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Tuesday, May 5, 2020

Chanel and The RealReal Both Nab Wins in Latest Round of Ongoing Counterfeit Lawsuit

The RealReal and Chanel have each scored a few wins in the highly-watched trademark-centric lawsuit that the famous French brand waged against the resale giant for allegedly selling counterfeit goods, and using the Chanel name to “deceive consumers into falsely believing that [it] has some kind of approval from or an association or affiliation with Chanel [when it doesn’t] or that all CHANEL-branded goods sold by The RealReal (“TRR”) are authentic.” In response to the motion to dismiss that the San Francisco-based resale site filed last year, a New York federal court has agreed to toss out a number of Chanel’s claims, while enabling three to remain intact.
On Monday, Judge Vernon Broderick of the U.S. District Court for the Southern District of New York granted TRR’s motion to dismiss in part, agreeing to toss out Chanel’s claims of trademark infringement, and false endorsement and unfair competition, as well as the Paris-based brand’s claims under New York State General Business Law on that basis that TRR’s “use of Chanel’s genuine trademarks is not likely to cause customer confusion, and because Chanel has not adequately alleged injury to the public at large.”
At the same time, the judge refused to dismiss Chanel’s trademark counterfeiting/infringement and false advertising claims, and similarly kept its common law unfair competition claim in play, as well because Chanel “adequately alleges that TRR marketed and sold counterfeit Chanel products, and because [TRR’s] advertising regarding the authenticity of the products it sells is literally false.”
In the recently-released opinion and order, Judge Broderick looks first to Chanel’s claims of trademark infringement, false endorsement and unfair competition, which he says Chanel “does not plausibly allege … based on [TTR’s] use of genuine Chanel trademarks” in connection with its sale of authentic Chanel products, as the Lanham Act – the federal statute that governs trademarks and unfair competition – “does not prevent one who trades a branded product from accurately describing it by its brand name, so long as the trader does not create confusion by implying an affiliation with the owner of the product.”
Here, Judge Broderick asserts that Chanel fails to successfully make its claims because it is “highly unlikely that a customer buying a secondhand Chanel product from [TRR]—which unambiguously holds itself out as consignment retailer in a luxury market— would confuse the nature of [TRR’s] business, the source of its products, or its affiliation—or lack thereof—with Chanel.”
To be exact, the judge points to the following factors as examples of why consumers are not likely to be confused about the source of the goods in question or be misled into believing there is an affiliation between TRR and Chanel given TRR’s use of Chanel’s trademarks: 1) “Chanel’s trademarks are incredibly well-known, recognizable, and prevalent in the luxury fashion market;” 2) “As Chanel makes clear in [its complaint], [it] does not sell secondhand or vintage Chanel goods, and in that sense, [TRR] does not directly compete with Chanel;” 3) “Chanel has identified no evidence of actual customer confusion, or that [TRR] has adopted the genuine Chanel trademarks in bad faith;” and 4) “the luxury fashion market is a relatively sophisticated market that … commands top-dollar prices.”
The judge similarly states that “Chanel has not plausibly alleged facts suggesting that [TRR] ‘stepped over the line into a likelihood of confusion by using [Chanel’s] mark[s] too prominently or too often, in terms of size, emphasis, or repetition,” and thereby, diminishing the merits of a nominative fair use defense. “Chanel has identified no facts suggesting that The RealReal displays Chanel-branded goods ‘more prominently than other luxury-brand goods,’” Broderick asserts, and “has offered no non-conclusory allegations to suggest that [TRR] inaccurately depicts its relationship with Chanel or Chanel’s products and services.”
This is particularly true, according to the court, given the disclosure on TRR’s website that “[b]rands identified on [its website] are not involved in the authentication of the products being sold, and none of the brands sold assumes any responsibility for any products purchased from or through the website,” and that “[b]rands sold on the [website] are not partnered or affiliated with [TRR] in any manner.”
With those claims out of the way, Judge Broderick states that Chanel does, in fact, “plead sufficient facts to plausibly allege a cause of action for trademark infringement based on [TRR’s] advertisement and sale of counterfeit Chanel products.” And while the resale site is “involved neither in the manufacture nor the affixing of [Chanel’s] trademark to [any counterfeits], its sale of the [counterfeits] [is] sufficient ‘use’ for it to be liable for the results of such infringement,” Broderick declares, due to the nature of its model.
As distinct from the Second Circuit’s finding in Tiffany Inc. v. eBay Inc., in which eBay was let off the hook for the counterfeits sold on its site, Judge Broderick says that TRR may be liable for infringement in connection with the sale of allegedly counterfeit goods because it “retains the power to reject for sale, set prices, and create marketing for goods, and unlike eBay is more than a platform for the sale of goods by vendors.”
“By adopting a business model in which [TRR] itself controls a secondary market for trademarked luxury goods, and by curating the products offered through that market and defining the terms on which customers can purchase those products, [TRR] reaps substantial benefit,” according to Judge Broderick. “As a result of this business model, [TRR] must bear the corresponding burden of the potential liability stemming from its ‘sale, offering for sale, distribution, [and] advertising of’ the goods in the market it has created.”
In terms of the alleged counterfeits sold by TRR, the court states that “Chanel has adequately averred that its own investigation revealed that [TRR] marketed and sold counterfeit Chanel products, and Chanel has also alleged that [TRR’s] own customers have complained about the receipt of counterfeit merchandise,” which is “sufficient to plausibly allege that [TRR] directly infringed Chanel’s trademark.”
Finally, as for Chanel’s false advertising claim, the court sides with the “iconic” fashion brand, determining that TRR’s “advertisements regarding the authenticity of the products it sells, considered in context, are literally false.” For instance, TRR’s statement that it “ensures that every item on [its site] is 100% the real thing” is an “unambiguous representation of fact,” per Broderick, which stands in contrast with “Chanel’s allegations that certain products advertised and sold by [TRR] are counterfeit.” As such, this “suffices to establish a plausible allegation of literal false advertising based on [TRR’s] representation that all the products it offers have been authenticated and are 100% the real thing,” thereby, enabling Chanel’s claim to move ahead along with Chanel’s unfair competition and counterfeiting/trademark infringement claims.
Chanel made headlines when it first filed suit against The RealReal in November 2018, accusing the popular resale site of “selling counterfeit CHANEL handbags,” despite its claims that it “ensure[s] that every item on[its site] is 100% the real thing.” The fashion brand went on to claim that while “there is no nor has there ever been any approval by or association or affiliation between Chanel and The RealReal …. the RealReal understands that the value of its CHANEL-branded inventory and attraction for consumers is enhanced if consumers believe that Chanel has a business relationship or affiliation with The RealReal.”
From the outset, The RealReal has vehemently denied Chanel’s claims, characterizing the brand’s suit as “nothing more than a thinly-veiled effort to stop consumers from reselling their authentic used goods, and to prevent customers from buying those goods at discounted prices.”
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Wednesday, January 8, 2020

The RealReal Will 'Dominate Digital Consignment Space'

Several digital native fashion retailers are worth taking a look at, according to DA Davidson.
Analyst John Morris initiated coverage of several fashion retailers Tuesday, including Revolve Group LLC RVLV 0.19% with a Neutral rating and $19 price target.
“As a digitally native brand, Revolve sits squarely at the intersection of sophisticated data-driven assortment planning and coveted fashion apparel,” the analyst said.

Inventory Overhang Remains A Concern

In the near term, Revolve is struggling with growing pains that are likely to last for several quarters as it "right-sizes" inventory and invests in future growth, Morris said.
Part of Revolve’s inventory overhang has been planned, as the company is building up for the launch of its superdown division and braces for international expansion, he said.
“Yet inventories have risen significantly faster than sales, most recently rising 31% in 3Q, ahead of 21% sales growth,” the analyst said.
A portion of the higher inventory levels have led to more discounting that weighs against gross margin upside, Morris said.
"We see these headwinds continuing for several more quarters."

The Real Deal

DA Davidson initiated coverage of The RealReal, Inc. REAL 5.2% with a Buy rating and $22 price target.
The RealReal is a brand destination with several first-mover competitive advantages in a market that is displaying accelerating growth, Morris said.
RealReal has a unique business model that makes it possible for the company to be a front-runner for trends like sustainability, uniqueness and individuality that are favored by the millennial and Gen Z demographics, he said.
"With a seamless supply chain, high customer retention, and substantial take rate, we expect REAL to dominate the digital consignment space,” the analyst said.
The RealReal’s authentication process has come into question of late, but this went unmentioned in the DA Davidson note.

Stitch Fix: Rising Ad Spend Tempers Sentiment  

Stitch Fix Inc SFIX 2.34% reported a first-quarter earnings and sales beat Monday, and several analysts highlighted the company’s new "direct buy" feature as a catalyst for future growth.
DA Davidson took a more guarded stance on Stitch Fix, initiating coverage with a Neutral rating and $27 price target.
Morris said he is cautious about Stitch Fix’s growth prospects, cost efficiency and a lack of visibility.
"We rate it Neutral because the company is showing a decelerating client growth rate despite significantly increasing marketing spend at a time when its core business is more challenged by competition and the complexities of growth which is likely to erode margins in the near term."
Stitch Fix is chasing new clients, and its advertising spend as a percentage of sales increased from 3% in 2016 to 8% in 2018 — yet its client growth rate is decelerating, the analyst said.
The e-commerce site is expecting  advertising spend as a percentage of sales to settle at around 9%-11% in FY2020, according to DA Davidson.
Increased competition could threaten the company’s market share, Morris said.
“According to our industry sources,, Inc. AMZN 2.72% and Nordstrom, Inc. JWN 2.05% lust for the customer data gathered from a subscription service: sizes, style preferences, direct feedback, etc.”
The new fashion subscription service entrants Rent the Runway and Urban Outfitters, Inc.'s URBN 0.22% Nuuly are other competitors clawing for market share, according to DA Davidson.  oa here

Monday, January 6, 2020

By 2023, the secondhand clothes market will double to $51 billion. Here’s why

How Poshmark, Depop, and the RealReal are making your closet more eco-friendly

Resale platforms like the RealReal, ThredUp, and Depop have made shopping for used clothing easier than ever—and consumers are buying in. Fueled by millennials and Gen Z, the secondhand market is on track to more than double over the next five years, from $24 billion to $51 billion, according to ThredUp and retail analytics firm GlobalData. Traditional retailers are taking note: In 2019, Foot Locker invested $100 million in shoe reseller GOAT. Here’s a look at the numbers behind fashion’s latest trend.
Sources: The RealReal, Poshmark, GOAT Group, Depop (User Numbers, Depop demographics, What’s Selling); Company Valuations: Recode, April 2019 (StockX), market cap as of October 16, 2019 (the RealReal), the Wall Street Journal, April 2019 (Poshmark); ThredUp 2019 Resale Report (Who’s Shopping); A New Textiles Economy report, Ellen MacArthur Foundation (Environmental Impact); Euromonitor International (new clothing per capita)

A version of this article appeared in the Winter 2019/2020 issue of Fast Company magazine.



Wednesday, November 13, 2019

Inside the world of reselling clothes on Shopping apps

It’s never been more chic to wear someone else’s clothing—that is, clothes that once belonged to someone else. Kate Moss herself is a great advocate of vintage. “I love the idea that the clothes have a history and have been worn previously,” she said recently in a press interview for her new book. “Who knows what they have experienced?” While we can’t all be the poster child for the super glamorous supermodels, there’s no doubt that the secondhand fashion market is thriving. According to a study by ThredUp earlier this year, the total secondhand apparel market is set to double in the next five years—with resale and shopping apps driving a lot of that growth. In fact, resale has grown a whopping 21 times faster than retail over the past three years.

These are numbers to be happy about, especially when we are coming to terms with the impact that consumerism and fashion can have on the planet. 

Shopping apps like Depop, Carousell, and Poshmark have made names for themselves by offering users the opportunity to gain a little cash from clothes they probably just had lying around anyway. Closer to home, Toronto-grown trading app Bunz, extended this philosophy past just your closet to your entire household.
There’s money to be made off of your own closet, it seems—and with strangers you’ve never met on the internet.

The sustainability bonus is a significant benefit. 

Ethical blogger Nannan Wan has been a proponent for secondhand fashion for a while, noting that consumer trends are shifting quickly away from fast fashion to more sustainable options.

“Secondhand clothing has started a movement where it’s now cool to purchase luxury vintage at the thrift store,” she says. “These apps open the space for people to explore secondhand buying and selling, maybe for the first time.”
What makes these apps so attractive, aside from diverting has-been clothing from landfills, is knowing that you’re in it together with thousands of others with similar goals. These apps have gained traction not only for their ease of use, but also the platforms and communities that they have created.
Poshmark, for example, made its hotly-anticipated expansion to Canada just this year (after being founded 8 years ago in California. The app now boasts over 500,000 users in Canada alone.

“Our app allows people to create a revolving closet, giving a second, third, or even fourth life to clothing while also making room for new pieces,” says Maria Morales, Poshmark’s Director of International Expansion.
“But most importantly, Poshmark is a social platform above all else. We’ve seen the community grow so quickly because buyers and sellers have the ability to like, share, comment, and build connections with each other.”

Community is the core driving force of these apps and consequently, it’s become the core driving force of secondhand fashion in general.

These apps would be unfeasible if not for the thousands of users scrolling, posting, and engaging everyday. The apps offer a new digitized version of thrift shopping and conscious consumerism, and they do it in a way that is mimics social media.

London-born Depop gained traction due to its uncanny resemblance to Instagram, (founded a year earlier in 2010). Users have similar profile pages with likes and comments, and the home feed looks nearly identical.

Even Bunz originated from a secret Facebook group.

Since 2016, the company has grown to a user base of over 400,000 and averaging 5,000 posts a day—with clothing and accessories as its largest category, about three times as much posted daily as furniture or beauty.
For Toronto-based illustrator Wandy Cheng, Bunz is a welcoming place, where you can get rid of things for something useful to satisfy both parties’ needs.

“The app had just launched when I joined, so it was a whole new exciting space for everyone,” she says. Cheng has quite an extensive history with reselling clothes, from Kijiji and eBay to Salvation Army, but stuck with Bunz because of the people she found there.

“Compared to other sites, Bunz was the only space where I felt a strong sense of community, which was a surprising bonus when I had initially joined with the sole purpose to declutter.”

Since joining three years ago, Bunz and thrift-shop finds to make up the bulk of her closet—however, she continues: “I’ve also been making a conscious effort [not only] to buy less, but also to bring less clothes into my life. Although I am still excited to trade for cool items, I ponder on the article of clothing for a lot longer than I used to.”

Whether you’re just dipping your toe into the world of reselling or if you’ve been a secondhand apparel wearer for years, there’s no question that apps have become an integral part of the process.

Poshmark, Bunz, and Depop apps act like closet extensions, mini thrift-shops and social platforms all in one—all from your phone, meaning you don’t even have to leave your house. It’s like online shopping, except better for the planet. Only in this case, there’s no telling what—or who— you’ll find.  oa here


Tuesday, October 8, 2019

Teens Are Shopping Differently, Could Cause Trouble, For These Brands

Learning how teens spend has been a years-long effort for retailers because their likes and dislikes can decide the fate of a brand or a season. Cracking the code on today’s teens, dubbed digital natives, is no exception. 

Image result for teens spending 

As retailers gear up for the industry’s critical holiday sales season, the latest reading on teens may offer some cause for worry: Teens, part of Gen Z, have lowered their self-reported annual spending by 4% from a year earlier, to $2,400, the lowest level in eight years, investment bank Piper Jaffray reported in its Taking Stock With Teens fall survey, released Tuesday.
One culprit: About a third of the teens, up from a quarter a year earlier, said they believe the economy is getting worse, according to the survey, which polled 9,500 teens across 42 U.S. states, with an average age of 15.8 years. But that’s not the only reason. Female teens’ spending on handbags has hit a new low of $90 a year in the 38th edition of semi-annual survey, less than half of the record $197 reported in the spring 2006 survey. Cosmetics spending also declined more than 20%, to $106, from a year earlier.

Overall, the survey’s results echo other findings associated with today’s teens. For instance, they care about social and political issues including global warming, immigration and gun control. To do their part for the environment, nearly half of the teens said they are changing their habits, including using more metal straws, recycling more and using less plastic.

Here are other takeaways:

The preppy-style teen uniform is out: Mirroring fashion brands’ performance scorecards, the survey showed athletic labels dominate teens’ top fashion preferences. Lululemon hit a new survey high as the No. 7 preferred apparel brand and catapulted to No. 2 among upper-income female teens. Nike, whose stock recently jumped to a record high after it posted better-than-expected results, remained the No. 1 shoe and clothing label for teens.
Skate shoe Vans remained teens’ No. 2 favorite footwear brand, followed by Adidas and Converse. Plastic-clog maker Crocs saw the biggest jump, rising to the No. 7 shoe spot, from No. 13.
“The casualization of fashion continues,” said the 70-page study, adding that preppy brands including Ralph Lauren, Sperry and Vineyard Vines continue to lose share among teen apparel makers to athletic labels. The teen fast-fashion label Forever 21, which recently filed for bankruptcy protection, saw its favorite apparel brand share among teens decline 2 percentage points, to 3%, over the past year.

Accessible luxury handbags are losing favor: As handbag spending hit a new survey low, Michael Kors, Kate Spade and Coach saw their combined favorite-brand share among female teens decline to 49%, from 57% last year. Michael Kors, while still No. 1, saw its share slump to 27% this fall, from 36% in spring 2018.
European luxury brands including Louis Vuitton and Gucci, on the other hand, picked up mind share among teens, thanks partly to online resale platforms including The RealReal and StockX that give them “access to luxury for less,” according to the report.

Food takes the biggest chunk of teens’ wallet share: Food has continued to outpace clothing as the biggest spending category for teens, the study showed. For instance, restaurants represented 23% of spending among upper-income teens in the most recent survey, topping clothing at 21%.
Where teens are eating doesn’t bode well for full-service restaurants: The percentage favoring limited-service restaurants has jumped to 68%, from 44% ten years earlier.
Their favorite restaurant? Chic-fil-A, followed by Starbucks and McDonald’s in the top five for both upper-income and average-income households. Fast-casual and fast-food chains Chipotle, Dunkin’ and Taco Bell rounded out the top five for either of the income groups. Olive Garden was the only full-service chain to make the top five.

Amazon is cultivating a bigger teen following: 52% of teens voted Amazon as their favorite e-commerce site, up from 47% a year earlier. Nike, in second place, trailed far behind, with a 4% mind share.

Amazon’s major rival eBay, No. 5 with a 2% share, “continues to face mind share challenges with teens,” according to the study. Amazon’s major brick-and-mortar rivals Walmart and Target didn’t make the top ten. In another sign of Amazon’s growing popularity with teens, it’s become the No. 5 beauty-shopping destination for them, up from No. 17 a year earlier, according to the survey.
“Amazon remains well positioned to take share of overall retail sales, and having the support of the teen (demographic) is critical,” the study said.
Amazon isn’t just winning teens from the upper-income household bracket, either. With the Amazon Prime adoption rate among teens rising to 78%, from 74% a year earlier, the study found the growth was led by teens from the lowest household-income bracket ($21,000 to $41,000).

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Monday, September 30, 2019

Waddell & Reed Financial Inc. Invests $8.02 Million in RealReal Inc (NASDAQ:REAL)


Waddell & Reed Financial Inc. bought a new position in shares of RealReal Inc (NASDAQ:REAL) during the 2nd quarter, according to its most recent Form 13F filing with the SEC. The institutional investor bought 277,445 shares of the company’s stock, valued at approximately $8,018,000. Waddell & Reed Financial Inc. owned approximately 0.34% of RealReal as of its most recent filing with the SEC.
Several other institutional investors and hedge funds also recently added to or reduced their stakes in the company. FNY Investment Advisers LLC bought a new stake in shares of RealReal in the 2nd quarter valued at about $63,000. Pendal Group Ltd acquired a new stake in RealReal during the 2nd quarter worth approximately $146,000. Maven Securities LTD acquired a new stake in RealReal during the 2nd quarter worth approximately $289,000. Crestline Management LP acquired a new stake in RealReal during the 2nd quarter worth approximately $482,000. Finally, CIBC Private Wealth Group LLC acquired a new stake in shares of RealReal in the 2nd quarter valued at $575,000. 25.14% of the stock is currently owned by institutional investors.

RealReal stock traded up $0.66 during trading on Friday, reaching $19.35. The company had a trading volume of 2,103,900 shares, compared to its average volume of 1,467,223. RealReal Inc has a 12-month low of $12.58 and a 12-month high of $30.05. The business’s 50 day moving average price is $16.23.
RealReal (NASDAQ:REAL) last released its earnings results on Tuesday, August 13th. The company reported ($0.28) earnings per share (EPS) for the quarter, beating analysts’ consensus estimates of ($0.34) by $0.06. The company had revenue of $71.00 million during the quarter, compared to analysts’ expectations of $70.10 million. The business’s revenue for the quarter was up 51.1% compared to the same quarter last year. As a group, analysts anticipate that RealReal Inc will post -1.24 EPS for the current fiscal year.
REAL has been the topic of a number of recent analyst reports. Stifel Nicolaus reaffirmed a “buy” rating and issued a $30.00 target price on shares of RealReal in a research report on Wednesday, August 14th. Credit Suisse Group initiated coverage on shares of RealReal in a research note on Tuesday, July 23rd. They issued an “outperform” rating and a $30.00 price objective for the company. UBS Group initiated coverage on shares of RealReal in a research report on Tuesday, July 23rd. They set a “buy” rating and a $30.00 target price for the company. Bank of America cut their target price on shares of RealReal from $28.00 to $24.00 and set a “neutral” rating for the company in a research report on Monday, August 12th. Finally, Cowen began coverage on shares of RealReal in a research report on Tuesday, July 23rd. They issued an “outperform” rating and a $32.00 price objective for the company. Two analysts have rated the stock with a hold rating and six have given a buy rating to the company. The company currently has a consensus rating of “Buy” and a consensus target price of $28.14.

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Saturday, September 14, 2019

Why Competitor Poshmark May Be The RealReal And ThredUp’s Best Friend In Exploding Resale Market

Investment analyst Michael Binetti, Credit Suisse, is out with a bold prediction: “We believe the secondhand/resale market could grow much faster in the near-term than the +mid-teens growth that industry sources project.”
As current projections stand, the combined digitally-native resale and the traditional, largely brick-and-mortar thrift/donation secondhand fashion market will reach $51 billion by 2023, according to ThredUp, a major player in the resale fashion market and the primary source of the industry’s data.
By 2023, the resale segment is expected to account for 45% of the secondhand apparel market’s sales or $23 billion, growing from a mere 25% ($7 billion) of the total $28 billion in 2019.
The RealReal, the recently made public luxury resale company, the privately-held ThredUp, and social commerce peer-to-peer marketplace Poshmark are the current resale leaders.

On The Money Decluttering Tips

Dynamic growth in the online sales channel will be the main driver of growth, gaining twice as fast as thrift/donation or over 30% per year from 2019 to 2023. This will be thanks to consumers, most especially women, gaining awareness of the convenience of this new model as an alternative to giving bags of old clothes to Goodwill, Salvation Army or local thrift stores.
As mentioned, Credit Suisse’s Binette expects it to advance even faster, though he didn’t speculate just how much faster it will grow. However, he said, “We’ve networked extensively with management teams across the secondhand retail category and the most consistent comment we’ve heard is that the industry unanimously believes it is barely scratching the surface with the addressable market of consumers that would consider re-selling/consigning online.”

Supply, not demand is the industry’s challenge

Increasingly, women are willing to give secondhand shopping a try, with ThredUp reporting the number of women who’ve purchased secondhand has grown from 44 million in 2017 to 56 million in 2018, roughly half of all adult women.
However, the linchpin for resale’s future is getting inside people’s closets and convincing them to turn over enough good-old stuff that online buyers will want.
After all, they have been filling their closets with off-price (Marshalls, TJ Maxx), fast fashion (Zara, H&M), value chain (Walmart, Target) clothing at an aggressive pace, but this isn’t the stuff that a vibrant resale market is made on. The ThredUp study, supplemented with data from Credit Suisse, estimates that about 35% of consumers’ closets in 2018 are accounted for by clothing from these three sources and their share has grown from 28% since 2008.
Instead, the stuff consumers are most likely to want to buy in resale is department store (14% share of closet in 2018) and other specialty retail (13%) brands, which they also may want to hold onto longer. Mid-priced fashion (Gap, J.Crew) that comprises 20% share of closet today may go for ThredUp or Poshmark, but not The RealReal.
It isn’t consumer demand that could hold the fashion resalers back. It’s getting their hands on enough stuff that their customers will want. As a result, each player’s consignment strategies are critical to their future success.

Getting real is The RealReal’s key consignment strategy

The RealReal identifies unlocking the ~$200 billion of luxury goods available in the U.S. for the resale market as its greatest market opportunity, as well its most critical challenge.
“The biggest obstacle to growth for REAL is acquiring the right level and types of supply,” writes Cowen’s Oliver Chen, in a report on a recent meeting with The RealReal’s CEO Julia Wainwright and CFO Matt Gustke.
“Management highlights it is more difficult to get someone to consign for the first time,” he explains, but adds that after their first consignment, The RealReal customers typically return two-to-three times a year.
With Gucci, Louis Vuitton, Chanel, Prada and Hermès its leading brands, The RealReal has found making face-to-face connections with wary luxury consumers critical to getting prime merchandise. So, it operates three stores, two in NYC and one on Melrose Avenue, Los Angeles, where well-heeled shoppers can come in and meet with authentication experts. Such personal connection raises their comfort level.
The RealReal also operates 11 locations nationwide for jewelry, watch and handbag valuations, plus the convenience of free “white glove” in-home consultation and pickup in 20 markets.
In a previous discussion with CEO Julie Wainwright, she shared that not only do the stores pave the way for better consignments, they also result in an order size twice as large as is typical online. “It is a marketing tactic and sales tactic and product acquisition tactic,” Wainwright said. “We find we get lots of high-quality consignments when we do pop-ups,” like one recently in Las Vegas.
The RealReal is approaching half a million buyers and if turning new RealReal buyers into consignors is its primary way to source new supply, it has a long runway.
According to the BCG-Altagamma True-Luxury survey among consumers who met a threshold of luxury spending (~$5,500 in past year), only half of the U.S. luxury consumers surveyed have participated in the secondhand market. Among the other half, 21% have sold and bought, 18% have purchased only and 11% have only sold.
The RealReal is still in the early days in tapping its potential market. “Resale drives a perpetual consumption cycle that fuels recurring consignments and purchases as it provides liquidity to consignors to purchase new and secondhand items – this should support solid GMV (gross merchandise value) growth over the long-term,” Chen writes.

ThredUp has it in the bag

ThredUp’s consignment strategy is literally in-the-bag with its “Clean Out Your Closet” service where a potential consigner requests a postage-paid Clean Out Kit to bag up unwanted items. These item can either be sold for cash or credit to use at Reformation or Polarn O. Pyret for childrenswear or donated to charity along with a $5 cash gift.

The company notes, however, that it is picky about what consignments it accepts: only items in pristine condition with no damage or alterations, including missing sizing information. Given those criteria, ThredUp reports it only retains about 40% of the items shipped for resale. The rejects can be returned to the sender for a small fee or donated to charity.
Right now, through October 20, ThredUp is hot on the trail for fall fashion, offering a 20% extra payout for seasonally-appropriate sweaters, coats, boots, overalls, jumpsuits and designer handbags. In-demand brands it is on the hunt for include Madewell, Patagonia, Lululemon, Everlane, Sorel, Eloquii and Torrid.
ThredUp is also crossing over into physical retail in new partnerships just announced with Macy’s and J.C. Penney. ThredUp departments will shortly open in 40 Macy’s and 30 J.C. Penney locations.
These locations will give consumers an extra dose of confidence and credibility to ThredUp when they first meet the brand there. No word that consignments will be accepted there, but one can imagine each department will have a stack of clean-out bags readily at hand.

Poshmark takes a do-It-yourself approach

Poshmark claims to be the No. 1 fashion buying and selling platform, with some 50 million sellers. A recent survey by Raymond James supports that claim, with 67% of women surveyed recognizing the Poshmark name, as compared with 44% who know ThredUp and 12% The RealReal.
But unlike ThredUp and The RealReal, Poshmark operates under a different business model. It doesn’t take possession of the clothing for sale. It works as a peer-to-peer marketplace where sellers list items and Poshmark takes a piece of the action once a sale is completed.
With its stripped-down business model, it gives sellers the tools to make sales, but also requires them to do the heavy lifting to photograph, describe, and price each item. Poshmark provides a prepaid shipping label when an item is bought, but the seller has to package it and take it to the post office to ship.
It also supports sellers with what it describes as virtual shopping parties where people gather on the app to enjoy selling events around a theme or brand. Success in fashion has given Poshmark confidence to branch out into home decor and housewares.

Awareness builds customers and consignors

To attract people to the circular fashion resale economy, both Credit Suisse’s Binetti and Cowen’s Chen identify building awareness of the potential of resale platforms like The RealReal, ThredUp and Poshmark is critical.
To create awareness, all three companies have taken to television to get the word out. In that Poshmark is the leader, running 14,872 spots in the last 30 days and ranking No. 311 in terms of overall advertising spending, according to ISpot.TV. ThredUp (2,674 airings and No. 839 in sending) and The RealReal (2,533 airings and No. 1,020 in spending) lag far behind.
And from that awareness, consignments grow. Signs are that American consumers are already lightening their load, as the ThredUp study reports consumers have reduced the number of items in their closets from 164 in 2017 to 136 in 2019. But that also means, they may have fewer choice items to pass along into the resale channel.
Ultimately Poshmark’s heavy-lifting in the awareness department may be a blessing for both ThredUp and The RealReal. After a few times a person does all the work on the back end to make a sale –or not make a sale if the price isn’t right or the description fails – my guess is that people looking to get in on the resale action may quickly turn to the frictionless and more convenient alternative that ThredUp and The RealReal offer.
Poshmark may open the door for customers to try online resale, but I bet that ThredUp and The RealReal will be the ones that will keep them around for the long haul and get the best pickings from their closets.

oa here


Tuesday, June 6, 2017

The RealReal Is Officially Consignment Queen

$173 Million later, the new funding comes just in time for the retailer to open its first store.


While it’s fair to say e-commerce has totally changed shopping — putting mall brands out of business and spawning a new category of fast fashion retailers on steroids — the luxury market has had a harder time breaking out online. High-end brands are notoriously uneasy about e-commerce for fear of eroding exclusivity, and sites like Amazon, Alibaba, and eBay, riddled with counterfeit goods, have not proven to be great business partners.
You can get your Louis Vuitton and Hermès another way though: The secondhand market has found a way to make luxury and online shopping work, and San Francisco-based site The Real Real is leading the sector. This morning, it confirmed it’s just closed on $50 million in funding from private equity firm Great Hill Partners. The startup’s largest amount of funding to date brings the total amount it’s raised to $173 million. The upcoming wad of cash will go toward expanding the business, which consists of more than 800 employees and three giant fulfillment centers, and a company spokesperson confirms The Real Real will eventually file for IPO, though there are no current plans in the works.

The RealReal is one of many secondhand luxury shopping companies that have leveraged the ease of the internet and enticed shoppers to buy and sell luxury online (although not all have survived). But while sites like Tradesy, ThredUp, and Vestiaire Collective have cashed in on this previously untouched sweet spot, The Real Real remains the fastest-growing of the bunch; even the Kardashians and Saudi princesses use it. The site boasts five million users, has sold four million items to date, and is expected to surpass $500 million in revenue this year.
To Julie Wainwright, the company’s founder and CEO, the site’s success really boils down to trust — a major factor in both online and luxury shopping. Wainwright started The Real Real in 2011 during a time when the options for selling luxury were feeble.
“There was nothing out there that provided the level of service and trust that needed to be added to the equation,” Wainwright told Racked in an interview a few months ago. “eBay can say 90 percent of its products are legitimate, but then what about the other 10 percent? There were consignment stores, but the space was always limited, and most of them weren’t big enough to be sophisticated. I wanted to construct a business that gives you the best of the internet, and then fills in where the internet leaves holes on trust, authentication and service. We take off of the top of eBay and the bottom off Sotheby's.”

Part of the appeal of the startup is that it employs luxury buyers, art curators, gemologists, and watchmakers to authenticate product — not quite as high-end as shopping at Christie’s, but not quite a pawn shop either. The Real Real has employees who visit homes to evaluate product in every major city in the US, and perhaps most importantly, the site takes ownership of listed items, so shoppers can feel secure when splurging — and oh, are they splurging.
Listings have hit as high as six figures (while Wainwright wouldn’t confirm the average listing price, she has said that “Net-a-Porter[‘s] average basket is $430, and ours is bigger.”). These days, The Real Real is selling everything from clothing to art to furniture to diamonds, Wainwright told Racked that 25 percent of its customer base is men, which probably is a nod to the site’s robust list of watches and sneakers.
The icing on the cake here is that The Real Real sees itself as a player that’s bolstering the luxury sector, not preying off of it. In 2017, it is expected to pay almost $300 million to those who are selling on the site, and the company says this money will then be spent “back in the primary market, continuing the luxury lifecycle.” The company is also collecting data on luxury brands, and is currently in conversations about potential partnerships with brands like Louis Vuitton, according to TechCrunch. Wainwright told Racked a third of its customers are millennials, and The Real Real studies which brands are popular by age demographic.

“I’ve met with all the top brands and I tell them that I’m the gateway drug for their brands, and some are in trouble,” she told TechCrunch last month. “Dolce is in trouble. We pick it up from people over 40 [years of age] and sell it to people over 50. There’s a whole disconnect with its advertising and they know it. They aren’t reaching millennials at all. We can also predict trends... if you have Valentino Rockstuds, hand ’em over, because the party is over.”
As part of its ongoing growth strategy, The Real Real is getting into brick and mortar. Wainwright tells Racked she can envision opening a giant store of sorts in five years that’s dedicated to secondhand merch — “a superstore in a major metropolitan area that has one floor dedicated to women's fashion, one to men’s, one to home, and one for art.”
For now, The Real Real is executing its plans for store expansion on a more practical level: This winter, it will open a shop in New York City’s Soho neighborhood that will double as a valuation space and a store. Wainwright has said that the new store will have 100 Birkins on the wall and well, nothing can really top that. 


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