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Is The RealReal investable?

The question is… is the luxury consignment juggernaut worth your investment dollars?

Is The RealReal investable?

The sustainably conscious consumer is creating a new beast in the consignment economy. That’s why you hear brands like Allbirds, Nike, and Adidas talk of carbon footprints and recycled products.

But you can’t just “recycle” a Gucci bag into another product haha. That’s why The RealReal has an interesting opportunity to fill a void in the aftermarket luxury space. Looks like a great business in theory.

Trends are in The RealReal’s favor. We’re accepting resale more, conscious of our consumption, and have a renewed focus on sustainability.

So I took a quick glance at their S1 from their IPO in 2019 to see whether it’s a risky investment to add to your portfolio, or not.

THOSE RISK FACTORS THO

There’s a lot of them that’s for sure. I laid out the ones that reallllyyyy concerned me:

  • If we fail to generate a sufficient amount of new and recurring supply of pre-owned luxury goods by attracting and retaining consignors, our business would be harmed.
  • We may not be able to identify and lease merchandising and fulfillment facilities in geographic regions that enable us to effectively scale our operations and attract and retain specialized personnel to effectively manage the merchandising operations required to authenticate, process, and sell consigned luxury goods.
  • We have a history of losses and we may not achieve or maintain profitability in the future.
  • National retailers and brands set their own retail prices and promotional discounts on new luxury goods, which could adversely affect our value proposition to consumers.
  • Our success depends on the accuracy of our authentication process, and failure by us to identify counterfeit goods could adversely affect our reputation and expose us to liability.

THERE'S SOME GOOD... KINDA

buyer acquisition costs
Buyer acquisition costs

They’re incredible at managing acquisition and marketing costs. In just 6 years, they slashed costs to acquire customers in half. While adjusting ad spend in real-time to optimize across all channels.

As I mentioned, they play into the sustainably conscious consumer, and I think they gain some headwinds from that.

THOUGHTS

I mean, their backs are against the wall. I’m not sure I can get behind a business that simply can’t control their own supply and have literally no control of costs. Plus, habits change. What if people want to hold onto their shit longer. What will they do then?

And we haven’t talked about counterfeits. Amazon and Alibaba can’t even deal with it, so you think The RealReal can?

But I love the possibility of an acquisition (LVMH maybe?). And it makes sense! They could control their topline products while building relationships with aftermarket buyers and sellers. But is profitability or acquisition on the horizon? Maybe. But I’ll look elsewhere to put my dollars.

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September 11, 2021

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