How Does The RealReal Make Money?

The RealReal is an online and offline marketplace selling authenticated luxury goods including jewelry, watches, home accessories, and clothing. The company charges consignment fees for managing the sales of applicable products. The company charges consignment fees for managing the sales of applicable products. The company also offers two premium membership options for buyers.

Business Model Element	Analysis	Implications	Examples
Value Proposition	The RealReal’s value proposition is to offer customers access to authenticated, high-quality luxury items at a fraction of their original retail prices. The platform guarantees the authenticity of all products, providing buyers with confidence in their purchases. The RealReal emphasizes sustainability by extending the lifespan of luxury items through resale. Additionally, the platform offers a convenient and curated shopping experience with a wide selection of luxury brands and styles.	Provides access to authenticated, high-quality luxury items at discounted prices. Guarantees product authenticity to build buyer trust. Emphasizes sustainability by promoting the resale and reuse of luxury goods. Offers a curated and convenient shopping experience with a wide range of luxury brands and styles. Attracts customers looking for luxury items at affordable prices. Promotes sustainable fashion choices. Enhances the shopping experience for luxury enthusiasts.	– The RealReal’s value proposition appeals to customers seeking luxury items at more affordable prices, widening its customer base. – The guarantee of product authenticity builds trust and confidence among buyers, a critical factor in the resale luxury market. – The platform’s sustainability focus aligns with growing consumer interest in eco-friendly fashion choices. – Offering a curated shopping experience with a wide range of luxury brands and styles enhances customer engagement and satisfaction.
Customer Segments	The RealReal primarily targets luxury fashion enthusiasts and shoppers interested in purchasing high-quality, authenticated luxury items at a discount. The platform caters to both women and men across various age groups and geographic locations. Customers may range from budget-conscious shoppers seeking deals to eco-conscious individuals looking to support sustainable fashion practices. Additionally, the platform attracts sellers of luxury items who want to consign their pre-owned goods.	Targets luxury fashion enthusiasts and shoppers seeking discounted, authenticated luxury items. Caters to diverse demographics, including both women and men, various age groups, and geographic locations. Appeals to budget-conscious shoppers and eco-conscious individuals interested in sustainable fashion. Attracts sellers looking to consign their pre-owned luxury items. Accommodates different shopping motivations and preferences.	– The RealReal’s broad customer base includes luxury fashion enthusiasts with varying budgets and preferences, making it accessible to a wide range of shoppers. – Attracting both buyers and sellers of luxury items creates a balanced ecosystem on the platform. – The platform aligns with consumer trends toward sustainable and eco-friendly fashion choices, appealing to a segment of environmentally conscious customers.
Distribution Strategy	The RealReal operates primarily as an online marketplace, accessible through its website and mobile app. Customers can browse, purchase, and consign luxury items directly on the platform. The company also has a few physical retail stores where customers can drop off items for consignment. The RealReal leverages digital marketing, social media advertising, and email campaigns to reach and engage customers.	Relies on an online marketplace accessible through the website and mobile app for browsing, purchasing, and consigning luxury items. Operates a limited number of physical retail stores for item drop-offs. Utilizes digital marketing, social media advertising, and email campaigns for customer acquisition and engagement. Prioritizes a user-friendly and secure online shopping experience.	– The online marketplace offers customers convenience and accessibility to a wide range of luxury items. – Physical retail stores for item drop-offs provide an additional touchpoint for sellers, enhancing the consignment process. – Digital marketing and social media advertising play a key role in reaching and engaging potential customers. – Ensuring a user-friendly and secure online shopping experience is essential for building trust and encouraging repeat business.
Revenue Streams	The RealReal generates revenue through several key sources: 1. Sales of consigned luxury items, where the company takes a commission on each sale. 2. Consignment fees charged to sellers for listing their items on the platform. 3. Subscription services like “First Look,” offering early access to new arrivals for a monthly fee. 4. Service fees for additional services such as white-glove consignment, where The RealReal handles the entire selling process for the seller. 5. Revenue from physical retail stores. 6. Advertising and promotional partnerships with luxury brands.	Relies on revenue from: 1. Sales of consigned luxury items with a commission on each sale. 2. Consignment fees from sellers for listing items. 3. Subscription services like “First Look” for early access to new arrivals. 4. Service fees for additional services such as white-glove consignment. 5. Revenue from physical retail stores. 6. Advertising and promotional partnerships with luxury brands. Diversifies income sources for financial sustainability.	– The RealReal’s multiple revenue streams provide financial stability and allow for continued investment in platform enhancements and marketing efforts. – Offering subscription services and additional services like white-glove consignment creates opportunities for upselling and increasing average transaction values. – Partnerships with luxury brands and physical retail stores contribute to diversified income sources and brand collaborations.
Marketing Strategy	The RealReal’s marketing strategy includes digital advertising, social media marketing, influencer partnerships, and email marketing. The company promotes its platform through online ads, engaging content on social platforms, and collaborations with influencers and celebrities. The RealReal actively engages with its community through customer testimonials, user-generated content, and social proof. The platform also runs campaigns highlighting sustainability and eco-friendly fashion practices.	Utilizes digital advertising, social media marketing, influencer partnerships, and email marketing to promote the platform. Showcases the platform through online ads and engaging social content. Collaborates with influencers and celebrities for wider reach and credibility. Actively engages with its community through customer testimonials, user-generated content, and social proof. Runs campaigns highlighting sustainability and eco-friendly fashion practices. Focuses on building brand awareness and fostering user engagement.	– Digital advertising and social media marketing help The RealReal reach a broad audience of luxury fashion enthusiasts and potential consignors. – Collaborations with influencers and celebrities enhance the platform’s visibility and credibility in the luxury resale market. – Engaging with the community through customer testimonials and user-generated content fosters a sense of trust and authenticity. – Sustainability-focused campaigns align with consumer trends and attract eco-conscious customers. – The marketing strategy focuses on building brand awareness and fostering user engagement among luxury fashion enthusiasts and consignors.
Organization Structure	The RealReal operates with a structure that includes teams responsible for technology development, authentication, consignment, marketing, customer support, legal and compliance, and data analytics. The company places a strong emphasis on authentication processes to ensure the quality and authenticity of luxury items. Customer support teams assist users with inquiries, listing items, and issue resolution. Legal and compliance teams ensure adherence to relevant regulations. The RealReal’s technology development teams continuously innovate and improve the platform’s features and security.	Employs a structure with specialized teams for technology development, authentication, consignment, marketing, customer support, legal and compliance, and data analytics. Emphasizes authentication processes to ensure quality and authenticity. Provides customer support for inquiries, listing items, and issue resolution. Ensures legal and regulatory compliance. Prioritizes continuous innovation and platform improvement through technology development teams. Focuses on data-driven decision-making and user satisfaction.	– The authentication process plays a crucial role in maintaining the quality and authenticity of luxury items on the platform, a key factor in buyer trust. – Customer support teams are essential for addressing user inquiries, guiding sellers through the consignment process, and resolving any issues, ensuring a positive user experience. – Legal and compliance teams play a critical role in ensuring adherence to regulatory requirements and maintaining the platform’s integrity. – Continuous innovation through technology development teams helps keep the platform competitive and user-friendly. – The RealReal’s strong emphasis on data-driven decision-making and user satisfaction is reflected in its organization structure and operational approach.
Competitive Advantage	The RealReal’s competitive advantage lies in its ability to provide customers with authenticated, high-quality luxury items at a discount, offering a sustainable and eco-friendly alternative to traditional luxury retail. The platform’s guarantee of product authenticity builds trust among buyers. Collaborations with influencers and celebrities enhance credibility and brand recognition. Diversified revenue streams, including subscription services and additional service fees, contribute to financial stability. The RealReal’s focus on sustainability aligns with growing consumer interest in eco-conscious fashion choices.	Derives a competitive advantage from offering authenticated, high-quality luxury items at discounted prices, promoting sustainable and eco-friendly fashion practices. Builds buyer trust through the guarantee of product authenticity. Enhances credibility and brand recognition through collaborations with influencers and celebrities. Ensures financial stability through diversified revenue streams, including subscription services and additional service fees. Aligns with consumer trends toward sustainable and eco-conscious fashion choices. Stands out as a reliable and trusted platform for luxury resale.	– The RealReal’s focus on sustainability and eco-friendly fashion practices positions it as a leader in the luxury resale market, attracting environmentally conscious consumers. – The guarantee of product authenticity is a significant competitive advantage, ensuring that buyers can confidently shop for luxury items. – Collaborations with influencers and celebrities enhance the platform’s credibility and visibility, attracting both buyers and sellers. – Diversified revenue streams reduce dependency on a single source of income and contribute to financial stability. – The RealReal’s unique value proposition and focus on authenticity, sustainability, and innovation make it a trusted and competitive player in the luxury resale industry.

Table of Contents

Original Story

The RealReal is an online and offline marketplace selling authenticated luxury goods including jewelry, watches, home accessories, and clothing.

Founder and entrepreneur Julie Wainwright established the company in 2011 after a shopping trip with a friend to a wealthy part of Silicon Valley. Wainwright noted that her friend made several purchases of second-hand designer items from a boutique fashion store.

Curious, she began researching the second-hand luxury industry that same evening. Her new idea was also validated after experiencing difficulty in selling her designer pieces via eBay and pawnbrokers.

The RealReal commenced operations with Wainwright working from her kitchen table and visiting consignors at their homes with a U-Haul. Soon after, she moved into a proper office and secured a large warehouse to store clothing.

By 2012, the start-up had amassed 750,000 members. But the platform had trouble maintaining supply in its marketplace.

As a result, it employed over 100 consignors to source more items. Some would even stop people on the street to ask them if the clothes they were wearing were for sale.

In 2017, the first physical store opened in New York City, allowing the company to interact with buyers and sellers. Fifteen more stores followed.

Today, the company sells used and new items. It has also formed partnerships with Gucci and Burberry to sell exclusive items not available elsewhere.

Recent figures show The RealReal now has over 17 million members.

The RealReal revenue generation

The RealReal makes money in two primary ways: consignment fees and membership subscription fees.

Following is a look at each.

Consignment fees

The company charges consignment fees for managing the sales of applicable products.

The exact fee depends on:

Total net sales for the seller over one year.
Total item price – higher-priced items attract lower consignment fees.
Total item demand – again, higher demand items attract lower consignment fees.

With that in mind, the RealReal Rewards program offers three tiers based on sales volume:

VIP – for sellers with more than $10,000 in annual net sales. Here, the company takes 30%.
Icon – for sellers with between $1,501 and $9,999 in annual net sales. Icon sellers are subject to a 40% consignment fee.
Insider – for sellers under $1,500 in annual net sales. The consignment fee for Insider sellers is 45%.

For those selling single items outside of the rewards program, fees vary by item category:

15%

watches with a resale price exceeding $2,500.

20%

Handbags and sneakers with a resale price of $5,000 and $500 respectively.

30%

Handbags sold for $1,000 to $4,999.
Watches sold for $1,000 to $2,499.
Jewelry sold for more than $1,000.
Single art items sold for more than $196.
Home items with a resale list price exceeding $1,000 (excluding furniture).

50%

Any items with a resale price of between $146-195.
Home items with a resale price of $146 or more.

60%

Any item with a resale price under $145.

Memberships

The company also offers two premium membership options for buyers:

First Look ($10/month) – giving members 24-hour advanced access to sales and exclusive invites to monthly promotions via email.
First Look Platinum ($30/month) – offering the additional feature of unlimited free upgrades to 48-hour shipping. Note that this service is only available in the continental United States for fashion, jewelry, and watches. For deliveries to Alaska and Hawaii, there is a subsequent charge of $5.

Key takeaways

The RealReal is an online and offline marketplace selling authentic luxury new and used goods. It was founded by Julie Wainwright after she witnessed her friend purchase a large amount of second-hand designer fashion.
The RealReal makes money by charging consignment fees to those who wish to sell on its platform. Fees vary by item sale price, historical sales volume, item demand, and whether the sale is part of the RealReal Rewards program.
The RealReal also makes a less significant amount of money from two premium membership options for buyers. They can receive exclusive access to promotions and receive two-day shipping to the continental United States for certain items.

The RealReal: Key Takeaways

Company Overview: The RealReal is an online and offline marketplace that sells authenticated luxury goods, including jewelry, watches, home accessories, and clothing.
Founder: Julie Wainwright founded The RealReal in 2011 after observing her friend’s purchases of second-hand designer items in Silicon Valley.
Early Operations: Wainwright initially operated the business from her kitchen table and later expanded to a proper office and a large warehouse.
Growth and Challenges: By 2012, The RealReal had amassed 750,000 members but faced challenges in maintaining a consistent supply of products. The company employed consignors to source more items, even stopping people on the street to inquire about items they were wearing.
Physical Stores: In 2017, The RealReal opened its first physical store in New York City, followed by more stores in various locations.
Partnerships: The company has formed partnerships with luxury brands like Gucci and Burberry to sell exclusive items not available elsewhere.
Revenue Generation: The RealReal generates revenue through two primary methods: consignment fees and membership subscription fees.
Consignment Fees: The company charges consignment fees based on factors such as net sales, item price, and item demand. Fees vary across different seller tiers and item categories.
Membership Options: The RealReal offers two premium membership options for buyers: First Look ($10/month) and First Look Platinum ($30/month), providing advanced access to sales and exclusive promotions.
Key Takeaways:
- The RealReal is a marketplace for authenticated luxury goods, founded by Julie Wainwright.
- It earns revenue through consignment fees, which vary based on seller tiers and item categories.
- The company also offers premium membership options for buyers, providing access to promotions and shipping benefits.
- The RealReal has grown to over 17 million members and partners with luxury brands to offer exclusive items.