Secoo is an e-commerce site for luxury products. Unlike traditional Luxury B2C websites, Secoo selected second-hand luxury as main product. Also, Secoo plays not the role of wholesaler, but intermediary, mainly profiting from the consignment fee. Mr. Lee, Secoo’s founder and CEO, defines Secoo as: Personal Consumption Finance.

B2C website usually serves as a merchandising channel, while Secoo is a platform for a consignment. Secoo employs a number of qualified jewelry and luxury goods appraisers, establishing the capability for appraisal and valuation of luxury. Secoo currently allows two ways of consignment: complete the entire consignment process online; or go to the offline flagship store for consignment. Secoo already opens flagship store called “Secoo club” in Beijing and Qingdao. Store in Shanghai will be opened in April of this year.

The entire process of appraisal, valuation and selling can be done online. Before delivery, customer service staff will contact the seller for confirmation. As for the transaction settlement, sellers can realize the value either at the point of appraisal or after completion of final transaction. Sellers can also choose to accept the Secoo virtual currency rather than cash for clearing.

Secoo mode is smart in its target market and business model. First, Secoo chose the second-hand luxury goods as the main product. What’s interesting in this market is that the sellers and buyers may essentially belong to the same group. With strong desire for real luxury, while unable to afford brand-new goods—they are those who accept used luxury and may resell them for liquidity. Many luxury B2C websites also target at this group and attract them with “everyday low price” considering their price sensitivity. But Secoo brings out product with even lower price and more important, a channel for resell.

Another point worth of mentioning is the business model. Secoo avoids large input on supply chain by positioning itself as a consignment platform rather than a traditional retailer. Sellers offer products, and make the delivery, and pay commission after sales. The major devote on supply chain is the appraisal and storage cost. On contrast, traditional B2C companies spend too much on supply chain, logistics and marketing.

But what inspires me most is the special design of clearing system. Let’s assume the most optimistic scenario and see what will happen: if all the sellers choose virtual currency for settlement and re-purchase products with virtual currency, money will circulate inside Secoo.

See the flow chart below for better understanding:

If we extend this brave assumption, we will find a virtuous cycle: luxury goods circulate among sellers and buyers, and cash floods into Secoo.

You may be amused by this bold imagination. But Secoo founder already adopted this payment mode in his previous project which targeted on used household appliances, which according to rumors, circulated over several hundred million RMB in the system. Secoo appears as e-commerce, but actually does finance.

With the recognition from famous venture capital, Secoo seems to enjoy a brighter future compared to other panic luxury B2C competitors. The capacity of the Chinese luxury goods market is huge enough to nurture several listed companies; Milan Station, the offline second-hand luxury retailer mainly focused on HK market, already set a great example by getting listed in HK with market cap of nearly 900 million. Still, obstacles lie ahead for Secoo: How to attract more suppliers for quick expansion, defeat competitors, capture the market, attract more customers and maintain brand reputation. No standard answers for these questions, but every ambitious company needs to face them before huge success.

However, this project amazed us most because it injects great potential to a seemingly ordinary business with innovative mode. In my personal view, Secoo is smart enough to: 1. use an innovative settlement mode to retain cash inside it; 2. choose the target market and product category delicately; and 3. add value to both sellers and buyers, while build up entrance barrier with appraisal and valuation service.

We do have reason to expect more from Secoo.