November, 15 2023
Daniel Feith, co-CEO of REAWAKE
Tim A. Fongern
Based in Zurich, Daniel Feith joined REAWAKE in April 2022. As co-CEO, he leads a team of 28 individuals. A specialist in the sale of second-hand luxury products, the Swiss company operates shop-in-stores in Zurich, Bern, Basel and most recently Geneva. Tim Fongern is a certified German lawyer and is the head of corporate and M&A at Oracle Solicitors, based in their Frankfurt office. Oracle Solicitors is a Luxury Law Alliance partner.
For those readers who are not yet familiar with your company, can you briefly describe REAWAKE’s business?
REAWAKE brings high-quality “treasures” back into the product lifecycle, with a current focus on bags, clothing, shoes and accessories. We work mainly on a commission model and currently employ 28 people. What differentiates us from other players in the second-hand luxury market are our premium stores in prime city centre locations combined with a strong online business. We believe that having physical stores to meet customers – both commissioners and buyers – in person is key to building and maintaining trust and good relationships in the high-end industry. Our commission clients want to know that their treasures are in good hands, and buyers, especially when dealing with REAWAKE for the first time, want to see their treasure in person before investing thousands of Swiss francs. REAWAKE also runs an atelier where we upcycle treasures with a love of craftsmanship and also offer “Bag Spa” services to our clients.
Can you tell us the story of how REAWAKE came about and what inspired you to enter the world of high-end luxury goods?
The roots of REAWAKE date back to 2008. At that time, our founder, Rea Bill, left the modelling industry and started a one-woman business with a 30-square metre shop in Zurich. Rea’s passion was to bring high-quality treasures (many of which had a sad life in a closet) back into the product cycle, thereby contributing to the sustainable use of resources. I myself have had a classic business career of 10 years as a strategic consultant, interrupted by a two-year detour as a manager in a start-up in the sports industry. I got to know Rea in 2016 and became enthusiastic about her business model, especially the sustainable approach. So, on top of my day job, I helped her improve and professionalise her business. In 2020, Rea and I decided to go “all in” and found, together with other shareholders, the current REAWAKE AG (initially in the form of a GmbH). For me personally, going “all in” meant turning down a partnership opportunity in a consulting firm to join REAWAKE full time.
My brother had been working as a lawyer in US law firms for almost 10 years, focusing on private equity and growth capital investments in the DACH (Germany, Austria and Switzerland) region. Needless to say, it is always useful to have an experienced lawyer on board when starting a business. I asked him to join us as a shareholder and provide us with external legal advice. He has a regular full-time job and therefore limited resources. So he looks at legal issues from a bird’s eye view and steers us in the right direction, which is invaluable. For the day-to-day nitty-gritty, we work with external law firms.
Would you call your company a “start-up”?
That’s a very good question, and one we’ve asked ourselves many times. From a legal point of view, yes. We had to legally start a company from scratch, like any start-up, with all the associated issues of legal form, incorporation, fund raising, shareholders’ agreements, IP protection, setting up proper contract templates and management systems, and so on.
From a business perspective, the answer is not clear cut. Yes, we face the typical challenges of a start-up company in terms of hiring a good and dedicated team (for me clearly the number one challenge), building and expanding our operations beyond Zurich, establishing our brand name in the market and professionalising REAWAKE in every aspect. On the other hand, we were able to draw on the rich resources, experience and contacts that my co-CEO, Rea, had built up over almost 15 years in the fashion industry, 10 of which were spent running the small-scale business model on which REAWAKE is now based. Somehow we already knew that the business model worked, we just needed to find the best way to scale it.
At a time when sustainability is becoming increasingly important, how does your company address environmental concerns?
Keeping our environment and ecosystem liveable for future generations is at the heart of REAWAKE. It was the main motivation for Rea to enter this industry and it is still the foundation of the company as a whole. The fashion industry plays an important role in this effort, as it is unfortunately still one of the world’s biggest polluters and is largely associated with environmental sins and exploitation of workers. REAWAKE was set up to make a difference – on the small scale we can within this large industry. This is best reflected in our slogan, which also represents our core values: “Respect – Recircle – Reawake”.
“Respect” means respect for all living creatures, our employees, our customers and, above all, for nature itself and the already processed raw materials. The idea of “recircle” comes directly from respect for Mother Nature. To make it concrete for REAWAKE, we strive to avoid introducing new products into the product circle as much as possible – we recycle existing products. This goes far beyond our main business model of selling only second-hand products and upcycling treasures in our studio, but is integrated into every aspect of our business. For example, we try to avoid buying new items when furnishing our headquarters and shops. Instead, we scour local second-hand platforms for products we can use, collect them, refurbish them if necessary and use them in our shops or office. Believe me, they look great and create an atmosphere that new products cannot. In this way, we bring treasures back to life. And “reawake” as a value stands for the high-quality approach to everything we do. This aspect is also emphasised by our upcycling studio, which we launched in 2022, where we bring old and damaged treasures back to life.
Our customers appreciate experiencing first-hand that for REAWAKE, sustainability is not a means of greenwashing, but is in our DNA and permeates every aspect of our business.
What is the role of the legal team in REAWAKE?
The clear focus of start-ups, with the exception of highly regulated industries, must be on the business side, not the legal side. In this context, it is crucial that the legal function is an enabler rather than an inhibitor of ideas. The main task of the legal function is to analyse and manage major legal risks. It is less important to optimise every contract down to the last detail.
What did REAWAKE need to start with from a legal perspective?
One focus has been on brand protection, starting with the registration of the REAWAKE trademark in all potentially relevant classes of protection in Switzerland, Europe (including the UK) and the US. We have already had to defend our trademark in a legal dispute in Switzerland, which we successfully defended. We also regularly have to deal with copies of our brand in web shops or on Instagram, which is particularly challenging when the operators of such shops are based in jurisdictions with a less rigorous IP protection framework.
Another focus has been on establishing a clear corporate governance structure, in particular having a proper, full-fledged shareholders’ agreement in place. My brother is, of course, particularly cautious in this regard, as he regularly sees in his day-to-day work what can go wrong if a company neglects this aspect in the beginning and only deals with these issues when the company is more mature and successful.
Last but not least, while we did not want to invest too many resources in optimising our contract forms from a legal perspective, we did want to have a decent middle-of-the-road standard that we could trust to work in practice. For example, we put a lot of effort into having a good set of general terms and conditions for the different business models, as these are the terms on which dozens of transactions are based at REAWAKE every day.
A major problem in the luxury brand sector is counterfeiting, which is sometimes difficult to detect. How do you deal with the issue of authenticity?
Maintaining an excellent reputation for our authentication processes is vital to the success of our business. As with any product category, counterfeiting has become more sophisticated, especially in the handbag industry – our largest revenue contributor – also known as “superfake bags”. Interestingly, only the manufacturer can legally define a product as counterfeit or fake. So we never tell our customers, “Sorry, we can’t sell this treasure because it’s a fake”. The wording we use is rather “…because we at REAWAKE cannot confirm the authenticity”.
There are two aspects to selling only authentic treasures: firstly, you want to minimise the number of fake treasures coming into your system, and secondly, you want to identify the fake treasures when they are dropped off by customers.
Regarding the first aspect – minimising the influx of fakes – we have over 3,000 customers who regularly sell their treasures via us. We know each customer personally and each time they bring treasures to us, there is an extended personal contact. We know their names, addresses and so on. What does this mean? The likelihood of a customer deliberately selling a fake treasure through us is very low. There are simply much more convenient ways to cheat, such as on more anonymous platforms.
Regarding the second aspect – identifying fakes – we have several layers of authentication. The final and ultimate authority is, and always will be, our authentication teams of industry-leading professionals who have been in the business for over a decade and have handled thousands of treasures from the top brands. Many team members have worked with the brands themselves. With this wealth of experience, we can spot the differences, especially in the stitching, the feel of the leather, clear authentication marks such as logos, as well as certain hidden authentication flags. Of course, if a bag comes with the original certificate, box and maybe even the original invoice, that helps too.
We also have a supporting layer of AI-based high-tech authentication software. The providers of these AI solutions feed their database with high-resolution images of the original bag. The AI customer gets a high-resolution camera from the provider and when they want to verify a piece of jewellery, the software tells them – specific to each model – which parts of the bag to take pictures of and then upload them to the system where they are compared to the original part of the bag. At the end of the process, the software will tell you whether the bag is genuine or fake – or, as they call it, “identified” or “non-identified”. However, we would like to stress that for REAWAKE, such AI-based verification is never sufficient for a treasure to pass our authentication processes. We have refused to authenticate treasures in several cases where the AI software confirmed authenticity.
And there is a third layer: extra caution, common sense and a “reject when in doubt” approach. For example, we had a case where we were offered bags that we believed to be genuine, and our AI-based technical solution confirmed our assessment. However, the circumstances of the case made us suspicious of how a single person could supply a large quantity of this type of bag. We suspected that these bags were the result of overproduction at the original manufacturing plant. This is also why the AI-based solution could not detect any signs of counterfeiting, because the bags are identical in every way to the original bags, but may have been produced in excess of the quantity ordered by the high-end brand.
If we have even the slightest doubt about the authenticity of a product, we will refuse to accept it, which sometimes leads to a lack of understanding on the part of our clients. In such cases, we stress to our clients that we are not saying that their product is a fake, but that we are not fully convinced that it is genuine and therefore we are kindly declining to accept their treasure. It is also important to note that in those cases where we have been able to clearly identify a product as not genuine, the owners have usually believed the product to be genuine, having received it as a gift, inheritance or otherwise from a trusted source.
Are there any examples of how your strict authentication policy has paid off for REAWAKE?
The most important proof of this is the trust our partners place in us. REAWAKE operates through shop-in-shops in prominent houses, currently Jelmoli in Zurich, Loeb in Bern and Bongenie Grieder in Basel and Geneva. These houses are very traditional, often family-owned for more than a century, and their reputation is just as important to them as it is to REAWAKE.
We also have a large Swiss insurance company that requires clients who wish to insure high-quality bags to obtain a certificate of authenticity from REAWAKE before underwriting a policy. We also have a steady stream of requests from top brands and auction houses, which speaks for itself.
Last but not least, we are proud of the general recognition we have gained in the market. People come to us for advice on their bags, and the term “treasures” that we created for the products we sell now seems to have become an industry term in Zurich. We also know that high-end brands regularly send customers to us when they are unable to supply a particular model.
Does REAWAKE plan to grow? If so, how?
Our plan is for controlled and organic growth. We have a clear timetable for opening more stores in Swiss cities that we consider relevant to our business model over the next few years. We are also working on a flagship store. We have also received requests for collaborations to expand outside Switzerland and are currently looking at Germany as a potential next step for further growth outside Switzerland. But for now, the most important is to maintain the substance of our current footprint. The last years (we started our first shop-in-shop three days before the first Corona lockdown) have been very intense and we are realising now that we first want to balance our approach and work on substance rather than expanding at all costs. Which also led to tough decisions to cancel or delay shop openings
What do you see as the biggest challenges and opportunities for luxury brands in the coming years?
Many challenges. Some high-end brands have significantly increased their prices, while quality has stagnated at best, or even declined. This is something we hear a lot from our customers and also experience ourselves. So they have to be careful not to push price increases too far.
They are all facing the growing challenge of sustainability. Not too much overproduction like many fast fashion brands, but how long will leather bags, for example, be accepted by the general public? How can they introduce resale programmes or work with second-hand companies?
How can they use technology to protect their goods from counterfeiting? It was easier 150 years ago. The famous Louis Vuitton monogram was introduced to combat counterfeiting.
Buying luxury products is more a form of entertainment and experience. How can you transfer such a unique experience to the digital space?
The other side of the coin is opportunity. If you do a good job of overcoming the above challenges, you are on the winning side. And luxury tends to be a winner-take-all industry. Many of the products come with a very high level of quality materials and craftsmanship. As extending the life cycle of already processed raw materials is a key pillar of sustainability (as opposed to mass production), and these products have a comparable longevity, this is also an aspect that luxury brands can capitalise on.
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