The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
SAN FRANCISCO, United States — In Silicon Valley, amidst a start-up scene dominated by founders in their twenties, Julie Wainwright, 57, is something of an anomaly: an Internet veteran who helped to pioneer e-commerce in the late 1990s, first as CEO of Reel.com and then as CEO of Pets.com, which became something of a poster child for the 'dotcom' boom and bust. But at the helm of her latest venture, the San Francisco-based luxury resale site The RealReal, Wainwright has proven that experience matters.
For nearly 20 years, EBay has been the dominant player in the market for vintage clothing and accessories. But in recent cycles, a slew of slick, luxury consignment start-ups have been gaining ground, aiming to disrupt the secondary market for high-end fashion with a more curated and seamless customer experience, while still offering consignors a greater percentage of the sale price than traditional auctions and brick-and-mortar consignment stores.
The value of me doing it later in life is that I do have a very, very big playbook.
Towards the front of the pack is The RealReal, which employs a team of experts to curate, evaluate and authenticate the clothing, handbags, shoes and fine jewellery sold on the site, taking 40 percent (30 percent once a consignor reaches $7,500 in sales) in commission. Launched just three years ago with less than $100,000 in personal savings and a handful of angel investors, the platform has already attracted 3 million members (as well as $43 million in venture capital) and is currently on track to generate over $100 million in revenue in 2014.
BoF spoke to Julie Wainwright about building The RealReal, what she learned from the ‘dotcom’ crash, launching an Internet business in a tech culture that is ageist and sexist, and why experience matters.
BoF: You’ve had such an interesting career trajectory. Where did you start? How did you first get into tech?
JW: I actually started my career in brand management at Clorox. But one day, someone in finance brought in their Apple II computer with VisiCalc (the first spreadsheet computer program) and I saw the power of computing first-hand. When I got a call from Software Publishing, one of four personal computer software companies that set the foundations for the industry, I joined as a product manager.
Software Publishing ended up getting to about $250 million. The biggest product was Harvard Graphics. After that, I went to a spin-off called Power Up! and set them up overseas, before coming back to the US as vice president of worldwide sales and marketing for a company called Berkeley Systems. They were about $30 million and trying to reinvent themselves. I ended up getting promoted to CEO and launched them into entertainment with a game called “You Don't Know Jack,” which became the best-selling game in the United States at that time.
The company was sold and I was recruited as CEO to Reel.com, where I stayed for two years and saw the company go from $400,000 to $25 million. Reel was later sold for $100 million to Hollywood Entertainment, who saw the company as a competitor and shut it down. Then, I was recruited to Pets.com. I took the company from zero to $45 million, but the financing environment dried up and I ended up shutting the company down and giving money back to shareholders.
BoF: Let’s talk about Pets.com, which became something of a poster child for the ‘dotcom’ boom and bust. What was the biggest lesson that you learned from the demise of Pets.com?
JW: One of them is that timing is everything. If Pets.com had been started a year earlier, it would have been able to manoeuvre through the financial whiteout. Cash is critical to survive and when windows shut, they can shut pretty hard. Secondly, Pets.com had taken on Amazon as a strategic partner. Amazon put $60 million into the company, but at the end of the day, Amazon did not buy Pets.com and probably had no interest, because they were going through their own problems. So, the key lesson is: when you bring in a strategic, remember that businesses move to their own rhythm; even if interests are aligned when a relationship starts, there’s no guarantee they’re going to be aligned two or three years later. So, strategic investments are tricky.
BoF: Why did you decide to launch The RealReal?
JW: I saw an opportunity and I thought that I was the best person to make it happen. A friend of mine bought high-end luxury goods and I asked her if she had ever gone into a consignment store; if she had ever shopped on EBay. I literally quizzed her. EBay’s biggest issue was trust. And the more I dug into things, I realised that if I could address the problem and create a trusted market for luxury resale, it could be a multi-billion dollar opportunity. But I also knew that if I had this idea, probably a hundred other people did too. It comes down to how you execute and how clean and clear your vision is.
Fast-forward to today and we’re finding that the trusted experts behind the products we sell are actually a key differentiator for our business. Of all the companies in our space that have been funded to date, everyone else set out to create an easier EBay or an EBay for fashion. I never set out to do that. What I set out to do was to take the top off EBay by adding trust into the equation, while taking the bottom off Sotheby's and Christie's.
BoF: Why focus on fashion?
JW: You have to look at multiple criteria. Is there a precedent for what you're doing? Are people transacting? Fashion was fast-moving. EBay was doing billions of dollars in fashion. It's highly covetable and people are used to buying fashion online. Then, it comes down to which brands are the most covetable, whether those brands allow the company to go horizontal across many categories and whether, by adding the trust component, those brands can demand a high-end price point. This is why we really do focus on Chanel and Hermès and Prada and Gucci, which are also amongst the most frequently counterfeited brands.
BoF: What impact do you think luxury resale sites like TheRealReal will have on the fashion industry at large?
JW: Well, what we’ve observed from our customer base is that, once they understand the resale value of the products they buy, they change their buying patterns. So customers who are very engaged with the site, they don’t stop buying at full retail price at all. In fact, they tend to spend more money on the high-end [items with high resale value] and that puts more pressure on purchases in the middle of the market, which don’t have high resale value, but may still cost $300.
BoF: You recently expanded into art. Why? What are the limits to the verticals that you'll enter?
JW: We continually look at multiple categories where vetting or authenticating adds value. And we look at the cost of getting the consigner, which is really our single biggest cost as a company. So once you have that consigner, you want to continue to service them and they have various needs and requests. We were constantly asked by consigners: can we sell art for them? So we started selling art this year and it’s going to be a small portion of our revenue, but a good one. It’s a leverage play for us, because we already have that relationship with the consigner.
There are multiple ways to look at it, but for us, there’s the act of authentication and vetting the items we’re selling, so we can engender trust with the customer and then leverage the consigner to meet their needs when they’re getting ready to sell different things.
BoF: Where do you see The RealReal in five years time?
JW: We have a plan that gets us past a billion dollars in the next five years, which isn’t unrealistic given the fact that we’re in year three and we’ll do well over a hundred million this year. It’s just about simple numbers at this point. The number of consigners and the number of customers, along with expansion outside the US. Our formula is working in Japan and we’ll just keep doing it.
BoF: How has founding and growing your own company been different to being a hired CEO?
JW: It’s completely different and, yet, very much the same, because a business is a business. Being a founder is more of a time commitment, however. Whenever anyone decides they’re going to found a company, they have to realise that it will absolutely always have to be their number one priority. Most CEOs come into a company that already has infrastructure in place that you can leverage. As a founder, you’re putting up the infrastructure. You really take on all the risk yourself and it requires more emotional and physical stamina to see it through.
BoF: You founded The RealReal quite late in your career. Has that been an advantage to you?
JW: A really good businessperson is sort of like being a trained athlete. You win some, you lose some and you get back up and you do it again. The value of me doing it later in life is that I do have a very, very big playbook. I’ve got sales departments, I’ve got marketing departments, I’ve turned around companies, I started as a product manager, I ran international. Many plays I’ve seen before and I know how they’re going to work.
I see a lot of young founders make mistakes that I would never make, but that’s okay. They’re all on their own learning paths. I don’t think there’s any set path to success. But training and experience at all those different companies was right for me. I’m also the type of person who won’t stop until I’m probably in my late 70s. My father is the same way. He has his own business, he’s in his late 70s and he’s still loving it.
BoF: Silicon Valley is notoriously ageist. And the kids who are getting funding today are getting younger and younger. Has that been a challenge?
JW: It’s ageist, it’s sexist and there are very few people of colour who get funded, because people tend to fund people who look like themselves. White young men and Asian young men, if you look at the numbers, get funded at a higher rate for their first company. But I can’t change that and that doesn’t mean their businesses are going to work.
All I can do is deliver great business results consistently. At the end of the day, Valley investors, just like all other investors, want to back companies that are successful and provide good results for their shareholders. Do women have a harder time? Yes. Do older people have a harder time? Yes.
I think I was naïve when I first started. I didn’t see any discrimination until my senior year in college, when my professor accused me of cheating after I got the top score on a test. This was a long time ago, but he basically said that pretty girls can’t be that smart. He literally said that. I remember being shocked. I’m short and blonde and that can negatively impact a woman. But ultimately, it didn’t stop me.
This interview has been edited and condensed.