Outside View: In Race for Resale Dominance, Who Will Win Authentification?

Out with the new, in with the old. Consumers’ blossoming love of resale has seduced major investors and luxury conglomerates: in January, Poshmark Inc. made a splashy stock market debut. In February, LVMH Moët Hennessy Louis Vuitton executives told reporters the fashion behemoth was looking to enter the secondhand market. On March 1, Kering S.A. took a minority stake in Vestiaire Collective S.A., and this week, ThredUp Inc. is due to set to price its initial public offering, with shares beginning to trade on Friday.

In trademark law, the first-sale doctrine allows the resale of branded products after trademark holders first put them on the market. That means the resale boom is “something that brands can’t ignore. Especially since a brand’s performance on the secondary market is a key indicator of its performance on the primary market,” said Graham Wetzbarger, founder and chief executive officer of Luxury Appraisals and Authentication LLC, which advises companies and investors on authentication best practices.

Moreover, he observed that resale companies can easily track the reemergence of past fads because they acquire valuable data about “how long people hold on to items.”

Of course, trends also inspire fakers. “Whatever’s really trending at retail is what the counterfeiters are going to knock off,” Wetzbarger said. One-size-fits-all, logo-heavy handbags and leather goods have long been the top product category for fakes, but sneakers have also become a popular counterfeit item, he noted.

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While the first-sale doctrine limits their control over the secondhand market, brands must safeguard their trademarks, which the law requires them to defend or abandon. The exploding popularity of resale also raises concerns for shoppers, who want to know they’re buying Gucci, not Guci. Enter resale authentication policies, which purport to reassure consumers they’re getting the real deal, while also placating jittery fashion companies.

Right now, each platform has its own authentication policy — but as investors line up behind star performers, an emerging market leader could soon set standards across the field. “As these companies go public and grow in scale, that’s where you’re going to find the most commitment [to authentication], because the investment community is going to require that for liability reasons,” said Wetzbarger, adding that investors “want to know how you know it’s real and how you do it cheaply and how you scale up.”

Poshmark, which counts more than 70 million registered users, has a policy of only authenticating products that cost more than $500. Noting that the company prohibits the sale of counterfeit products on site, a spokeswoman acknowledged that “the share of transactions on our marketplace that require authentication is the minority.”

“A majority of Poshmark purchases are made at lower price points — in 2019, 17 percent of Poshmark purchases were over $200, 30 percent were between $51 and $200, and 53 percent were under $50. Of those that do require authentication, the percentage of items from that group that don’t pass is minimal. Higher-risk categories include luxury brands or items, simply because of the price point. Our Posh Authenticate team was created with this category in mind,” she said, referring to a trained group of in-house employees.

Poshmark revokes the account privileges of sellers found to be hawking infringing or fake products. The Posh Protect policy provides refunds to consumers for “counterfeits, damaged goods or misrepresented items.” For deterrence, Poshmark “employs machine learning and rule-based detection to proactively identify and remove suspicious product listings. This also includes a variety of systems to prevent restricted users from creating new accounts under different aliases,” the spokeswoman said. Additionally, the company has community reporting mechanisms and a “Content Integrity” team that reviews and removes alleged fakes.

Wetzbarger said the $500 authentication gateway seemed reasonable given Poshmark’s peer-to-peer business model. “That’s going to cover all major high-end bags. Is it going to catch everything? No,” he said, citing a fake designer coin purse, or a product deliberately priced at $499 to elude detection, as examples. “But it’s a pretty solid threshold.”

By contrast, luxury-driven The RealReal authenticates all consigned items in-house before shipping to consumers. The company, which went public in 2019, says it hires “hundreds of in-house gemologists, horologists and brand authenticators,” many of whom have worked for luxury brands or auction houses, and tasks them with inspecting products. The RealReal flags items according to risk level, with the highest risk assigned to very expensive products like the Hermès Birkin bag, which can cost tens or even hundreds of thousands of dollars, as well as hot-ticket streetwear pieces.

In a statement, the company said it had recently “deployed advanced artificial intelligence and machine learning to support our authentication experts, including Item Risk Scoring, in which we assess more than 50 data points on each item and consignor combination to identify points of risk before an item is evaluated by our authentication team.” The RealReal also hosts regular training sessions to canvass new counterfeiting trends and says it works with both brands and law enforcement to fight fakes.

At upscale Vestiaire Collective, “all items are quality controlled by our team unless the buyer opts out of this service by selecting Direct Shipping at checkout,” a spokeswoman said, adding that the option is only available for “local-to-local purchases” in which both buyer and seller are U.S.-based, and if the item is $1,000 or under. Direct Shipping results in the buyer receiving goods directly from the seller.

Wetzbarger noted many brands are reluctant to spend time on authentication discussions with resale platforms or independent experts. “They don’t want to confirm that something is authentic or counterfeit because they’re not making money on it,” he said. Brand sales associates can look up product serial numbers, but they’re not typically authorized to do so, he added.

Authenticators who are uncertain about a product’s authenticity may, in special circumstances, take items to a store for repairs, which brands won’t perform for products they consider fake. If an item is accepted for repairs, that still may not guarantee its authenticity. Still, Wetzbarger said, “you’ll get a receipt, and what the brand says carries weight.”

Cynthia Martens is an associate at The Nilson Law Group PLLC in New York. She was previously a WWD correspondent in Milan.

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