The RealReal, a San Francisco-based seller of luxury consignment, has raised $40 million in new venture funding led by Industry Ventures with participation from Greycroft Growth, DBL Partners, e.Ventures, and existing investors. The fast-growing company has raised a total of $83 million in venture backing.
Four years in, The RealReal continues to double its sales each year. In 2014, it sold $100 million worth of goods to its 3.5 million members. This year, it plans to generate $200 million in sales. Unlike most online marketplaces, The RealReal buys its inventory from sellers in order to authenticate it and provide a consistent white glove-style service. For its services, The RealReal takes a 40% cut. (Once a seller hits $7,500 in sales, the cut drops to 30%.)
The RealReal sits in a curious position in the luxury market. From one perspective, it is selling luxury to a new audience: people who might not be able to afford it otherwise. On the other hand, it is boosting the value of those secondhand luxury items, which might have otherwise languished in a closet. This means luxury shoppers see more value in buying new. If they know they can sell an expensive item down the line, they’re more likely to splurge on it, argues CEO Julie Wainwright.
This boosting of resale value is why the luxury apparel industry has embraced The RealReal. (After all, designer items are supposed to be “investment pieces.”) Luxury retailers like Saks Fifth Avenue and Neiman Marcus even offer The RealReal by offering gift cards in exchange for consignment on the site.
According to The RealReal’s data, used Chanel, Hermès, Christian Louboutin, and Cartier sell the fastest and retain the most value. Secondhand items from Marc Jacobs, Versace, and Givenchy lose their value the fastest. Over the winter, the most common fakes were parkas masquerading as Canada Goose and Moncler. Fake Louis Vuitton bags consistently rank high, too.
As I wrote earlier this year, The RealReal has a rigorous authentication process, evidenced by the four-inch thick binders full of specifications for thousands of luxury items on each employee’s desk. The company even holds internal “Find the Fake” contests, giving away prizes to authenticators who identify tell-tale signs on counterfeits. The signs can be counter-intuitive—sometimes the fakes boast more expensive-looking details than the real ones. When a fake is spotted, The RealReal destroys it. To do anything else with them would be against the law, Wainwright says.