Published 16 Jun,2021 via Bloomberg Technology & Innovation - Dubai may be better known as the Middle East’s capital of excess but a startup based in the city is raising funds for international expansion by marrying luxury with thrift.
The Luxury Closet, an online platform for buying and selling used high-end goods, secured fresh financing led by regional investment firm GMP Capital, alongside international and local investors including Huda Beauty Investment, the private office of the founders of a popular Middle Eastern cosmetics brand.
The proceeds of the latest $14 million equity round will be used to bankroll the company’s expansion outside the United Arab Emirates as the global pandemic puts a strain on people’s finances and investors take more interest in sustainable fashion. The U.S. is already the Dubai startup’s second-largest market after the Gulf.
“Re-sale is the future of shopping,” said Kunal Kapoor, chief executive and founder of The Luxury Closet. “We expect one in six transactions to be pre-owned by the end of the decade.”
The resale market took off in the Arab Gulf where spending on a per capita basis was among the world’s highest before the pandemic. But disruptions in trade and tourism caused by the virus ripped through the region last year, leading to a 17% decline in the local luxury market, according to consultant Bain & Co.
Read more: Middle East Startup for Your Unwanted Cartier Gets New Funds
The pandemic and the economic insecurity that’s followed have been good for fashion resale globally, which has ballooned into a $40 billion industry.
Changes in shopping habits and the emergence of environmentally-conscious consumers have also meant a boon for resellers. Almost 70% of high-net-worth buyers in the Gulf -- who tended to favor the in-store experience in the past -- now say they are comfortable with online shopping, according to Bain.
U.S. companies like Poshmark Inc. and ThredUp Inc. listed earlier this year, while New York-based Etsy Inc. bought second-hand fashion app Depop for $1.63 billion this month. Kering SA, the owner of Gucci, Bottega Veneta and other luxury houses, recently acquired a 5% stake in second-hand fashion platform Vestiaire Collective SA, boosting its valuation to more than $1 billion.
The Luxury Closet is similarly capturing consumer attention after lockdowns to combat the coronavirus accelerated the region’s shift to e-commerce.
Founded in 2012 and employing about 80 people, The Luxury Closet lists 60,000 luxury items ranging from Gucci handbags to Rolex watches on its website.
Sellers using Luxury Closet send their products to the company to keep in a temperature-controlled warehouse until they are bought, while the firm’s experts verify their authenticity and condition.
Dubai-based Awad Capital Ltd. acted as financial advisers to the company, in cooperation with Drake Star Partners. The Luxury Closet has raised a total of $32 million so far.
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