When Prince Charles hosted the recent G-20 event on climate change and the private sector, Julie Wainwright, founder and CEO of TheRealReal, was asked to participate in a fashion and sustainability working group. His Royal Highness did not make the roll call, but regardless, it was an honor to be so honoured.
This put the nose out of place for some of the luxury brands hosting the group. They suggested that she would be better placed elsewhere.
She wouldn’t have any of that – “I’m a luxury resale, that’s what I do.” – and decided if they didn’t want her, then she didn’t want them. “My advice to Prince Charles is to organize a truly independent think tank, not go to the brands to organize it.”
From the start, Wainwright and TheRealReal have had a contentious relationship with luxury brands. The company sells its authenticated pre-owned items on its online platform and in 18 outlets. TheRealReal reports that it has sold over 22 million luxury items since its launch just over a decade ago.
Consignment stores have a long history of selling second-hand luxury items, but TheRealReal was the first to fully exploit the inherent value skillfully woven into luxury brand marketing and product construction. And he did it online for everyone to see, not hidden away in a little thrift store.
What started as a simple nuisance for luxury brands – “You are so small. Who cares?” Wainwright heard often in the early days – TheRealReal has now become a real threat. “You’re my worst nightmare,” an executive at one of the industry’s biggest brands told him.
Grow by leaps and bounds
As a leader in second-hand luxury, TheRealReal is benefiting from the dynamic growth of its niche market, which is estimated to have reached 33 billion euros ($38 billion) worldwide in 2021, according to the latest global market research from luxury bath products.
Moreover, it is almost half the individual size of the three main categories of personal luxury goods – leather accessories ($71 billion), beauty ($69 billion) and clothing ($65 billion) – and grew five times faster than the first-hand market from 2017 to 2021, up 65% from 12%.
And when it comes to market potential for the luxury aftermarket in general and TheRealReal in particular, Bachman Turner Overdrive has said it all. “You have not seen anything yet.”
In his recent presentation to the Raymond James Consumer Conference, CFO Matt Gustke “conservatively” estimated the Total Market Potential (TAM) for luxury resale at $200 billion and added: “We are comfortably establishing a Gross Merchandise Value (GMV) CAGR next year and beyond at 30+%.”
TheRealReal has barely scratched the surface so far, with GMV totaling just over $1 billion through Q3 2021. Profitability still eludes the company, but with steady revenue growth ‘business, the company is confident that profits will come sooner rather than later.
It is counting on the return on investment from its heavy investments in technology, the relocation of its distribution facility to Arizona and the growing brand awareness from its recent television advertising campaign as well as the continued expansion of its neighborhood stores. in places where luxury shippers and potential customers shop.
Evolve through technology and service
At its core, Wainwright describes TheRealReal as a technology company rather than a fashion company. “I don’t have a fashion sensibility,” she admits. “But I have the technical side. This is where my experience lies. And like other tech companies before it, like eBay and Amazon, scale is key to unlocking profitability.
Now with over 24 million members, TheRealReal continues to leave its competitors in the dust. The main difference is its full-service approach. Unlike other second-hand fashion sites that simply connect buyers and sellers and require shippers to post their own items, TheRealReal takes ownership of items logged for authentication and manages the listing.
The self-service model is the Achilles heel of other platforms when it comes to attracting top shippers and their shipments. And through its neighborhood stores, it conducts door-to-door visits, which the company says is the best way to source the most cost-effective supply. That’s why Wainwright says, “TheRealReal is one of the best.”
Value is the key
“We changed the culture,” boasts Wainwright. “We showed people the value of the things they had locked up in their closets and changed the way people think about reselling.”
Or, you could say, the culture was already changing and Wainwright and TheRealReal were ahead of the curve. “Timing is everything,” she admits, noting that TheRealReal struck just as consumers became aware of the environmental damage being done in the name of consumerism.
And then, of course, people are always drawn to good value. “Compare spending $100 with us buying a few trendy outfits. People are smart. They realized right away that they could buy from us and then make money when they resell it. can’t make money from fast fashion,” she says. “We opened up a whole new world for people and we were the first to do that.”
Due to the inherent value in everything people buy from TheRealReal, it has become an on-ramp for customers into the luxury market.
“We find that once customers get to know us, it changes the way they buy,” she explains. “Compared to fast-fashion or even mid-range brands, it’s like night and day. Luxury products are beautifully thought out, beautifully constructed with amazing fabrications.
From the start, the goal was to maintain the integrity of the original brand while providing added value to consumers. “We made luxury resale relevant by honoring the beauty and integrity of the brand. We have democratized these brands, for which they all hate me, ”she says.
This is not entirely true. Stella McCartney is a long-time partner of TheRealReal. “She is bold. She understands the resale and she buys the resale herself. And she’s trying to create sustainability in the fashion industry,” says Wainwright.
Burberry and Gucci also conducted a six-month test with TheRealReal. She said conversations are still ongoing to do something more, but admits, “I’m sure it scares them.”
And currently, Saks Fifth Avenue has a TheRealReal pop-up store in its Miami Brickell store for luxury jewelry and watches, both for shopping and for reviews.
From strength to strength
Wainwright has been playing with TheRealReal for a long time since its founding. It was an entirely new concept in luxury resale, although savvy fashionistas were regular patrons of consignment and thrift stores. Now they and everyone else have access to thousands of the best in fashion at their fingertips and cost a fraction of what they would pay for the first time.
“We changed the way people think about reselling. It didn’t happen overnight,” she concludes. “Early users knew this first and it’s still happening now. We’re in a really interesting inflection point. It’s good for the planet and it’s good for people who like to wear nice things. We just keep going from strength to strength.