The Achilles heel of resale

The luxury resale market is ultimately a collection of peer-to-peer (P2P) transactions. We recently conducted a survey that revealed 70% of resale transactions in United States occur via third party consigners/resellers and are therefore anonymized. This means that buyers have no option but to trust the middle man to protect them from getting ripped off. Consumer trust is very fickle when it comes to products they know are at risk of being counterfeited. A few high profile mistakes is all it takes for consumers to lose confidence (there is a reason no one gets their pre-owned luxury from Alibaba). One of the major flaws of the resale market is the lack of a controlled supply – inventory comes from a sea of consumers instead of centralized and trusted facilities.

Authentication is a daunting task for any reseller. Once a new product is purchased from a retailer, there are virtually no ways to reliably demonstrate where it came from. Receipts, designs, material quality, and word of mouth is all that ties a product back to its original creator. In most cases, only some of that information is available at the point of resale. Since P2P platforms never actually touch the product, they only have access to the description and the design provided through the product listing and images, respectively. These platforms have created algorithms that work wonders with such a limited data set, but they are far from 100% effective.

Companies like The RealReal were created in part to address this issue. Unlike P2P platforms, most of these online consignors focus exclusively on fashion and control product inventory. Consignment personnel inspect products by hand to ensure quality and authenticity. This approach is significantly more expensive but it’s a service that consumers are willing to pay for – the price of pre-owned luxury products are 90% higher on curated sites like The RealReal compared to ebay.

Manual authentication is the most effective tool when it comes to identifying fakes but it comes with two main drawbacks. The first is human error. This is an unavoidable consequence of having few performance standards. There is no universal formula for inspecting luxury goods nor is there any certification required to become an authenticator. There are plenty of highly trained people that are qualified to authenticate luxury goods, but they come at a price. That leads to the second major drawback, which is cost. Because real authenticators are expensive, platforms will only authenticate high risk products and leave the rest to be inspected by cheaper employees. This approach works well but platform owners are tasked with finding the right balance between cost and authentication.

Our mission is to completely overhaul the way products are linked to their origin. With Arylla, P2P platforms can remotely confirm authenticity without ever touching the product, legitimate resellers can bolster their listings, and consignors can authenticate at a fraction of the cost. There is no silver bullet for authentication. Our job is to complement the many tools already being used to banish counterfeits to the fringes of the genuine resale market.

Arylla