NEW YORK (AP) — Shares of The RealReal jumped on their first day of trading on Friday, as the secondhand-fashion online retailer tests investors’ appetite for the staying power of online marketplaces for pre-owned discounted Gucci and other luxury goods.
The San Francisco company, founded in 2011 by CEO Julie Wainwright, debuted on the Nasdaq Stock Market and is listed under the ticker ‘REAL’. Late Thursday, the initial public offering of 15 million shares was priced at USD20 a share, above an expected range of USD17 to USD19 a share. That would raise USD300 million before expenses.
The stock surged 44.5 per cent, closing the day at USD28.90.
The RealReal says it’s the world’s largest online marketplace for authenticated, consigned luxury goods. Its total revenue was USD207.4 million last year, up 55 per cent compared with 2017. As of the end of March, it offered more than 620,000 unique authenticated pre-owned luxury items bearing the brands of more than 5,500 luxury and top designers.
But it hasn’t made a profit and its losses widened to nearly USD76 million last year, up from USD42 million in the previous year, according to its prospectus filed with the Securities and Exchange Commission.
The move to go public comes as online marketplaces that sell used clothing and other items are flourishing as a new generation of younger shoppers don’t want to pay full price. They also are more conscious about the environment.
While shoppers for years have been buying and selling used discounted designer items at thrift shops and on eBay, this latest generation of secondhand online retailers make the shopping experience easier, with new technology and services.
Poshmark, an online retailer of secondhand clothing, expanded earlier this month into home decor with items including bedding and bath. Online rival ThredUP is opening physical stores.
Meanwhile, Neiman Marcus in April bought a minority stake in resale site Fashionphile. As part of this deal, at select Neiman Marcus stores, customers are able to not only receive an immediate quote for their items from Fashionphile but also payments they can spend immediately on new luxury items at the store. Neiman Marcus said it will not be selling any preowned merchandise at its stores.
The RealReal Inc. offers a “white glove” service where consignors, those who are selling their used designer goods, make an appointment with one of its luxury managers and receives a complimentary consultation at their home. It also operates 11 luxury consignment offices in key cities like New York and Los Angeles. It also operates three stores — two in New York and one in Los Angeles.
The RealReal said it has been able to build trust among its customers.
It employs more than 100 gemologists, horologists, brand experts and art curators and said that its authenticators are highly trained, experienced experts in their respective fields.
The company said that as buyers become consignors and vice versa, it creates a “unique flywheel that further accelerates our momentum.” Through March 31, 53 per cent of its consignors are buyers and 13 per cent of its buyers are consignors, according to the prospectus.
“The sustainability of this model is going to hinge on their ability to do two key factors,” said Alex Fitzgerald, manager in the consumer and retail practice of global consultancy AT Kearney. “As they grow, can they continue to offer enough high quality, interesting luxury items to meet demand and keep shoppers coming back for more? And will they be able to maintain their commitment to authentication which is essential to making the online consignment model work?”
During a phone interview with The Associated Press, Wainwright said that she’s confident about the company’s ability to get regular supplies of luxury goods and “monetise it fast” and add authentication.
“We are setting growth as a priority, but not growth at any cost,” she added. “We’re not sacrificing good business management for growth.”
The RealReal says that 80 per cent of its consignors were female, primarily with household income of about USD50,000.
It says its top-selling luxury designers include Cartier, Chanel, Christian Louboutin, Gucci, Hermès, Louis Vuitton, Prada, Rolex, Tiffany & Co and Valentino.