Luxury’s Gray Market Is Emerging From the Shadows

Imagine you are hunting online for a pair of square-toed slides from Bottega Veneta, one of the most-hyped luxury brands of the moment. A new season pair can cost more than $550 from the brand’s website, an old-guard department store like Neiman Marcus or a newer e-commerce player like Net-a-Porter.

But what if you chose to buy from Cettire, a website offering discounts of up to 30 percent on the latest fashion styles? You would be a player in the multibillion-dollar luxury “gray” market, a fast-growing sales sector that has historically operated out of sight of most Western consumers. However, with the arrival in recent years of companies like Baltini in Italy, Italist in the United States and Cettire, which listed on the Australian Stock Exchange at the end of 2020, gray sales have been ending up in millions of digital shopping baskets.

Unlike the illegal counterfeit goods often found on the black market, the gray market sells authentic luxury products — but at a significant discount, usually between 15 and 35 percent, and with no contact with the brands. Through a practice sometimes known as parallel importing, gray market sellers tend to take advantage of the varying pricing strategies and taxation requirements for luxury products across different regions in order to get certain hot products to those who want them for less.

One of the best-known examples are daigous, or purchasing agents who cater to Chinese demand for foreign goods, particularly luxury wares. Daigous typically buy products in a region outside China where an item is cheaper, then mail or travel back to China with the goods to sell them for profit.

The price differences between markets can be striking. According to research recently published by, a customer in Europe will pay a little over $2,800 for an Yves Saint Laurent sac de jour, but the same bag will cost more than $3,700 in South Korea. A shopper can purchase a white Fendi canvas baguette bag for roughly $2,620 in continental Europe. That same item will cost about $3,350 if bought in mainland China.

Taking advantage of such disparities has become big business. Last year, the gray market was estimated to be worth up to 8 percent of the $257 billion personal luxury goods market, said Luca Solca, an analyst at the research firm Sanford C. Bernstein.

“Traditionally, plenty of luxury brands either turned a blind eye to or even indulged in sales from the gray market as it meant quick cash and a chance to beautify their reported numbers from wholesale retail partners, especially on non-moving or excess stock,” Mr. Solca said. “But in recent years that attitude has had to change as the market morphs into something that has become more and more difficult to control.”

A number of daigous have formed large-scale collectives, and companies like Beyond have emerged for easier cross-border transactions from the United States to China. Recently, Western businesses using similar gray market tactics at scale have emerged, including Cettire, which expanded rapidly during the pandemic, and unauthorized watch dealers like and Chrono24.

Cettire was started in 2017 by Dean Mintz, a reclusive young founder with no previous experience in fashion, and offers global consumers deep discounts on some of the best names in luxury, including Prada, Gucci, Chanel and Saint Laurent. According to its prospectus for its initial public offering, sales between March and June 2020 grew 331 percent from a year earlier. Cettire raised $49 million when it went public in December, and its share price soon swelled more than 400 percent.

Then in June, questions raised about the long-term viability of Cettire’s business model in a report by the Australian Financial Review prompted its share price to slump 30 percent. Trading of the company’s stock was halted on June 15, the same day Cettire received a public letter from compliance officers at the Australian Stock Exchange. Cettire did not respond to requests for comment for this article.

Cettire could be seen as a case study in how a company operates around the gray market. It claims to sell about 160,000 goods from around 1,300 high-end fashion brands on its “unique proprietary platform” via a process known as dropshipping. Dropshippers are online sellers that don’t keep any products in stock. Instead, when an item is purchased, they buy the item from overseas and ship it to the customer.

Cettire takes a commission on the sales, which are mostly of products made and priced in Europe to customers in the United States and Asia. Like Farfetch, a London-based site, Cettire is a middleman between boutiques and customers. Cettire has no direct relationship with the luxury brands.

“The luxury gray market is not new, thanks to fashion’s notorious inability to really get a handle on its production volumes,” said Julie Zerbo, a lawyer and the founder of The Fashion Law, a website exploring the legal and commercial challenges facing the industry. “Particularly in Southern Europe, genuine product has often had a way of coming out the back door of a factory or off the back of a truck and eventually into the hands of consumers looking to pay less than full price.”

Of course, many customers are now finding bargains through affiliate advertising on Google or via aggregate search sites like Lyst. When deals exist just a few clicks away from the full-price wares on a brand’s own website, pricing inconsistencies become stark.

Cettire caught the eye of Tommy Mathew, a fashion e-commerce veteran with stints at Acne Studios and Helmut Lang. In May, he noticed those Bottega Veneta slides — one of the brand’s hottest current styles — on Cettire for 24 percent less than their recommended retail price. Similar deals could be found for the “Chain” pouch leather shoulder bag — $3,506.65 on Cettire, $300 cheaper than on the official Bottega site — and on items like Chanel eyewear, Prada skirts and Saint Laurent belts. (Those deals disappeared after Cettire received press attention this summer.)

“The Cettire business model isn’t illegal — it’s just very good at exploiting legal loopholes in trade regulations,” Mr. Mathew said. He noted that shipments valued less than $800 can generally be shipped free of import duties to the United States, where two-thirds of Cettire’s customers are. China has a similar exemption.

But Cettire also has quirks. Despite selling to other European locations, it has blocked web traffic from France, Italy and Switzerland, where many of the world’s biggest luxury groups are based. (In a letter to Australian regulators, Cettire denied it was a strategy to prevent brands from seeing the site’s products and prices, saying the platform “is not currently accessible in certain markets as the company prioritizes its global expansion.”)

“The main reason authorized retailers don’t exploit these sorts of loopholes is because they would likely lose access to products by openly undercutting the brands,” Mr. Mathew said. “Cettire obscures its suppliers to ensure their access to luxury goods while providing plausible deniability to suppliers who engage in this type of practice.”

Three brands have stopped being sold on Cettire: Celine, Vetements and Acne. Other brands, like Chanel, Prada and Yves Saint Laurent, all declined to comment for this article.

Luxury brands are now effectively competing against themselves. Exactly how much they stand to lose is difficult to quantify. But most are acutely aware of the gradual thinning of the veneer of exclusivity that they have worked hard to establish and that has already been partly diluted by the heavy discounting of off-season stock by department stores and outlets.

Now, many brands are working with consultants and local governments to develop new ways to combat the gray market after previous attempts to control the practice — like buying back and destroying unsold stock — led to backlash over sustainability issues.

“If brands don’t want to be a victim of these platforms, then they have to button up their distribution and reduce wholesale volumes to protect their image,” Mr. Solca said. Brands like Gucci, Prada and Burberry have recently trimmed wholesale orders in an attempt to cut back on the appearance of ubiquity and the risks of heavy discounting. The eyewear producer Luxottica is creating chips for its glasses that will allow it to better track products. Others are exploring using blockchain technology or improved auditing measures to identify problem suppliers and retailers.

Still, incentives remain for customers to look to the gray market. Brands like Chanel raised prices as much as 15 percent in the past year as a result of changes to raw materials prices and currency exchange rates.

In July, weeks after the controversy that had roiled its stock, Cettire suggested it would expand into children’s wear and said it was “still assessing new opportunities for growth.”

“Eventually, this market will contract, but for now there are plenty of price-sensitive luxury consumers who are willing to purchase authentic goods at a discount through gray channels,” Mr. Solca said. “That demand won’t go away any time soon.”

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