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RealReal Takes Earnings Hit

By the numbers, reCommerce has had a split decision in 2020. On one side, the pandemic has hurt companies like The RealReal that have included physical stores in their business models. On the other hand, companies like Poshmark are flying high, ready to IPO and expanding into new product categories. One thing is for certain: Consumers are increasingly drawn to consignment sellers of all stripes — some who are searching for a more sustainable way to shop for fashion items, others looking to snag a deal on high-end luxury goods and still others on the hunt for something unique.

Luxury resale site The RealReal is a prime example of the cross-currents in the category. It announced earnings on Monday (Feb. 22) that showed a disappointing Q4, but an optimistic outlook on the balance of the year. Its stock price took a beating after it reported that that the pandemic has “temporarily disrupted” its path to profitability. The RealReal lost $53 million, or 60 cents a share, in the fourth quarter, compared with a loss of $23 million, or 25 cents a share, in 2019. Sales fell to $84.6 million from $93.7 million, the company said. GMV, however, was up.

“With improving trends in Q4, culminating in December GMV increasing 6 percent year on year, we exited the year with strong momentum,” Julie Wainwright, founder and CEO of The RealReal, noted in a statement. “Q1 2021 GMV grew 14 percent year on year quarter to date through Feb. 19, 2021, so that momentum continues, and we are optimistic about the year ahead. Last year, we embarked on strategic initiatives surrounding our neighborhood stores, vendor program and authentication center expansion that will enable us to emerge a stronger company.”

And while a CEO might be expected to be optimistic about a firm’s future prospects during earnings season, that optimism seems to come with some outside backing.  According to reports, experts now predict that reCommerce (including resale, rental and subscription models) will account for 14 percent of the apparel, footwear and accessories market by 2024, up from about 7 percent as of last year.

According to a thredUP report released in late 2020, the resale market grew 25 times faster in 2020 than the overall retail market did in 2019. Some experts have been worried that the pandemic would prompt consumers to pull back on purchasing their goods secondhand, for fear of receiving the coronavirus as an unwanted free gift — but as ThredUP Co-founder and CEO James Reinhart noted, that didn’t happen.

“The constant news cycle around how the virus is transmitted educated consumers. It does not get transmitted on apparel,” he said. “When this started, we were all worried about takeout food. Now that is safe. Consumers are smart about this stuff. Resale is here to stay. The next question is who wins and who loses.”

The answer to that question will no doubt be complex, given the rather wide range of resale retail players in the market currently scrapping for a position. There are the luminary startups with names most closely associated with the space, like ThredUp, The RealReal and Poshmark. Then there are the major name-brand players wading into the dance, like Levi’s, Lululemon and Patagonia. Finally, there are the super small thrift-shop players that quickly transitioned online via digital outposts, and are increasingly deciding to stick with their newly created digital channels. “I’ve built up a community and [I’ve] been able to connect with them,” Instagram thrift-shop operator Kaitlyn McAlpine told the CBC (Canadian Broadcast Company) about her plan to carry on with her digital side hustle ever after the pandemic has passed.

But as Forbes noted, the smallest players in the game — particularly when high-end and luxury goods are in the mix — face the biggest challenges in making sure that goods are authenticated before being shipped out. That’s because small brands often lack the know-how and technological resources to scale a reCommerce business beyond the side hustle phase, given all the pieces that are constantly in motion.

Firms like Reflaunt — which, by its own description, is  “a disruptive Resale-as-a-Service (RaaS) technology company empowering global fashion brands to embrace circularity” — are picking up momentum, making it possible for more firms to embrace the worldwide reCommerce calibration. Reflaunt has just announced a $2.7 million pre-Series A funding round led by the investment arm of luxury fashion distributor MadaLuxe Group.

Will the increase in the number of technological support tools make reCommerce a more accessible option for merchants operating digitally? That is hard to predict, as the strength of tools lies in how well they actually deliver. But it’s clear that consumers are increasingly comfortable buying used in the apparel market, giving brands another inroad to bring them onboard.

Read More On reCommerce:

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NEW PYMNTS DATA: BUY NOW, PAY LATER CONSUMER STUDY 


About: Buy Now, Pay Later: Millennials And The Shifting Dynamics Of Online Credit, a PYMNTS and PayPal collaboration, examines the demand for new flexible credit options as well as how consumers, especially those in the millennial demographic, are paying online. The study is based on two surveys, totaling nearly 15,000 U.S. consumers.

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