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Thursday, April 09, 2015

The RealReal Raises $40 Million to Double Sales in 2015

The RealReal Raises $40 Million to Double Sales in 2015:

Photo: The RealReal
Photo: The RealReal
Online re-seller The RealReal has raised $40 million, bringing the San Francisco-based startup’s total funding to $83 million. The Series D round, its biggest to date, was led by Industry Ventures, with participation from a whole slew of other new and existing investors.

That’s a lot of money. The RealReal founder and CEO Julie Wainwright plans to use it to help double the company’s revenue in 2015. (Last year, it generated $100 million in sales.) At this point, profitability is also a top priority. “We’re laser-focused on scaling the business operationally and continuing to provide our members with the best authenticated luxury shopping and consigning experience anywhere,” Wainwright said in a statement.

Since its founding in March 2011, The RealReal has distinguished itself from other re-sellers in several ways. For one, it operates more like a consignment shop, requiring users to send their products into a centralized warehouse. There, the items are authenticated, uniformly photographed, and sold without any information released about the seller. The anonymity is appealing to both high-profile individual sellers -- like celebrities -- as well as upscale boutiques and designer brands that need to offload unsold inventory. And it makes for a more seamless experience for the consumer at both ends. There is no dealing with disgruntled buyers or irresponsible sellers.

Wainwright was aggressive about securing as much venture capital  as she could as early as possible. In a crowded marketplace where scale will win out, this wasn’t a bad idea. The generous funding has not only allowed the company to buy more product, but price it reasonably. (For instance, a $3,500 fall 2014 Celine “crombie” coat with tags is on sale for $1,095. Similar styles are currently going for $2,500 or more on Ebay.)

The RealReal sells everything from Chanel bags to Alexander Calder prints, but its fastest-growing categories are fine jewelry and watches along with menswear. Hard luxury was up 225 percent in 2014, and is expected to jump another 250 percent in 2015. Men’s fashion was up 225 percent in 2014, and should more than double in 2015.

The RealReal warehouse in San Francisco. Photo: The RealReal
The RealReal warehouse in San Francisco. Photo: The RealReal
The RealReal has sold 1 million items since opening its virtual doors four years ago, paying out more than $100 million to consigners. To keep up the momentum, it will need to attract more sellers, and in turn, more product. Marketing is one way to do that, but another way is through acquisition. There are dozens of online re-sellers, from Shop Hers to Vaunte, that have cropped up over the past few years. Surely some of them have been unable to scale to the same extent as The RealReal and are looking for a way out. While TheRealReal says that it has no plans for acquisition at this time, it does seem like a natural way to grow.

To be sure, The RealReal isn’t the only re-seller aiming high. San Francisco-based peer-to-peer shopping site Threadflip has raised $21 million to date, and Santa Monica-based Tradesy has raised $44.5 million. And we’ve heard that another re-seller is about to make a funding announcement. Most of these sites sell luxury goods but don’t focus on them, so their customers are likely a tad different than The RealReal’s. The London-based Vestaire Collective, which has raised $31.7 million, is probably The RealReal's biggest competitor in terms of attracting luxury shoppers. It has, over the past year, made a serious push in the U.S. (The biggest difference is that Vestaire allows sellers to post directly to the site and to set their own prices.)

The good news is that the market has, in a way, proven itself. There is enough product to keep these re-sellers afloat, and enough to make a few of them really big. It’ll be interesting to see how much The RealReal can grow over the next year or two.

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