SAN FRANCISCO, United States — The RealReal built a $100 million business around second-hand Chanel flap bags and lightly scuffed Christian Louboutin pumps. Now it wants to double in size using a new injection of venture funding.
The online luxury consignment store announced on Thursday, April 9, that it has raised $40 million in its largest venture- funding round to date. Led by Industry Ventures, the Series D round nearly doubles the company’s total backing to $83 million. Julie Wainwright, chief executive of RealReal, says the immediate objective is to achieve profitability—a goal she wants to reach by the end of 2015. To do that, she must keep the business expanding.
“When you have a commerce component, it really comes down to scale,” Wainwright says of becoming profitable. “We’re going to get there earlier than most through a combination of high average order size and strong repeat numbers.”
Founded in 2011 by Wainwright, former chief executive officer of infamous tech-bubble flameout Pets.com, RealReal resells luxury goods for owners who no longer want them. The online shop is part of a wave of fashion e-commerce startups that have popped up in recent years, from flash sale websites such as Gilt and Rue La La to such subscription services as StitchFix and the Ms. Collection. Other consignment marketplaces it competes with include Tradesy.
With 3.5 million members signed on, RealReal takes possession of its consigned items up front, authenticates them, and guarantees their genuineness. Verification is a necessity since the site deals in industries plagued by counterfeiting, from bootleg Louis Vuitton monogram satchels to fake Andy Warhol silkscreens. To battle forgeries, the site employs in-house staff of fashion pros, gemologists, horologists, and appraisers.
Wainwright says her consignors are becoming a retail force, spending much of the money they make from reselling their unwanted wares at such luxury retailers as Neiman Marcus, Saks Fifth Avenue, and Barneys New York. Consignors receive about 60 percent to 70 percent of the sale price, and they&aposre expected to accumulate more than $100 million in payouts this year, according to the company.
For now, Wainwright plans to keep focusing on growth for its current product categories—women's fashion, menswear, fine jewelry, watches, and art—rather than entering into a bevy of other luxury products.
By Kim Bhasin. Editor: Alex Dickinson.