The RealReal shows strength of its secondhand luxury model in first post-IPO report

Analysts are bullish about The RealReal even after department store discounts posed a threat:

Analysts are bullish about The RealReal despite the unexpected discounted in the luxury market

RealReal Inc. stock soared after earnings indicated that even when luxury goods are sold at a discount, The RealReal’s secondhand goods are still in high demand.
The RealReal REAL, +0.84%   reported sales in line with expectations during its first quarterly announcement post-IPO. Gross merchandise volume (GMV) rose 40% year-over-year to $228.5 million.

Shares were up in Tuesday after-hours and in Wednesday premarket, though they fell about 5% in early trading alongside many others after concerns about global economic data.
The RealReal stock began trading on June 28.
“We view the positive after-market stock reaction reflects some easing of investors’ concerns on higher promotions in the luxury space weighing on The RealReal’s growth trajectory,” Cowen analysts led by Oliver Chen wrote.


“We acknowledge that average order value (AOV) was flat year-over-year due to earlier-than-expected promotions in the luxury space. However, management highlighted promotional trends in 3Q appear similar to prior years and they expect AOV in 3Q to improve year-over-year.”
Analysts say they’re “encouraged” by the loyalty of the customer base and its progress in automation.
The RealReal’s Chief Executive Julie Wainwright said department store discounting isn’t new for the company and it has already seen a fast recovery. The impact is felt more in women’s clothing.
“I would say if department stores get desperate in September, October, we might have some of that tension, again that will be offset by high seasonality,” she said on the earnings call, according to a FactSet transcript.

“[T]his this is one of the beauties of having product diversity because we don’t see it on fine jewelry, watches, men’s and streetwear, and even women’s handbags,” she said.

“While 2Q AOV was modestly below expectations due to increased promotional activity across the industry, management believes the company is partially insulated from periods of aggressive discounting given its category diversification, and the inverse relationship between pricing and active buyer growth,” wrote Stifel analysts in a note.
“As the leader in the luxury consignment space, we believe The RealReal has strong growth potential and ongoing investments in automation should drive operating leverage in pricing and fulfillment.”
Stifel rates The RealReal shares buy with a $30 price target.
The RealReal shares have fallen 44.6% over the past month while the S&P 500 index SPX, -2.93%   is down 5.8% for the period.

 OA here

In China, Even Luxury Goods Authentication Services Are Being Faked

August 29, 2018 TFL

image: derodeloper

A central part of the premise of luxury consignment platform The RealReal is its dedication to ensuring that the Chanel bags, Alaïa frocks, and Manolo mules you are buying are real. The San Francisco-based site touts itself as “the leader in authenticated luxury consignment.” Rival Vestiaire Collective similarly boasts about its grade-A offerings, which are “expertly checked for 100% quality and authenticity.” Even eBay has made inroads in this realm, introducing a network of brand experts to its service in order to verify the authenticity of goods being offered for sale in its marketplace.

Given the rise in demand for authentic second-hand luxury goods, paired with the ever-increasing sophistication of counterfeits (so much so that some fakes are 99 percent identical to the real thing), it should come as little surprise that services dedicated to weeding out the fakes are on the rise. The trend has made its way to China, which is – on one hand – the source of more than half of the world’s counterfeits, as well as full-blown fake Yeezy and Supreme stores.

On the other hand, China is also home to an ever-growing population of big-spending millennials who are not interested in anything but authentic luxury goods and are willing to pay handsomely for


With such a mixed hand at play, Chinese startups are popping up in an attempt to fill an important void: Telling the difference between the real and the fake. As noted by Jing Daily last year, one startup, Zhiduoshao launched an iPhone app in March 2017 to help users authenticate luxury goods. On Zhiduoshao – which means “how much it’s worth” in Chinese – users can upload photos of their luxury goods to the app, and an expert will give his/her feedback as to the authenticity of the product.  

The app’s founder and CEO, Xu Shichen, said that his company is seeing “a rise in authentication demands,” particularly as parts of the Chinese population begin to a exhibit growing acceptance of the second-hand luxury goods market, which is currently popular in first-tier cities, such as Beijing and Shanghai, but is spreading to Tianjin, Chongqing, Chengdu, Wuhan, Xiamen (the big second-tier cities) and beyond.

The rise of the second-hand luxury market has been slow to catch on in China in part because of authentication concerns. As a spokesman for the China Resale Goods Trade Association said in 2016, even well-meaning shops have unknowingly stocked huge selections of counterfeits “due to their inability to authenticate the products.” Yishepai, an online luxury goods authentication platform, revealed that in 2016, only 40 percent of the goods they examined were real.

Maybe unsurprisingly, given China’s position as one of the more problematic global players when it comes to the protection of non-native intellectual property, no small number of the authentication services that are meant to be separating the bona fide luxury goods from the counterfeits are fake, themselves. In many cases, the seemingly authentic sites are copying the names, website layouts, and the imagery of more established authentication services, such as Zhiduoshao.

The scheme runs even deeper, according to China’s state-run China Youth Daily website, with companies offering up sham courses for individuals who would like to be trained as expert authenticators, something of a growing profession in China. The publication revealed this spring that a number of companies have begun offering classes “that promise to teach people to become an expert” in just a matter of days.

Such classes, according to China Youth Daily, are often fraudulent in nature, with Zhang Chen, a luxury bag authenticity expert at the Beijing Price Certification Center, emphasizing, “The process of identifying authentic luxury goods is particularly complicated because it requires a wide range of knowledge and experience.” Chances are, that knowledge takes more than a few days to acquire. 

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The Best Designer Bags to Buy Now and Sell Later

Designer handbags are expensive: This is a fact. And that many shoppers prefer to pay less than the original retail price for them is another. Fortunately, there are a lot of places to do that online.

Resale itself is a billion-dollar industry; the annual revenue is an estimated $17 billion, and the category of handbags is particularly lucrative. High-end consignment sites like The RealReal and Vestaire Collective are owning this space, and making it incredibly simple (and more secure) to shop for pre-owned designer bags online, with the same type of customer service experience you’d find at any other reputable e-commerce site. Secondhand shopping has come a long way in the past few years.

So what’s worth your investment? Here, we asked Graham Wetzbarger, The RealReal’s senior director of authentication, which bags you should consider buying now if you’re looking to resell later.

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What are some of the most popular bags on The RealReal right now? What are people going crazy for, or showing an increased interest in?

There are always going to be some staples: the iconic brands that are always in fashion, both on the high end and on the low end. The biggest names are Chanel, Hermès, and Louis Vuitton. Those always have really high demand; they’re iconic, and because of their very high price point, people really seek them out on the secondary market.

Last year, Mansur Gavriel was huge, but now the bags sit for a few days. They still sell, but the sense of urgency is a little less than what it was. We’ve seen other brands come up and come down. Sometimes it has more to do with the silhouette and brands that cater to that silhouette. We’re seeing a big spike in Kate Spade right now, because they do a lot of really youthful and colorful bags. They also do tons of crossbody, just like Rebecca Minkoff. They’re an accessible price point, and the color palette is suited toward spring and summer. When people want a seasonal bag, they’re not going to go too expensive.

MCM is also really coming up. We’re seeing a customer who’s more street-style-driven than luxury Fifth-Avenue-driven, who’s loving cool sneakers and MCM backpacks and bags and baseball caps. Even some of these vintage MCM bags are doing really well.

A Delvaux bag.

Photo: Vanni Bassetti/Getty Images

What other shapes are big?

I think Lady bags — with a nice, sophisticated, gorgeous top handle — are back, and have been for a while. You see these from Delvaux, they’re gorgeous; Valextra has many that are stunning. And then the backpack is back, so hard. Everyone from Chanel to Mansur Gavriel and so many brands in between — everyone wants a backpack, and everyone is doing a backpack.

What are some of the best bags to buy now that’ll be worth the investment later on?

You can’t go wrong with Louis Vuitton monogram canvas. Not only is it very durable, but it holds its value, probably 70 percent of what you paid for it. And then when you consider the brand increases prices 10 percent every year, that’s a great ROI.

Something on the more entry-level price point is harder, because they tend to go on sale. Department stores will put things on sale seasonally, so you can get them retail at a lower price point. And there are just so many more of them made, so the secondary market gets a little bit flooded. You’re never going to get a really strong ROI on something like that — it needs to be slightly less approachable and more covetable than a mass brand. Finding those brands that don’t go on sale, have smaller production, and have bags that are very publicized are always going to have staying power.

Also, there are some silhouettes, even in Louis Vuitton, that wax and wane depending on what the house is doing now. These houses and these brands that have lots of history and deep archives are often pulling and resurrecting styles that have been out of production for a while, so that really has an influence and effect on the secondary market and on vintage items that are similar.

Photo: Christian Vierig/Getty Images

How long should you hang onto a designer bag before selling it?

In general, I always say a year. If you keep your bag for a year, it’s still going to be in great shape and still relatively on trend. And if it does have some spin of seasonality to it, in a year you’ll be back in that same season as when you bought it.

Sometimes, we can feel a trend before the data shows it. About four or five months ago, we kept getting more and more Rockstud Pumps from Valentino every day. At first we were like, “Awesome!” and then we were like, “Wow,” and then we were like, “Uh oh...” The data always comes a month later. So intuitively, that means it’s time to clear your Rockstuds. When the data starts showing that their velocity has slowed down and they’re taking longer to sell and the selling price point has gone down as well, that’s the sign that this trend is over.

Just like with technology, being an early adopter always helps. Trust your instincts. If you see something and you like it, go for it. If you start seeing a lot of other people carrying it or that style being replicated by other designers, you know it’s at its peak, and that’s a great time to part with your goods — before the trend is over. It’s just over-saturation. Mansur launched the bucket bag and it was huge, and every other designer started doing a bucket bag. It was popular for a minute, and there are a ton out there. So while there aren’t as many Mansurs, there are a ton of other facsimiles. So it just slows down and kind of kills the trend. 

This interview has been edited for length and clarity. Original here