“We showed people the value of things they had locked in their closets and we changed the way people … [+]
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. HRH didn’t make the call, but no matter, it was a honor to be so honored.
That put the noses out of joint for some of the luxury brands organizing the group. They suggested she would be better placed somewhere else.
She’d have none of that –“I’m 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 beginning, Wainwright and TheRealReal have had a contentious relationship with the luxury brands. The company sells their pre-owned authenticated items on its online platform and in 18 retail locations. TheRealReal reports it has sold 22+ million luxury items since its launch a little over ten years ago.
Consignment shops have long traded in secondhand luxury items, but TheRealReal was the first to tap at scale the inherent value skillfully woven into the marketing of luxury brands and the construction of their products. And it did it online for all to see, not tucked away in a little secondhand store.
What started out as a mere nuisance to luxury brands – “You’re so tiny. Who cares?” Wainwright heard often in the early days – TheRealReal has now become a real threat. “You’re my worst nightmare,” she was told by an executive at one of the industry’s leading brands.
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Growing by leaps and bounds
As the secondhand luxury leader, TheRealReal is enjoying the dynamic growth in its niche market, one estimated to have reached €33 billion ($38 billion) globally in 2021, according to Bain’s latest worldwide luxury goods market study.
What’s more, it’s nearly half as large individually as the three leading personal luxury goods categories – leather accessories ($71 billion), beauty ($69 billion) and apparel ($65 billion) – and grew five-times faster than the firsthand market from 2017 to 2021, up 65% compared with 12%.
And when it comes to the market potential for the secondary luxury market in general and TheRealReal specifically, Bachman Turner Overdrive said it all. “You Ain’t Seen Nothin’ Yet.”
In its recent presentation before 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 laying out a gross-merchandise-value (GMV) CAGR next year and beyond at 30+%.”
So far, TheRealReal has barely scratched the surface, with GMV totaling just over $1 billion through third quarter 2021. Profitability still eludes the company, but with steady topline growth, the company is confident that profits will come sooner rather than later.
It’s counting on payback from its heavy investment in technology, the move of its distribution facility to Arizona, and growing awareness of the brand through its recent television advertising campaign along with continued expansion of its neighborhood stores in locations where luxury consignors and potential customers shop.
Scaling through technology and service
At its core, Wainwright describes TheRealReal is a technology company rather than a fashion company. “I don’t have a fashion sensibility,” she admits. “But I have the tech side. That’s where my experience is.” And like other technology companies before it, e.g. eBay and Amazon, scale is the key to unlock profitability.
Now with 24+ million members, TheRealReal continues to leave its competitors in the dust. The key difference is its full-service approach. Unlike other secondhand fashion sites that simply connect buyers and sellers and require consignors to post their own items, TheRealReal takes possession of consigned items for authentication and handles the listing.
The self-service model is other platforms’ Achilles Heel when it comes to attracting the prime consignors and their consignments. And through its neighborhood stores, it makes house calls which the company says is the best way to source the most profitable supply. That’s why Wainwright says, “TheRealReal is one of one.”
Value is key
“We changed the culture,” Wainwright boasts. “We showed people the value of things they had locked in their closets and we changed the way people perceive resale.”
Or, one might argue, the culture was already changing and Wainwright and TheRealReal were ahead of the curve. “Timing is everything,” she admits, noting TheRealReal hit just as consumers awoke to the environmental damage done in the name of consumerism.
And then, of course, people are always drawn to a good value. “Compare spending $100 with us versus buying a couple of fast-fashion outfits. People are smart. They figured out right away they can buy from us then make money back when they resell it. They can’t make money back on fast fashion,” she says. “We opened up a new world for people and we were the first to do it.”
Because of the value inherent in whatever people buy from TheRealReal, it’s become an on ramp for customers to the luxury market.
“We find that once customers experience us it changes the way they shop,” she reflects. “Compared with fast-fashion, even mid-tier brands, it’s like night and day. Luxury goods are beautifully thought out, beautifully constructed with amazing fabrications.”
Honoring the brands
The goal from the very beginning was to maintain the integrity of the original brand while giving consumers extra value. “We made luxury resale relevant by honoring the beauty and integrity of the brand. We democratized these brands, which they all hate me for,” she asserts.
That’s not strictly true. Stella McCartney has long been a partner with TheRealReal. “She’s bold. She understands resale and she buys resale herself. And she’s trying to create sustainability in the fashion industry,” Wainwright says.
Burberry and Gucci also had a six-month test run with TheRealReal. She said conversations are still ongoing about doing something further but admits, “I’m sure it feels scary to them.”
And currently Saks Fifth Avenue has a TheRealReal pop-up shop in its Miami Brickell store for luxury jewelry and watches, both to buy and for valuations.
Going from strength to strength
Wainwright has been playing a long game with TheRealReal since its founding. It was a totally new concept in luxury resale, though in-the-know fashionistas have been regular patrons of consignment and secondhand stores. Now they and everyone else have access to thousands of the best-of-the-best in fashion at their fingertips and costing a fraction of what they’d pay first-time round.
“We changed how people perceive resale. It didn’t happen overnight,” she concludes. “Early adopters knew it first and it’s continuing to happen now. We are in a really interesting inflection point. It’s good for the planet and it’s good for people who love wearing beautiful things. We just keep going from strength to strength.”
