At an event in San Francisco last night I sat down with The RealReal founder and CEO Julie Wainwright, who is renowned instartup circles for a variety of things, including her role inwindingdown the e-commerce company Pets.com during the dot.com era; being one of the bigger personalities in the industry; and launching whats become one of the fastest-growing consignment startups among a handful that received funding roughly six years ago.
Some no longer exist. The RealReal has, meanwhile, garnered $123 million in venture funding and is on track to see $500 million in gross merchandise value this year nearly half of it through the companys mobile app.
She attributed that success so far to zeroing in onthe luxury market, taking possession of consigners products and focusing on trust above all else, by ensuring that every item that The RealReal sells to a customer has been inspected and authenticated before it gets shipped out the door. She also said the company is weighing a strategy of opening a series of brick-and-mortar stores, starting first with one New York location thats currently in the works.
Excerptsfrom our sit-down, edited for length and clarity, follow:
TC: Youve raised a lot of money, including a $40 million Series E round last year, but youre also very much in growth mode. For the VCs in the audience: might you raise another round anytime soon?
JW: No. Were good for a while.
TC: You started with apparel, butyou sold $100 million in watches and fine jewelry last year.Is that now your best-selling category?
JW: The reason we went into jewelry was we were trying to cater to our consigner base, who was saying, Can you sell this for me?Can you sell that? And we said, Youcan bring in your jewelry and watches; we have a gemology and a watch expert on site. And it just exploded our business.
TC: Youre talking about valuation offices, which youve been launching across the U.S. over the last 18 months. You and I talked about these recently, but they seem to be underreported.
JW: Its true. We did a little test in Midtown [in New York] around 18 months ago. We now have six offices across the U.S. and soon to be seven. We wanted people tocomparison shop because we know you make two-and-a-half to three times more money if you sell your fine jewelry to us. We also wanted to remove any friction. [Jewelry consignment] issort of weird space. If youve ever tried to sell jewelry to anyone else, its a pawn shop environment; its a little gross. So we wanted to bring the whole process up front, have a discussion with people, and have it be transparent and respectful.
TC: Back to your best-selling items . . .
JW:For men, its Rolex. For women, there are three across all age groups: Chanel, Hermes and Louis Vuitton.
TC: Meaning clothing or jewelry or both?
JW: Apparel is our number-one product in unit and dollars.
TC: Are men buying or selling on The RealReal? Whats the gender breakdown?
JW: We actually dont get enough mens consignment, so it sells through faster. Twenty percent of our shoppers are men who are shopping for themselves. Theyre buying watches, primarily, and leather goods, but also apparel. Their average order size is smaller, but you men [in the audience] dont like to return things, despite that we have a return policy. So thats good; it all evens out. [Laughs.]
TC: Whatpercentage of shoppers are also consigning items?
JW: We have aboutfour buyers for every consigner, and half of our consigners buy.
TC: How do you ensure then that you have a constant flow of goods? We sat down a few years ago and you mentioned that summer is particularly tricky because your consigners are on vacation.
JW: We do a lot of lead generation that drives people to the site. We have sales people in the field who will go and clean out closets, including in the Hamptons. Also, demand isnt that great in the summer, so it balances out. Things slow down around the third week of June. In the middle of August, it goes crazy again.
TC: Shipping takes a week. Is there a way to speed that up?
JW: At some point well designate that certain items will arrive faster or well say, if you want items today, heres your selection [of things to choose from]. Hopefully, by the fall, if youre in New York and you order from our New Jersey warehouse, you can get your item the same day.
TC: What about the companys demographics? Is it all over the map?
JW: A third of ourbuyer base is millennials. And they still buy Hermes, Chanel, Louis Vuitton, but after that [as they age] its a lot of Gucci, Saint Laurent, Cline. Weve been able to track brands by age and Ive met with all the top brands and I tell them that Im the gateway drug for their brands, and some are in trouble.
JW: Dolce is in trouble. We pick it up from people over 40 [years of age] and sell it to people over 50. Theres awhole disconnect with its advertising and they know it. They arent reaching millennials at all.
We can also predict trends. If we get a lot of [a particular kind of inventory], it isnt good for the brand and we have to drop the prices. We dont give out raw numbers, but women in the audience, I can tell you right now, if you have Valentino Rockstuds, hand em over, because the party is over.
TC: How much do items sell for on average?
JW: We dont give that out, but Net-a-Porterjust announced that its average basket is $430, and ours is bigger. The highest sale weve had is $100,000, and weve done it a couple of times.
TC: What sold for $100,000?
JW: This is good. From one of our valuation offices, a Saudi princess consigned a Van Cleef & Arpels diamond cuff that retails for $250,000. Four days later, we sold it to another Saudi princess on the other side of the U.S for $100,000. That flew, but we do sell $30,000, $40,000 and $50,000 items on a regular basis.
TC: Are most people buying one item at a time? And what percentage are recurrent shoppers?
JW: Theyve buying almost two items on average, and theyre buying often. We dont give out the number of recurrent buyers, but its a high number.
TC: How much of your business is coming through mobile versus the desktop?
JW: Three years ago, on every panel I sat on, the refrain was, Apps are dead. Well, our app generated about $100 million in GMV this year and it accounts for the majority of visits to the site. Its still not half our sales, but its getting there.
TC: Whats on the roadmap?
JW: We now have about 75 people who are gemologists, watch experts, art curators or brand authenticators and in December, we decided to put a handful of them into a pop-up store in [New Yorks] Soho for two weeks to showcase merchandise leading in to the holidays. We did more than $2 million in revenue. Half the shoppers were new to The RealReal. Some had heard of us but they hadnt shopped because they didnt understand the quality. So now were opening our first real store in Soho. Itll have a valuation office, but it will really be selling.
When you have 100 Birkins on the wall and people havenever seen that even at Hermes they tend to call their friends.
TC: Will you open another in San Francisco?
JW: If that works, well do a few of them. But well start with one.
TC: A lot of high-end boutiques like Louis Vuitton never discount their items; is there room for partnerships? [Editors note: this was actually an attendees smart question.]
JW: Were in conversations with them. A key tenet of what we do is sustainability; were a circular economy company and brands are starting to understand that if somethinghas a resell value, someone will pay more for new (knowing they can sell later), so were a value add.
LMVH group, too is taking sustainability seriously. While they destroy product, theyre conscious that its not a cool thing to do and there might be a partnership in the future because they like the circulation [economy]. I tell them: My consigners are your buyers. Im paying them out hundreds of millions of dollars, and theyre taking that money, and theyre buying new products that they know have a high resell value. So at some point [these brands] willcome around.