Luxury Consignment Retailer the RealReal’s Business Is Booming. Here’s Why.

The secondhand market is maintaining its momentum going into the new year.

Luxury resale platforms like the RealReal are seeing big sales ever since shoppers decided to cut back on high-priced designer purchases, The Wall Street Journal reported on Thursday. The online consignment retailer—which stocks thousands of items including Chanel, Gucci, Louis Vuitton, and Rolex, to name a few—has recorded sales growth for three straight quarters now. In addition, the company revealed to the newspaper that it offloads the bulk (a whopping 75 percent) of its wares within three months. 

The reason the platform can move inventory so quickly is because it uses technology to speed up the authentication process. More specifically, the RealReal implements machine learning and AI to determine whether a watch, for example, is actually counterfeit. In addition, these technologies are able to write copy and accelerate the cataloging process, which was previously done by employees, and come up with real-time competitive comps for preowned pieces. 

“Everything is going to sell, given the sales rates on our platform, but where is the sweet spot in terms of how quickly we want something to sell and what price we can get for it?” said Ajay Gopal, the RealReal’s chief financial officer. “That’s what our algorithm is trying to solve for.” 

The new developments come at a time when the luxury sector is experiencing a slowdown. The ongoing downturn can be attributed to several factors, including a decrease in Chinese shoppers which has caused French luxury group LVMH, and its founder Bernard Arnault, to report losses this year. There’s also concern regarding dramatic price hikes, which has priced some buyers out.  

“If you can buy the $7,000 Chanel bag for $4,000, and it’s authentic . . . in great condition. I don’t think that if the consumer gets better, they’re going to go back to buying the new thing,” Bobby Brooks, a senior equity research analyst at Northland Capital Markets, told the WSJ.  

To his point, more discerning consumers are purposefully seeking out secondhand luxury goods through websites like the RealReal because they can get the same designer items for less, especially at a time when the luxury market is struggling.

Credit: robbreport.com