The RealReal is online & offline marketplace for authenticated consigned luxury goods (apparel, handbags, shoes, jewelry, art pieces, etc). Company revolutionized luxury resale business by providing trusted end-to-end service around the globe. Company established in 2011, successfully achieved IPO in 2019 but still in loss making stage.
The IPO offering price of common stock is $20 per share and listed in The Nasdaq Global Select Market (symbol “REAL”). Company’s valuation is more than $2 billion but gross income does not cover all expenses. Also Company never declared cash dividends on capital stock; intended to retain all funds for future growth.
The RealReal created loyal consignor and buyer base through providing only the best service and constantly improving online platform. All items listed in their webpage & app & in store are authentic and price depend on item’s condition. One of the main idea is to insure sustainability of luxury goods.
The RealReal constantly following demand & supply trends. In past a few years Company experienced shift in luxury shopping from offline to online (digital channels). The RealReal is active in all major social media, especially in Instagram (357K followers). Customers became more thoughtful about the environment impact of their shopping and sharply increased acceptance of second-hand luxury items. Company own a few retail stores in premium location.
The RealReal provide a seamless consignment experience by using advanced platform (web, app, social media, etc). In 2018 added approximately 2.6 million new items and average order value is $446. In company works more than 180 luxury managers who are responsible for obtaining exclusive luxury items. Each item authenticated, photographed and listed with detailed description. The RealReal generate high commissions for consignors (65%-85%). Per day company could process up to 14,000 items for online listing. In 2018 generated approximately 400 million items views and sold 9.4 million items since inception.
Here’s 2018 financial data about the company:
- Total revenue $207 million.
- Total cost of revenue $70 million.
- Marketing expenses $42 million.
- Operations and technology expenses $104 million.
- Selling, general and administrative expenses $63 million.
- Net loss $75 million.
In 3months ended September 30, 2019 company provided next financial data:
- Total revenue $80 million.
- Total cost of revenue $28 million.
- Total operating expenses $79 million.
- Net loss $25 million.
According to official financial data The RealReal is not profitable company yet but may became profitable in next a few years. The RealReal qualified as an “emerging growth company” by The Jumpstart Our Business Startup Act. This Act reducing the regularly burden on newly public companies.
There’s a few main risk factors which may affect the company:
- Demand & supply of luxury items.
- Authentication issues (like recent issue with Channel).
- Luxury items theft.
- Speed of revenue growth and extra expenses.
- Economic downturn may affect customers willingness to buy luxury items.
- Brand value.
- International markets expansion.
- Regulations and low changes.
- Cyber attacks and customers data leaks.
- Technology failure.
The RealReal raised more than $300 million through the IPO with $20 per share. Company intended to use money from IPO for general corporate purpose. 1% from IPO money used to create The RealReal Foundation (non-profit charity organisation). Non-profit foundation is amazing project but there’s no data about it. On June 13, 2019 done reversed stock split (1-for-2 basis).
The RealReal is unique company but surrounded by strong competitors. Financial data is not that exiting and net loss raised more questions than answers.
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