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Secondhand Nose
Auctioning Used Luxury Items Online Is Nothing to Sniff At -- or Maybe It Is

By Robin Givhan
Washington Post Staff Writer
Monday, July 30, 2007

ARMONK, N.Y.

The young man with the sandy-brown hair holds up an orange handbag that at first glance looks like an Hermes Birkin. His voice takes on an aggrieved tone and his mouth curls into a hint of a sneer. For Matt Rubinger, this fake designer handbag is especially insulting because it's so badly done. The handles have the wrong proportions, the leather is too slick, the zippers are cheap and the tiny keys to the bag's distinctive padlock haven't been tethered with a leather string, but instead are clipped to a metal key ring. To the average eye, the bag may look like an orange Birkin. To Rubinger, it is a travesty.

Rubinger is the sort of fellow a shopper would want to have along on a fashion bargain hunt. He knows if a bit of gold has been machine-stamped or etched. That an empty Balenciaga bag should melt into a buttery puddle rather than retain its shape. And he knows how authentic Hermes bags smell, which is a bit like a saddle that has spent time on a horse.

One might think Rubinger, 22, worked for some fancy handbag brand, but he does not and never has. He used to sell designer handbags on eBay, and now he works for the luxury auction site Portero as an "authentication consultant." It's his job to spot fakes and make sure they do not end up on the Portero site and ultimately in the hands of its customers.

There have been uncomfortable occasions when a seller, who in good faith wanted to put a purse up for auction, has to be told an embarrassing truth. "But it was a gift!" is the usual response, Rubinger says. It also is the the most damning one.

Rubinger, along with experts in jewelry, watches and art, are the human capital in the Portero experiment, which is seeking to change the mind-set of shoppers who indulge in high-priced fashion. Co-founder Michael Sheldon envisions a marketplace in which, all things being equal, fashion shoppers will make purchasing decisions based on resale value, the same way someone might select a car or a condo. He also believes they will be willing to make those fashion investments using the Web if they can be guaranteed they won't be taken for a ride.

In May, the Portero Web site boasted just the kind of fashion item that Sheldon believes exemplifies his concept: a used crocodile Birkin selling for $41,999 (a brand new specialty that Birkin can sell for as much as $85,000).

"Wouldn't you be more likely to purchase a $42,000 crocodile bag if you knew you could sell it after you got tired of it?" Sheldon asks. "Which one could I justify: Polo or Hermes? Which would I buy if one holds its value better?"

Sheldon is making this bet at a time when conventional wisdom defines luxury fashion by exclusivity, personalization and experience. That's the philosophy behind brands such as Goyard, which monograms its $1,000 tote bags, and Hermes, which keeps its supply of Birkin bags far below the demand for them.

As good design has trickled down to H&M and Target, high-end brands are distinguishing their flagship products by promoting limited editions. They're using the glamour of celebrities to lend pizazz to their image. They are highlighting their history: Christian Dior celebrated its 60th anniversary with a bash at Versailles. Valentino whooped it up on its 45th anniversary with an enormous blowout in Rome.

Sheldon would like to equate buying a Chanel handbag with picking out a mutual fund.

* * *

On a steamy summer afternoon, Sheldon is wearing a navy suit with a white shirt and pin-dot tie. He has dressed to have his picture taken, he says. Ordinarily, he would be in business-casual attire. He may be running a luxury goods company, but it is first and foremost an Internet one.

Sheldon, 46, became an Internet entrepreneur after working in the private equity field, dabbling in online auctions and developing a taste for fine watches. His first Internet-related venture was DropshopStore.com in 2004, where eBay novices could deposit their luxury castoffs for experts to put up for auction. That company evolved into Portero in 2006, which he co-founded with Daniel Nissanoff, another entrepreneur. At first, it used eBay as its online platform. In March, Portero became a stand-alone site.

Portero positions itself as sort of an online Christie's to eBay's flea market. While eBay has hosted more than 45 million auctions since its beginnings in 1995, Portero has hosted about 70,000. But Portero focuses only on high-end merchandise in a few limited categories such as jewelry, watches, art and handbags. Its typical sale ranges from about $6,000 to $10,000, Sheldon says, although it has sold a $30,000 diamond ring and there are plenty of $300 used purses for sale as well. "Some brands have more resale value than others," says Stephanie Phair, vice president of business development, noting that Hermes, Chanel and Louis Vuitton bags tend to hold more of their value online.

Many of its sellers are dealers or the Web site itself, after having purchased goods outright from an estate, for example. Individuals are most likely to be selling handbags. Portero aims to appeal to sellers who consider their Chloe Edith handbags an investment. (Regular price? About $1,200. Used? About $700.) Sometimes, however, sellers who thought they were ready to divest a handbag or a collectible turn sentimental at the last minute.

That crocodile Birkin, for example, never sold. The owner pulled it off the site. She was headed to Europe and decided it would look awfully fetching on the Continent.

Portero wants to appeal to buyers who appreciate the convenience of online shopping but who are more interested in getting their hands on a specific, genuine item than in getting a rock-bottom bargain.

"There is a market out there, call it an aspirational market, of people who really want that Chloe bag," Phair says. "With the pre-owned market . . . it's okay to have last year's. The breathless fashion customer is ours, but on the selling side."

Portero offers up Lois Rice as an example of a satisfied customer. Rice shops online as well as in the real world. "Neiman's and I are close friends," she jokes. "Saks, too."

She has bought jewelry from Portero as well as handbags by Marc Jacobs, Chanel and Fendi.

"I love discounts, but I don't want to buy used things that are obviously used. But I think some things have a quality to them that outlasts one person. . . . Americans tend to toss things away too quickly," says Rice, 64, who is a retired landscape designer living outside Boston. The Fendi handbag she bought a few months ago, a limited edition, "is just exquisite. . . . It looks brand new." She paid about $1,000 for it.

To make his experiment work, Sheldon has homed in on one of the nagging problems of high-end e-commerce: "People can't trust luxury online," he says.

"You're going to demand a bigger discount in the wide-open market; it could be a fake. That's the reason for a super-duper bargain. Ten pieces will be okay and X will be bad. So there's a price ceiling," Sheldon says.

He believes he has found a way to break through that ceiling by taking a cue from luxury automakers such as Mercedes and BMW, which traffic in "certified pre-owned" vehicles -- a fancy way of saying used cars that have been inspected and come with a warranty. He hires experts to inspect every item before it's put up for sale.

"The security of knowing I'm not buying a fake is important," Rice says, "especially given the amount of money I'm spending."

Portero controls the entire process. All goods come through the Armonk headquarters, a squat red brick building in a campuslike setting that houses at least four closet-size safes, security cages and inspectors. Each piece is professionally photographed. No bags are shown dangling from a chipped doorknob in murky mood lighting. A Portero employee prices the item and writes a description. All of which gives the site a uniform look rather than a hodgepodge one. Finally, each purchase is sent out in a port-colored gift box. Portero guarantees all purchases.

The site's main investor, the Atelier Fund, is financed by the Switzerland-based luxury conglomerate Compagnie Financière Richemont SA, which owns or has interests in companies including Cartier, Chloe, Van Cleef & Arpels, Vacheron Constantin, Jaeger-Lecoultre and the designer e-commerce site Net-a-Porter. There is a circular element to Portero. The site sells a multitude of used merchandise manufactured by its primary investor.

Portero makes its money by taking an average commission of about 25 percent from the sales it facilitates. The company expects $10 million to $15 million in revenue this year, says Sheldon, and hopes to be profitable in 2008.

The company's closest alliance is with Tourneau, which dispatches experts to authenticate watches. Tourneau's participation on the Portero site is an extension of what the company was already doing at its stores: buying back watches from customers, encouraging them to upgrade, and then selling the refurbished timepieces.

"We treat Portero like a store with different brands and price points," says Alan Goodman, Tourneau vice president of international stores and licensing.

Goodman says around 1,600 watches have been processed through Portero and the majority of them have sold -- and sold well. "By Tourneau being part of the equation, more people are willing to bid," he says, "and willing to bid higher."

Not every brand has been eager to support the secondhand market, however. Some companies want shoppers to focus on buying new goods in bricks-and-mortar retail outlets over which they have direct control.

Online shopping, notes Reed Krakoff, executive creative director of Coach, is focused on the "transaction" rather than the "experience." And for many brands, the experience of the purchase is as important as the purchase itself. It's partly how they justify the high prices. Sitting down on a tuffet in a Chanel boutique and having an assortment of handbags spread out like chocolates by an attentive sales consultant is an intrinsic part of the Chanel brand.

And of course, snobbery sells. Some brands "don't want someone who can't afford the bag" -- at least a new version of it -- "to have the bag," Phair says.

But part of the overhead in selling luxury fashion is providing customer service. And that now includes giving customers an efficient and financially productive way of getting rid of goods they no longer need or want, says Nissanoff, the Portero co-founder and author of "Futureshop: How to Trade Up to a Luxury Lifestyle Today." "Wearing something that makes you feel spectacular is great, but it feels less special the second time you wear it and even less special the third time," he says. Instead of languishing in someone's closet -- held there by sentimentality or guilt -- or being sent to a consignment shop with limited reach, he envisions such items being sold online by a dealer authorized by the brand.

And for buyers, he argues that the experience of being plied with flattery and Perrier in a boutique has limited value. "The luxury shopping experience, I think, is important, but it's more important in certain situations: if you're going in with your fiance to purchase an engagement ring or with a spouse to purchase a birthday present," Nissanoff says. "The counter to that is the 'I'm getting a great deal' experience."

Of course, deals are relative in the world of luxury fashion. There's a turquoise Gucci crocodile clutch on Portero. Current bidding: $3,599.

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