Suppose you (or your spouse) desperately want that Louis Vuitton handbag or that Omega watch, but can’t quite bring yourself to pay full price at the mall.
Fear not, for help is at hand in the form of The Luxury Closet, a Dubai-based online platform that offers high-quality used luxury goods, offering thousands of dirhams worth of savings.
The Luxury Closet is the brainchild of Kunal Kapoor, who founded the business in 2011 following a stint as head of sales for Louis Vuitton.
“It was a conversation I was having with a friend of mine,” says Mr Kapoor. “Luxury companies don’t typically offer discounts on their products, so how do you make them more available to a wider range of consumers?”
Mr Kapoor noticed a thriving second-hand luxury goods market on eBay, as well as specialised second-hand luxury e-commerce sites in the US and South East Asia.
“I saw there was already a proof of concept for what we wanted to do, so the idea of launching a similar business here made a lot of sense.”
The UAE was particularly attractive for the opening of such a business, given the growth of the luxury market in the region, and the success of other e-commerce start-ups.
“The global market for luxury goods shrank a bit during the downturn, but non-western markets continued to grow, particularly here in the Middle East, where the market is worth around US$8 billion and heavily concentrated on personal luxury goods,” he says.
Mr Kapoor says he chose to set up in Dubai because it is a key luxury destination “with lots of shops and buyers, so there’s a lot of access to used inventories”.
Examples of companies that had successfully tapped the e-commerce market, including Namshi, Marka VIP and Souq.com, showed it was possible to scale up very quickly and get access to investor funding, “so we felt it was a good idea to start up here”.
The company, which now employs 26 people in Dubai, has achieved triple-digit annual growth since launching in 2011, and last month announced that it had secured some $2.2 million of funding from some of the UAE’s most prominent venture capital funds.
These were the company’s seed-stage investor, Middle East Venture Partners (MEVP), as well as Dubai Silicon Oasis Authority (DSOA), twofour54, part of the Media Zone Authority Abu Dhabi, and Mena Venture Investments (MVI).
The funding options for start-up businesses have flourished in the years since the company began operating, says Mr Kapoor.
“When I was starting out there were several venture capital funds that were being incorporated, and it was easy to get angel financing, and Series A and B financing is currently being solved.”
“Right now it’s much easier to get a cheque for $100,000 to $500,000, but to get a $2m to $3m cheque is a bit harder. The facility to get funding of $5m to $10m doesn’t exist yet, but this is gradually being solved.”
The Luxury Closet’s website now racks up about 500,000 visits a month, and has about 100,000 registered members, with 60,000 items submitted to the site last year.
Customers looking to sell an item on the website send a photograph to Luxury Closet, which will then pick the item up, authenticate it, price it, display it on the site and then transfer the funds to the seller when it is purchased.
The company began by focusing on handbags, which remain the website’s largest sellers, with Louis Vuitton and Chanel the most popular brands across the region. The site has sold 29 of Hermès’ prestigious and extremely rare Birkin bags since its inception.
The site’s fastest-growing category is watches, says Mr Kapoor, with Rolex far out in front in terms of desirability.
“Even when a Rolex is 20 years old it will still retain up to half its value, which is amazing when you compare it with things like cars,” he says.
While the company has shipped to more than 60 countries since its launch, its focus remains the Middle East, with the UAE its largest single market.
“It’s not just in Dubai and Abu Dhabi that we’re seeing demand,” says Mr Kapoor. “People are purchasing from all parts of the country. We have deliveries nearly every day where we have to drive five hours as far as Liwa.”
In terms of the future, the company plans to use its new funding to scale up its infrastructure to tap into the growing luxury market in the region.
“The plan is to build the company up and go after a larger market,” says Mr Kapoor. “We’re still very small compared with the size of the market and where we want to go. We see the possibility of building a $100m business.”
Of particular importance is building up the company’s mobile capabilities, responding to the fact that more and more of its customers visit the website via a mobile device.
“We’re having to transform ourselves to the point where we are a mobile-centric company. It means bringing on new talent, building an infrastructure and a user interface that is simple and accessible for a large audience.”
As spending on luxury watches and handbags continues to rise, the future looks bright, says Mr Kapoor.
“The luxury market is climbing globally, and here in the Middle East the market is posting nearly double-digit annual growth,” he says.
“That’s particularly true here in the UAE. Dubai is the only city in the world where you have two Louis Vuitton format stores, and mall traffic continues to grow. It’s a great market.”
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