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Departure of the CEO of RealReal and the future of recommerce

Posted on June 8, 2022June 8, 2022 by Amy A. Stuart
08
Jun

As the “largest online marketplace for authenticated and resold luxury goods”, The RealReal (TRR) has spent a decade striving to become profitable as a niche business, catering to a clientele of niche, in a niche retail category.

Through it all, TRR Founder, President and CEO, Julie Wainwright, has stood as an unwavering voice for the business and the broader cause of reCommerce, championing both the viability of the business as well as the much-needed durability it offered by giving clothes and accessories a second life.

That is, until Tuesday afternoon (June 7), when the 64-year-old San Francisco-based executive suddenly announcement she resigned, indeed immediately.

“I am deeply proud of the company we have built and I am honored to have worked with a team that champions our founding vision of creating a more sustainable future for fashion,” Wainwright said in the official press release. company. “RealReal continues to progress down the road to profitability, and I believe the time is right for the next generation of leaders to guide the company through its next chapter.”

As the company embarks on a nationwide search for this permanent next-generation leader, TRR has been temporarily handed over to COO Rati Levesque and CFO Robert Julian, who will serve together as co-CEOs, with Wainwright remaining as a paid advisor. until the end of the year.

Now what?

As unexpected as Wainwright’s departure was, the fact remains that it came less than a month after the TRR reported first quarter results which, while ahead of average analyst estimates , saw the company post a loss of $57 million for the period, marking its 11th consecutive unprofitable year. quarter since its stock market debut in 2019.

Although Wainwright was optimistic about the future of reCommerce and spoke at length about the “extremely resilient” high-end consumers it serves as well as how the inflation-driven belt tightening was driving demand for bargains and second-hand goods, the results were poorly received on Wall Street and TRR stocks were then reduced to historic lows.

In the past month alone, shares of The RealReal have fallen 40%, extending a 15-month slump that wiped out 90% of the company’s valuation, leaving its shares at $3 and its market capitalization at just $280 million. of dollars.

“Looking ahead, we continue to see strong demand in our business as inflation has accelerated and prices have risen in the primary luxury market,” Wainwright told analysts on the conference call. May 10. “We believe the RealReal has a demonstrated value option offering unique and highly coveted items in the luxury goods space. Therefore, we believe we are positioned for a strong 2022,” she added , without giving any indication of what would happen four weeks later.

Resale is on sale

Certainly, the TRR is not alone in its current struggles, as its recommerce peers such as Poshmark and thredUP are also down 75% and 85% respectively in the last 12 months, compared to a 32% decline in the S&P. Retail ETF and a 5% gain for the S&P 500.

By comparison, thredUP CEO James Reinhart told investors last month that while the used clothing subscription service posted its fifth straight quarterly loss, it also saw a record number of shoppers. assets, up 33%, as well as record orders, up. 45% for a year.

“Even as we face increased inputs, labor costs and logistics cost overruns, our first quarter results reflect that our business model continues to benefit from the competitive advantages we have developed in our supply chain. procurement and our culture of continuous improvement,” Reinhart told analysts. during the May 9 conference call.

At the same time, thredUP is also ramping up its “resale-as-a-service” business for apparel manufacturers, most of whom are keen to restore their brands and reputations for sustainability, especially among younger, more socially conscious consumers. .

While Reinhart said the current period of inflation could be “clearly seen as making things harder” for consumers and the impact it was having on discretionary spending, thredUP chief financial officer Sean Sobers said also pointed out that these same rising costs – especially related to shipping and labor – were eating away at the brand’s earnings from reCommerce.

“It remains unclear how rising inflation, declining consumer sentiment year over year, shrinking GDP, recession fears and global geopolitical tensions will impact our consumers at short to medium term,” Sobers said, adding that thredUP was not immune to the impact of rising input costs.

Like so many other players in the broad retail category, reCommerce players – like most of their customers – are eagerly awaiting economic relief while trying to skimp and hold on until he does.

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NEW PYMNTS DATA: THE CUSTOM PURCHASING EXPERIENCE STUDY – MAY 2022

About: PYMNTS’ survey of 2,094 consumers for The Tailored Shopping Experience report, a collaboration with Elastic Path, shows where merchants are succeeding and where they need to up their game to deliver a personalized shopping experience.

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Amy A. Stuart

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