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The Rise of The RealReal: Revolutionizing Luxury Consignment

Luxury fashion brands are some of the most coveted in the world, but they come with a hefty price tag. While some people are willing to splurge on the latest fashion trends, others may prefer the option of purchasing pre-owned designer items at a more affordable price point.

This is where The RealReal, an authenticated luxury goods marketplace, comes in. Founded in 2011 by Julie Wainwright, The RealReal has grown into one of the most popular online consignment shops for luxury items.

In this article, we will take a deep dive into the history, founding, and growth of The RealReal, as well as the consignment process and challenges the company has faced.

The RealReal Overview

The RealReal is an online luxury consignment store that specializes in pre-owned designer clothing, accessories, and home decor. All items sold on the site are authenticated, which means that they have been verified as authentic by a team of experts.

In addition to selling items, The RealReal also offers consignment services to individuals who wish to sell their pre-owned luxury items. One of the unique aspects of The RealReal is their consignment process.

When a seller sends in their item, it is carefully examined by the company’s team of experts to ensure that it is authentic. Then, the item is priced based on a number of factors including its condition, rarity, and current market demand.

When the item sells, the seller receives 60% of the sale price, while The RealReal keeps the remaining 40% as a consignment fee. To help sellers get the best possible price for their items, The RealReal provides copywriting services and recommends optimal price points based on market trends.

This ensures that sellers receive a fair price for their items while also attracting buyers who are looking for a good deal on luxury items. The RealReal History & Founder

Julie Wainwright, the founder and CEO of The RealReal, has decades of experience in brand management and software.

She previously served as CEO of Pets.com and worked for several other tech companies before founding The RealReal in 2011. The company started as a membership-only site, with customers paying a fee to gain access to exclusive luxury items.

However, as the company grew, they expanded to include more supply-side challenges, such as sourcing inventory and verifying authenticity. The company also shifted its business model to allow sellers to consign their items directly, rather than having to apply to become a consignee.

One of the biggest challenges that The RealReal has faced is the need for physical expansion. In order to authenticate items properly, the company needs to have a physical storefront or warehouse where items can be examined.

The company has invested in several storefronts across the United States, including in New York, Los Angeles, and Chicago. The company went public in 2019, with an initial public offering (IPO) that valued the company at over $1 billion.

This was seen as a major milestone for the company and a sign of their continuing growth.

Conclusion

The RealReal is a unique and innovative company that has revolutionized the luxury consignment market. Their focus on authenticated luxury items and their detailed consignment process ensure that both buyers and sellers get the best possible experience.

While the company has faced challenges in terms of physical expansion and supply-side issues, their continued growth and success show that they are a force to be reckoned with in the luxury consignment world.

3) The RealReal Business Model

The RealReal has a unique business model that relies on a tiered commission structure for their consignment services. Depending on the seller category, the company charges different commission rates.

The company’s commission rate ranges from 15% to 45%, depending on the value of the item and the selling category. For items sold up to $2,500, the commission rate is 40%, but if the value of the item is over $2,500, the commission rate drops to 25%.

For high-value items sold for more than $10,000, the commission rate is 15%. Luxury watches and fine jewelry are also subject to a tiered commission structure, with items sold for up to $2,500 being charged a 40% commission fee, while items sold for over $10,000 are charged a 10% commission fee.

The company’s authentication process is a crucial aspect of their business model. To ensure that items sold on their platform are authentic, The RealReal has a team of experts who are trained to authenticate luxury goods.

The authentication process is free for sellers, and their item is typically listed within 10-15 days after being received by The RealReal. The company’s advanced authentication process has played a key role in their success, as it helps ensure that customers feel confident buying from The RealReal, knowing that they are getting authentic luxury goods.

The RealReal also has a subscription-based membership program called First Look. Members receive access to advanced sales and exclusive discounts, as well as a personal concierge service.

The annual membership fee is $295, which gives members access to premium features and advanced sales events. 4) The RealReal Funding, Valuation & Revenue

The RealReal has raised over $200 million in venture capital funding since its launch in 2011.

Investors in the company include Greycroft, e.ventures, Canaan Partners, and GreyLion Capital. In 2017, the company raised a total of $50 million in a funding round led by Great Hill Partners, which helped them expand their reach in the luxury consignment market.

In June 2019, The RealReal went public with an initial public offering (IPO) that valued the company at $1.21 billion. The company’s shares initially traded at $20, which was higher than the expected range of $17 to $19.

The IPO raised $300 million for the company, which has since been used to fuel their continued expansion. The RealReal’s gross merchandise volume, which refers to the total value of goods sold on their platform, was $933.8 million in fiscal year 2019, a 51% increase from the previous year.

The company’s total revenue for the same fiscal year was $318 million, a 53% increase from the previous year. However, despite their impressive revenue growth, the company is not yet profitable.

The company’s net loss for fiscal year 2019 was $75.8 million, up from $52.3 million the previous year. The company has attributed its losses to investments in technology and infrastructure to support their growth.

Despite the company’s current losses, The RealReal’s impressive growth and valuation show that they have a strong foothold in the luxury consignment market. As they continue to expand their reach and improve their technology and infrastructure, the company is well-positioned to continue their growth trajectory.

The RealReal is an online luxury consignment store specializing in authenticated pre-owned designer clothing, accessories, and home decor. Their business model relies on a tiered commission structure and advanced authentication processes to ensure that items sold on their platform are authentic.

The company’s advanced sales events and exclusive membership program, First Look, have helped drive growth and increase revenue. The company has also attracted significant venture capital funding and went public in 2019 with a valuation of over $1 billion.

Despite current losses, The RealReal is well-positioned to continue its success in the luxury consignment market through strategic expansion and technology investments.

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