When the former Louis Vuitton sales manager realised his customers wanted to use high-end products but not keep them, he hit upon a business idea that has the potential to be truly disruptive
In a city where luxury bags go out of fashion almost as fast as designers can make them, a former sales manager for Louis Vuitton realised consumers in Dubai are buying more high-end products than they want to keep. As a result, “unwanted” clothes, bags and shoes by fashion houses such as Chanel, Cartier and Louis Vuitton collect dust in closets across the emirate. So Kunal Kapoor decided to launch a platform that allows users to sell and buy authentic, pre-loved goods online and in store.
Dubai-based The Luxury Closet ships worldwide and has an estimated 20,000 stock base, adding products worth over $5m on a monthly basis. Its collections, which offer discounts of up to 70 percent, range from a $42,535 18k Rolex Day-Date wristwatch to a $100 Yves Saint Laurent shoulder bag, and even allows consumers to buy in instalments plans. Speaking to Arabian Business, Kapoor reveals why Dubai can become a global hub for discounted luxury.
Why does luxury retail need The Luxury Closet?
While luxury brands build products that can last for up to 20 years, Gulf customers continue to buy new designs, often building a portfolio of products, clothes and bags that end up sitting – unused – in closets. I still remember one day when a lady came in with a 20-year-old Louis Vuitton bag, and she wanted to change the zipper on it. She had it 20 years and it was the first repair it’d had. These products are made with so much care and with the best material and craftsmanship in the world. They’re not meant to last one year.
You build products that are meant to last 20, 30 years but clients are buying more products because they want to own more of them. On the opposite side, you see people who have never bought Louis Vuitton, who dream about buying one product. If you look at Chanel prices, on average they increase about five percent year on year. We need realistic prices, right?
When you started, did you predict the growth the firm is now enjoying, not least the $8.7m in funding it attracted last month?
No. I did not think it would become, in numbers, as big an opportunity as it is becoming. The willingness to sell pre-owned discounted luxury products in the region is very high. But it was only in the past few years that we realised that not only is there demand for pre-owned and discounted luxury items but that the supply opportunity locally is way more than the demand. This is because it’s the highest spend on luxury, which means people have more items. The average value of a closet is a lot higher; the GCC has the second highest average value of a closet in the world after Italy. So the supply is so great it can cover demand not just in the Gulf, but also internationally.
What do you see The Luxury Closet growing into? What is the plan going forward?
What we primarily want to do is build the largest community of sellers in the region, which we can now pursue thanks to the capital. That is our number one goal. In addition, we want to make it feasible for buyers in the region and internationally to buy from us. There is an estimated $500bn worth of luxury goods sitting in closets globally, according to consulting firm Bain and Company, while analysts predict the MENA luxury market will be worth over $12bn by 2021. They suggest that the size of the second-hand vertical alone can be upwards of $900m.
Where do you see growth opportunities for The Luxury Closet? Any expansion plans?
Much of the growth is going to come from Saudi Arabia, Kuwait and the US. The US is the fastest growing country for The Luxury Closet, followed by Saudi Arabia and then Kuwait. Around 30 percent of what we sell within the UAE is click and collect, meaning customers will browse online but choose to pick up the items from our office. So we have small shops where customers can see and try the product. And this is something that we will be expanding.