The RealReal: Luxury Items at Discount Prices
The RealReal is a luxury consignment store based out of New York City. After her divorce, the founder, Julie Wainwright, new that if she wanted to be successful, she was going to have to take action. She was inspired by a friend who was constantly on the hunt for luxury items to purchase from secondhand stores. This is where Wainwright got the idea for The RealReal and launched the business in 2011.
Despite making over $170 million in the first seven years of business, Wainwright is currently pitching to investors in an attempt to raise $100 million dollars in new funding. Some may wonder why the company needs these additional funds. One reason could be that the company isn’t yet on the monetary scale that appeals to public-market investors. Or, perhaps the company needs to prove that in the long-term it can be a standalone business. And still, perhaps the increased funding proves that The RealReal, and its current investors, have realized that the market for secondhand luxury items is a bigger opportunity than they originally thought.
The RealReal has a unique business model that was revolutionary at the time of development. Sellers, people who have luxury items they no longer use, ship their items to The RealReal. The item then goes through an authenticity process to ensure it is real and not a knockoff. After the item has been deemed authentic, the item is placed for sell in The RealReal store and/or on their website. Once the item has sold, the proceeds are Split between The RealReal and the original seller.
It used to be the case that luxury brands looked at The RealReal as competition, as the enemy. However, as it turns out, the company actually drives sales up. For example, the parent company to Gucci and Yves Saint Laurent, Kering, provided the information that after sellers have sold their luxury item through The RealReal, they go on to buy another item from the same brand they sold, driving sales up.