TheRealReal Sees Resilient Consumers

Bloomberg

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00:00We're seeing the buyer be quite resilient at the RealReal.

00:03We're seeing consumers' trends being quite strong around fine jewelry, watches, handbags.

00:09We're definitely probably a tariff beneficiary, but at the same time, there's other things kind of impacting our business.

00:16Resale's becoming more mainstream. That's number one.

00:20And definitely seeing that led by the Gen Z and millennial consumer.

00:24We're seeing fine jewelry and watches be very popular, like I mentioned, gold pricing, silver pricing going up.

00:31And then we're also seeing gifting becoming less of a stigma in resale.

00:35So almost 60 percent of consumers now say they prefer the secondary market outright.

00:41So seeing luxury and seeing resale specifically becoming much more mainstream right now.

00:47Now, you've been aggressively cost-cutting, restructuring your commission model and so on.

00:51Is there any danger that you will maybe not get in the supply that you need in order to keep supplying this market?

00:59Yeah, so, you know, it's interesting.

01:00I think that one of the things is that there's $200 billion trapped in people's closets.

01:05That's just in the U.S. alone.

01:07And so it's such an untapped industry at the end of the day.

01:12$80 billion gets added to that every year.

01:15So, so much luxury goods just in the U.S. alone.

01:20And so many of these people have never consigned anything before.

01:24So we're seeing people become kind of introduced to luxury for the first time.

01:29So double-digit new seller growth, for example.

01:33So people are really starting to change the way they shop.

01:36And they're checking the prices in the secondary market before they're even purchasing in the primary market.

01:41I wanted to talk about prices, Rati, because our very own Amanda Mullet Bloomberg wrote just a few days ago,

01:482019, the price of a Chanel flat bag, $5,800.

01:53Fast forward to right now, it's over $11,000.

01:57I'm wondering just how much the growth of the RealReal is coming out of the fact that people feel like they just can't,

02:04that they can't stomach the prices in the luxury market.

02:08Yeah, so there's a couple things happening.

02:09Anytime the price increases in the primary market, our pricing goes up too.

02:15So for whatever reasons, whether it's tariffs, whether the pricing of a Chanel bag goes up,

02:21for whatever reason, our prices go up as well.

02:24But like I said, what we're also seeing is more volume coming through.

02:27So more people being introduced to luxury and testing it out.

02:32And then they get that first paycheck, right?

02:34They get that first paycheck for the bag, and then they go back into the primary market.

02:39What we're actually seeing is that circular economy.

02:42And so they'll go back into the primary market with their check and buy the newest trend or buy something that they've been eyeing.

02:49And then they'll consign two or three things instead.

02:52So we'll see that kind of trade-up happening as well.

02:56And what are the consumers typically gravitating for on the RealReal?

03:00Are they looking for a bargain on a classic luxury item?

03:04Or are they turning to secondhand markets when they want to buy something trendier?

03:09Yeah.

03:10So we're seeing that intersection between value and luxury.

03:14That's what we offer, right, at the end of the day.

03:16And then you've got very unique items.

03:18Most of our items you can't buy anywhere else.

03:21So they're looking for those one-of-a-kind pieces.

03:24You know, they're kind of maybe done with the trends or everything's starting to look the same.

03:28It's the badge of honor to wear something very unique from the RealReal.

03:31So think of them like drops.

03:33Thousands of items get dropped every day that are very unique to the consumer.

03:38So that's number one.

03:39And fine jewelry, like I mentioned, watches, handbags, vintage is a big one, as is condition.

03:46Again, seeing more of that value play come through.

03:49People are looking for that value.

03:50They'll take something that maybe is in fair condition instead of pristine condition just so that it costs a little less at the end of the day.

03:58You know, there are competitors out there now, Fashionphile, Rebag, and so on.

04:02How do you compete with them, Rathi?

04:04Yeah.

04:04So, you know, when I think about the RealReal, it's really around, we offer very depth in product.

04:11So we don't offer just one category, right?

04:14It's handbags.

04:15It's jewelry, watches, fashion, textiles, silverware.

04:19All of that we're offering at the RealReal.

04:22So there's a lot of, and then we give you cash up front.

04:26And that's really important, right, versus trade up or trade in.

04:30And then you earn the most with us.

04:31And that's really important to say.

04:33And the reason why is because of the trust that we build with the consumer.

04:37Because we, you know, because you can sign with us, because we've got almost 50 million members now that we've built trust with.

04:44Because of our pricing algorithms, you can earn the most with us at the end of the day.

04:49I'm curious as well, how much are your physical stores contributing?

04:52Are they contributing to the bottom line?

04:54And, you know, is it just a marketing play at the end of the day?

04:58And when does that bottom line, by the way, turn positive?

05:01Yeah.

05:01So the stores pay back very quickly, actually.

05:04And what we see is a halo impact.

05:07So it's meeting the consignor where they are.

05:10Whether they want to drop off in a store on their way to work.

05:12Whether they want a van pickup at 3 p.m. this afternoon on demand.

05:17They can book that from their app.

05:19And we're seeing the consigner, the seller, consign more items when they interact with a store.

05:24And more high-value items because they're meeting with a gemologist and watchmaker.

05:28So, yes, it's a place that people get introduced to our brand.

05:33A quarter of our new consigners come from the stores, from our retail locations.

05:38But we more see a halo impact.

05:40So from the consigner, consigning more for us, with us, and then spending more at the end of the day, too.

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