00:00The RealReal, riding that growth, raising its full-year outlook after a strong second quarter.
00:05Joining us now is the company CEO, Rathi Levesque.
00:08Rathi, great to see you.
00:09And two pieces of data that caught my eye.
00:12One, that European luxury houses have raised their prices by over 50% since 2019.
00:17The other piece of data being that sales of items priced over $1,000 on your platform have jumped 36%.
00:25Rathi, are those two things related?
00:27Are people getting priced out of some of the luxury firsthand market and turning to the RealReal instead?
00:33So what we're seeing is our consumers just being quite resilient at the end of the day.
00:38We're seeing a lot of confidence in what they're spending, more fine jewelry, more watches, handbags.
00:44Like you said, more items over $1,000 in the first half of the year.
00:49But also wanting to monetize their closet.
00:52We're seeing more people want to check their closets.
00:55What are the items worth?
00:57And call our luxury or our sales team to book an appointment to see how much is in their closet
01:04at the end of the day.
01:05Louis Vuitton, though, for example, was one of your most searched brands.
01:08And again, it's one of the ones that I mentioned that have risen prices and seen their own sales stagnate.
01:15Does the data suggest at all that the growth of your consumers are coming from anyone who's been priced out
01:20of the boutiques?
01:21So I don't know if that's true or not.
01:24But what we are seeing is the circular economy.
01:26So we're seeing our customers shop in the primary market with more confidence.
01:30And what they are doing, especially our fastest growing segment, Gen Z, Millennials, what they are doing, over 80%
01:37are now checking the prices in the secondary market before they're purchasing in the primary market.
01:42So giving them more confidence to look at what is that item going to resale for and if they should
01:49go ahead and make that purchase or not.
01:51Interesting. Well, in the primary market, we have seen this shift where at least temporarily we've seen some of the
01:57American houses, be it Ralph Lauren or Coach, are outperforming some of the European luxury.
02:03Is the same happening on your platform, too?
02:06We're seeing a few different things.
02:08We're seeing great brands that are more emerging having a moment, too.
02:12What we're seeing is, again, that Gen Z, Millennial demographic.
02:16They're looking for items that make them feel unique, authentic.
02:19They say when they shop the real, real, they feel like themselves.
02:23They love, like, testing some of the trends.
02:26It gives them the confidence to test some of the trends that they're seeing.
02:29We sit at that intersection between value and luxury.
02:33And that's what people are really engaging with.
02:36There's also this idea, and, I mean, we've discussed it on the show.
02:40We have one hedge fund manager who joins us sometimes that has a hedge fund that specifically buys and sells
02:45Birkin and Kelly bags.
02:46This idea that some of these pieces are investments has really taken off.
02:51Rafi, on your platform, which types of clothing items, leather goods, are actually investments and see their prices appreciated?
02:59Is it just Hermes, the really high-end type luxury, or is it popping up elsewhere?
03:05No, it's not just the – we call those the marquee brands.
03:08It's not just those, actually.
03:09Like I said, they're emerging brands.
03:11They could be contemporary brands.
03:13It's items that are really iconic to maybe that season, that generation.
03:19So even think, like, you know, mid-tier prices and clothing items that just had a moment.
03:26And I think the thing that, you know, is surprising to people is that all of these items are unique,
03:32one-of-a-kind, limited edition.
03:34So a lot of the items and the value does go up in the secondary market because you can't find
03:38them anywhere else.
03:40Have there been any items that you've been surprised at how much prices have risen?
03:45You know, I think that it's the items that, again, that are just more contemporary clothing items.
03:51I think people expect jewelry, watches, vintage, and, you know, the big 90s resurgence that we're seeing.
03:58We're seeing the value of those really go up.
04:01And, you know, the Gen Z demographic is kind of discovering them for the first time where I grew up
04:08with those items.
04:09So that always surprises me.
04:10I was going to say, Rathi, it's a really good way that makes me feel incredibly old when, like, the
04:1490s is vintage and in now.
04:18What happens on the other side of things?
04:21If a brand sees its second-hand value collapse, because you said people look to your site perhaps before buying
04:27on the primary market,
04:28what happens to the industry when prices come down on the real world?
04:32Do you see the primary market ever react?
04:35Well, so what we're seeing is because we're so diversified in our product mix, you know, we have everything from
04:40handbags to ready-to-wear to shoes,
04:43is that we do see, like, trends kind of come and go, right?
04:46And I think the beauty in our marketplace is that you do have the diversification of the items.
04:53You know, I think what we're seeing is that some of these items are more sticky and others aren't.
04:58But it's really, you know, trend-specific and can be quite finicky in that way.
05:04How are you currently, as you adapt, for example, AI systems?
05:08I know you have Athena.
05:10It automates item intake and pricing.
05:12How do you make sure that you're using these tools but still keeping quality control, still making sure that things
05:18are authenticated
05:20and that fake designer goods aren't slipping through the cracks?
05:24Yeah.
05:24So, you know, we've built, been building, it was called machine learning before, and now AI into really our core
05:31operations for years.
05:32And it's really about the art and science, and that's really important to us.
05:36You know, we do have the technical piece, the math, the science, the STEM behind everything we do as well.
05:44But it's also the art of the piece, smelling the handbag, opening up the watch, making sure that the aftermarket
05:50parts are authentic.
05:51But really what we're seeing, you know, with AI specifically is, like, the breadth of where it's showing up,
05:58so how quickly things are going.
06:00And we see AI as a tailwind across the business.
06:03So really deepening our moat, our competitive moat, driving efficiency, and really focused on transforming the customer experience.
06:11So we launched something called Athena, where we're able to process an item a lot faster,
06:17but also take dollars out of the processing item of each of the unit economics of these items.
06:23And, you know, that's been great for us.
06:25But you still are looking at the art and science.
06:28You're seeing more flow through in the P&L through some of these systems and still seeing double-digit growth.
06:33So holding headcount flat, seeing double-digit growth, but more flow through.
06:38Rothy, I only have a few seconds here, but I just quickly am curious before you go,
06:42do you think we'll get to a point, are we getting to a point where some of these AI systems
06:45are just as good as,
06:46or maybe even better than humans at detecting counterfeit goods?
06:50Yeah, I mean, again, I think it's going to be about the art and science at the end of the
06:54day,
06:54because you still have to open up a watch to look at, you know, are there aftermarket parts?
07:00Are the aftermarket parts real gold or not?
07:03You still have to count the melli in a stone.
07:04You sometimes still have to smell a handbag.
07:06So I think these two things are going to work really well together.
07:11And it's really about giving our authenticity team, our authenticators, more leverage at the end of the day.
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