lower prices on all items — are in line with what customers want from a membership or loyalty program. “It always comes down to price when they’re making decisions,” she said. “So the free shipping and the discounts are going to appeal to customers being more cost-conscious lately.” Minkow added that the program’s structure is akin to an investment, “and since this is the luxury space, it is an investment mentally for consumers.”

While Mary Pilecki, a Forrester analyst covering loyalty marketing, told Modern Retail that she is fascinated by the Rebag+ program, she does have some concerns. Namely, that customers might be hesitant to tie up their money with Rebag unless they are true fans. “This will probably be a hit with existing customers, but a new customer may not join until they try the products and are confident they like and trust the brand,” she said. “Trust is key here.”

A bigger rebound for Rebag

Rebag has worked on Rebag+ for the majority of the past year, Gorra said. But the program is more than a new initiative — it’s part of the company’s larger turnaround efforts.

Like other fashion retailers, Rebag benefitted from customers partaking in “revenge spending” in the wake of Covid lockdowns and quarantines. In 2020 and 2021, Rebag was compounding 40% to 50% growth, Gorra said. However, that number has gone down as inflation has gone up. While Rebag aims for double-digit growth each year, its growth now hovers around 15% to 20% annually. “That’s where we’re trying to keep it in the medium term,” Gorra said.

Gorra does not expect shopping behaviors to revert to 2021 levels but hopes that Rebag+ can help make up some of the difference. “We think that most of the growth is within ourselves at this point, and we shouldn’t need to be looking elsewhere for what we may already have,” he said. “So, if we’re able to really incentivize users to give up that market share or a greater share of their closet, we think we can deepen our relationships with our user base and grow from there.”

Outside of Rebag+, Rebag has made various changes to its business model to try and boost its bottom line. While Rebag used to carry more apparel, it’s since pulled back on clothes to focus more on high-end premium items like Chanel purses and Louis Vuitton wallets. Rebag also added consignment last year and formed a “Closet Clean Out” partnership with ThredUp in November.

In addition, Rebag has reduced its store count from 10 locations to four. “Back in the day, we were looking a lot at things like premium features, and is [the store] in a great area?” Gorra said. “And I think now we’re looking a lot more at profitability.”

In general, luxury resale platforms like Rebag and Fashionphile are becoming an increasingly popular choice among shoppers who want upscale bags or watches but are concerned about the financial or environmental costs of buying them. The luxury resale market was worth more than €30 billion (around $32 billion) in 2022, Bain estimated, and more players are getting into the space every year. For instance, eBay began a luxury consignment business in December. In February, Amazon boosted its luxury resale offerings via a partnership with Hardly Ever Worn It.

Still, like any other discretionary category, luxury resale is not without its challenges. The founder of The RealReal, for example, stepped down in 2022 after the company remained unprofitable. It embarked on a turnaround strategy in 2023 after racking up millions in net losses. Luxury resellers also face challenges with authenticating merchandise, as verifying products can be labor-intensive and costly.

As for Rebag’s future, Gorra said he is cautiously optimistic and considers the investment in Rebag+ crucial in helping to boost business.

“We’re giving a lot of benefits in terms of lower prices and better rates and whatnot,” he said. “But we think, eventually, a customer who becomes a member becomes so much more loyal.”