LYNN Chen, a 25-year-old Shanghai native, recently snagged a luxury handbag at a bargain price, but it's nothing she wants to brag about to her friends.

Chen bought a Louis Vuitton handbag for around 8,000 yuan (US$1,264), a 50 percent discount to its retail price. It looks just like those sold in Shanghai's posh luxury boutiques, but if you look closely -- very closely - there are a few stains on the leather trim.

The handbag is second-hand.

"As long as it looks like a new one at first glance, I am fine with it," said Chen, who had concluded three months ago that she couldn't really afford a new luxury handbag at retail prices.

Chen may be the face of a new breed of luxury shoppers in China -- people with a fashion-conscious bent in a budget-conscious reality who want a showy lifestyle without losing face.

It is an emerging market that takes a lot of nerve to crack. Second-hand luxury goods does sound like an oxymoron in a country where hand-me-down products are traditionally considered inferior in quality and status.

When Brand Off, a dominant second-hand luxury retailer from Japan, first came to the Chinese mainland last September, it had some difficulties making any inroads.

'Almost new' are top sellers

"But the business is getting better as our name catches on among bargain-hunters," said Takayuki Shimata, a store manager of Brand Off in Shanghai.

The company, which has two shops in the city, specializes mainly in handbags and watches, with offerings divided among "never used," "almost new" and "used" categories at proportional discounts.

Besides the product's condition, the pricing factors in design specifications, edition, and brand.

Shimata said the "almost new" products are generally the best sellers because they look pretty much the same as brand-new ones but carry price tags that are more palatable.

The discount for a never used Louis Vuitton handbag is around 20 percent, while that for the "almost new" category is higher than 25 percent.

Brand Off is not alone in cashing in on consumers' newfound acceptance of what some euphemistically call "pre-loved" clothing and accessories. Right next to its store on Nanjing Road W. stands Milan Station, a Hong Kong-based rival.

That retailer reported a 20 percent surge in sales last year, with most of its customers mainland Chinese, including the 60 percent of visitors to its Hong Kong stores. To further unleash their buying potential, Milan Station has opened two stores in Shanghai and plans to open two more in Beijing and another in Guangzhou this year.

"We believe that the second-hand luxury goods market is becoming popular in Shanghai and China," said Tony Chan, chief marketing officer for Milan Station said. "Previously, the Chinese thought that buying second-hand goods was inferior and shameful. However, this concept has changed in recent years."

He noted that buying used merchandise in China has turned from being a sign of financial straits to a sign of problems in the "new urban lifestyle." Some people now see buying second-hand as being fashionably friendly to the environment.

Customers can trade in their old handbags to purchase never-used ones. More than 80 percent of Milan Station's stock comes directly from the public, the remainder from traders who buy the unused products locally or overseas and then sell them in to the secondhand retailer.

Customers at Milan Station usually fall into two groups: young women looking for a cut-price handbag and wealthy customers looking for unused limited editions, many of which, thanks to their rarity, cost even more than they originally did in the store.

Yet the retailer makes most of its money from these so-called "premium products," which cost HK$50,000 (US$6,444) or more and account for more than two-thirds of its takings.

At Brand Off, products are also bought directly from local consumers. It is noteworthy that never-worn products with their original tags still on account for 40 percent of its offerings in Shanghai, compared with 30 percent in Japan.

Gift culture comes into play

China's gift culture is part of the explanation, Shimata said. Luxury goods are often bought as presents and then resold by recipients who either didn't like the gifts or preferred cash in hand to a fancy label.

"Another source of second-hand luxury goods is merchandise procured overseas by Chinese travelers and then sold for profit when they get home," the store manager said.

In China, tariffs and consumption taxes can make foreign luxury brands 72 percent more expensive in Shanghai than in Paris, according to the World Luxury Association.

Louis Vuitton, Hermes, and Chanel handbags are as popular on the secondary market as they are in the high-end shopping malls.

In a country where pirate brands are still rife, the biggest challenge for second-hand retailers is weeding out fake products from authentic labels so that consumers can trust that they are buying the genuine article, Chan of Milan Station said.

Products bought from the public or traders are put through a rigorous two-stage examination before being resold, and all are checked weekly by a district manager to prevent any lapses.

Examiners must have at least three years' experience and have to go through a strict training course before they are allowed to authenticate products. Brand Off has compiled its own appraisal manuals for employee training.

Shimata said in Japan an association has been formed to guard against the distribution of pirate products. That helps maintain self-discipline among second-hand luxury retailers, he said.

Chen, who has got her second-hand bag authenticated as genuine by a friend working in a Louis Vuitton shop, admitted she had a moment of doubt over the bag's authenticity when she was about to cut the deal.

"But it passed quickly," she recalled. "I told myself a luxury bargain hunter should be prepared to take risks."