The RealReal: Luxury Consignment Retailer’s Stock Soars Upon Entering the Stock Market

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RealReal Inc. is the world’s largest online marketplace for authenticated, consigned luxury goods of a wide range of brands from Louis Vuitton handbags to Old Navy sweaters. Put simply, shopping on the RealReal website is essentially like shopping in another woman’s closet. The online retailer that is redefining the shopping and fashion experience counts Gucci, Cartier and Hermès to be among its top-selling designer brands.

The online marketplace is picking up speed and quickly becoming more popular among retailers as well as investors. It reached its most recent milestone within its niche – the commerce of secondhand-fashion – as it began trading on the Nasdaq stock market just a few weeks ago under the ticker “REAL.”

The initial public offering of 15 million shares was priced at $20 per share, which was well above an expected range of $17 to $19 per share, and it raised $300 million before expenses. Upon going public, the stock went up by more than 45 percent at $29.35.

RealReal’s Value Sky Rockets

RealReal was founded by Julie Wainwright in 2011. It had an impressive $207 million in revenue last year, which is 55 percent higher than what it was in 2017. This is estimated to be primarily due to a growing acceptance of buying pre-owned goods and increasing sales of luxury items online.

As of earlier this year, RealReal offered more than 620,000 unique, authenticated pre-owned luxury items bearing the brands of more than 5,500 luxury and top designers. Ms. Wainwright, the president and CEO, commented that the company had “a strong focus on growth, but with increasingly better unit economics.”

“Clearly, the space is big — just by sheer numbers, it’s always going to be bigger at the low end than the high end, as there’s more contemporary and fast-fashion out there than luxury,” Ms. Wainwright said.

“We have a lot of moats around our business from our service for consignors, to data we use to get optimal pricing, to back end processes and software and our authentication process.”

According to data from IBISWorld, a market research firm, used clothing, footwear and accessories represent a $10-billion market in the United States. Along with other big names such as Poshmark and ThredUp that are focusing on a similar niche that some are calling re-commerce, RealReal Inc. is on the cusp of explosive growth.

In fact, it claims to be on the vanguard of changing consumer habits that are the result of younger shoppers wanting luxury goods but not wanting to pay full retail prices. Add to this the fact that they want to be environmentally responsible by reusing and thereby reducing waste.

As such, these consumers are increasingly opting to buy used items or even rent apparel and accessories. This rapidly increasing interest from young, sustainability-conscious shoppers is anticipated to grow about 1.6 percent a year through 2024. Also, more than 80 percent of RealReal’s buyers and sellers – predominantly females – have estimated annual household incomes of $50,000 or more.

“I absolutely think there’s a shift in how certain cohorts are spending and thinking about spending on fashion,” said Liz Dunn, founder of Pro4ma, a retail analytics company. “There’s no stigma associated with it anymore, which is kind of crazy,” she said of buying used goods.

“One of my most posh friends announced to a whole table last weekend that everything she was wearing was from RealReal, which is a real shift. It also plays into the desire from younger consumers to feel a little more responsible about waste.”

White Glove Service Online

RealReal Inc. primarily focuses on making both the shopping as well as selling experience as convenient as possible. Selling items is fairly seamless thanks to its “white glove” service that enables consignors, those that are selling their used designer goods, to make an appointment with one of its luxury managers that will provide a complimentary consultation at their home.

For years, the status quo for online shopping has revolved around buying and selling used discounted designer items at thrift shops and on eBay. However, thanks to this new generation of secondhand online retailers that offer new technology and services, the shopping experience is much easier.

Poshmark, an online retailer of secondhand clothing, expanded its repertoire to include home décor, with items such as bedding and bath. Online rival ThredUp is opening physical stores.

Along similar lines, Neiman Marcus joined forces with resale site Fashionphile. This collaboration offers customers the option of not only receiving an immediate quote for their items from Fashionphile, but also payments that they can spend on new luxury items at the store right away. This option is available at select Neiman Marcus stores, while the actual stores are not selling any preowned merchandise at the store locations.

Given all the aforementioned, it is not hard to see that old clothing has become rather attractive to investment firms. In fact, according to data compiled by Bloomberg, more than $1.1 billion of venture capital has been invested into used-clothing operations over the last several years. This encompasses more than $350 million in funding for RealReal and about $130 million for ThredUp.

About the RealReal

RealReal has more than 1,700 employees. More than 100 of them are experts, including gemologists and horologists, to authenticate the luxury goods it carries, to reassure buyers worried about counterfeits.

Even though it is not profitable at the moment, with its revenue jumping more than 50 percent last year, and its loss widening by more that 40 percent, to $76 million, it does not appear to be worried about making money for now. The company said it had been investing in stores, merchandising, staff and marketing to attract more buyers and consignors and that it does not plan to slow down.

RealReal has a total of three brick-and-mortar stores that collect and sell goods – two in Manhattan, N.Y. and one in West Hollywood – with plans to expand beyond that. It also operates 11 luxury consignment offices in key cities like New York and Los Angeles. The plan is to open more stores and expand beyond the consignment locations, where clients bring in goods to be evaluated and potentially resold.

Read more about the RealReal’s recent market soar:

https://seekingalpha.com/article/4271289-realreal-readies-270-million-ipo-plan

Read related:

The RealReal Turns Real Profits By Combining Pop-Up Experiences With Online Sales

 

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