It was a $15,000 Hermès Birkin bag that first got Frederick Mannella hooked on the idea of selling luxury but at affordable prices.
"I love the products," says the 30-year Montrealer. "It's the prices that make me pause."
With his Japanese-born wife, 31-year-old Kei Izawa, in 2012 Mr. Mannella founded LXR & Co., a luxury resale business offering vintage designer accessories at a fraction of their original cost.
Featured brands include Hermès, along with Chanel, Céline, Louis Vuitton and Prada.
"All products are vetted preowned luxury items," says Mr. Mannella, who is a father of three. "They're authentic goods."
Customers sell the items directly to LXR, which, in turn, sells to consumers via the Internet, or bricks-and-mortar stores.
Recent offerings, as seen on the company's e-commerce website, include a Ferragamo shoulder bag listed at $295, from its original $1,180 price tag, and a $2,100 Cartier chain purse going for $395.
Buying preowned goods has gone from ick to irresistible, representing a new growth market for the fashion industry.
The trend first gained traction in the wake of the 2008 global recession when annual sales for preowned luxury totalled a couple million, notes Mr. Mannella, "but today it's a billion-dollar industry that is expected to grow in 15 years to $7-billion."
LXR & Co. is keeping pace with demand.
While a small Canadian company, it has three offices, four warehouses and sales in 15 countries. In the summer of 2014, it opened its first retail location within the Hudson Bay's flagship store on Queen Street in Toronto.
Today, about a year later, it has more than a dozen new stores in seven cities in the United States and five more in Canada. As of press time, an additional LXR resale boutique was set to open in Dubai, with another 30 being planned for 2016 in other international locations.
"Our story is a story of export," Mr. Mannella says.
"We technically never see the products come through Canada. Product is shipped out of three different warehouses in three continents directly to the customer, wherever he or she may be in the world. We've shipped to South Africa and all the way to Vietnam without seeing the product or the client. We do it all digitally."
But there are challenges.
LXR & Co. represents a new business model and this often results in delays at the border. "Since what we do is relatively new, we get audited and questioned a lot," Mr. Mannella says.
"Nothing that has stopped us so far as we are very careful about doing our business properly from the start. We invest massively in a strong team of professional consultants with expertise in regulatory issues arising from business development companies."
Sofia Spoltore, U.S. and Mexican customs manager at Milgram in Montreal, is not surprised that LXR has run into obstacles at the border.
"Intellectual Property Rights and the potential sale of counterfeit goods is a very hot topic, particularly in the U.S., where they've implemented processes to intercept counterfeit goods shipments and take action against offenders," Ms. Spoltore says.
"Apparel in general requires manufacturer identification and anything bearing a trademark would require proof of a licensing agreement before goods can be sold and distributed. Importers should be aware that the onus is on them to prove that trademarked goods are authentic and that they have obtained the license to distribute."
Beyond delays at the border, LXR frequently faces charges of copyright infringement by the same designer brands the company sells. It's a unique problem.
"I receive on a weekly basis letters from the houses of Fendi, Hermès, Louis Vuitton, Bally and others trying to halt us from expanding and creating a bigger presence in the resale luxury marketplace," Mr. Mannella says.
But design houses have no legal powers for stopping Mr. Mannella doing business, says Teresa Scassa, a University of Ottawa professor who holds the Canada Research Chair in Information Law.
"There is something called right of first sale that clearly spells out that trademark or copyright owners, after they put out a tangible good on the marketplace and sell it, exhaust their rights with respect to that tangible item." Dr. Scassa says.
"That means they have no more rights with respect to the resale of the item. This is about the sale of second-hand goods and everyone now does it, and you're allowed to do it."
However, she cautions vintage importers: "Just make sure you never represent what you're selling as new."
Mr. Mannella never does. He is scrupulous in telling customers his merchandise is used.
"I now have a letter in template form explaining to all the fashion houses that take issue with us that we are selling authentic preowned goods and are presenting their brand in the most beautiful way. We are fair in our description of the product and offer superior customer service. Really, they should be thanking us."
Still, knock-offs represent a real threat.
To make sure everything they sell is true to the original brand, Mr. Mannella employs a team of 15 buyers and authenticators whose job it is to make sure LXR is getting goods only from legitimate sources and the bags are authentic.
"Typically these people come from Hermès, as well as pawn shops and auction houses specializing in vintage fashion. We train them in authentication," Mr. Mannella explains.
"We have a robust system with all bags from the past listed so we track price fluctuation and changes in models to establish pointers of authenticity. We also offer full indemnification to all clients and customers for authenticity," he adds.
Of 20,000 bags already sold this year, Mr. Mannella says he has received not a single complaint.
In a quickly growing market, "we made preowned profitable," he says.