What Does RealReal CEO’s Departure Say About the Future of reCommerce?

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As the self-titled “largest online marketplace for authenticated, resale luxury goods,” The RealReal (TRR) has spent a decade striving to become profitable as a niche company, catering to a niche clientele, within a niche retail category.

Through it all, TRR’s founder, chairperson and CEO, Julie Wainwright, has stood as an unwavering voice for the company and the broader reCommerce cause, defending both the viability of the business as well as the much-needed sustainability that it offered by giving clothing and accessories a second life. 

That is, until Tuesday afternoon (June 7), when the San Francisco-based executive suddenly announced she was stepping down, effectively immediately.

“I am deeply proud of the company we have built and 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 company’s official statement. “The RealReal continues to make progress on its path to profitability, and I feel now is the right time for the next generation of leadership to guide the company through its next chapter.” 

As the company embarks on a nationwide search for that permanent next-gen leader, TRR has temporarily been put into the hands of COO Rati Levesque and CFO Robert Julian who will serve together as co-CEOs, with Wainwright staying on as a paid advisor till 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 TRR reported Q1 results that, while ahead of the average analyst estimates, saw the company deliver a $57 million dollar loss for the period, marking its 11th consecutive unprofitable quarter since its 2019 IPO debut. Revenue for FY 2021 was up 56%, but losses still widened to $236 million.

Although Wainwright was optimistic about the future of reCommerce and spoke at length about the “tremendously resilient” high-end consumers it serves as well as how inflation-driven belt-tightening was boosting demand for bargains and secondhand goods, the results were poorly received on Wall Street and TRR’s stock was subsequently pummeled to an all-time low. 

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

“Looking forward, we continue to see strong demand in our business as inflation has ramped up and prices have increased in the primary luxury market,” Wainwright told analysts on the May 10 conference call. “We believe the RealReal has a demonstrated value option offering unique and highly coveted items within the luxury goods space. Therefore, we believe we are positioned for a strong 2022,” she added, offering no hint of what was to occur four weeks later. 

Resale is on Sale

To be sure, TRR is not alone in its current struggles, as its reCommerce peers such as Poshmark and thredUP are also down 75% and 85% respectively over the past 12-months, compared to a 32% drop 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 secondhand clothing subscription service had posted its fifth consecutive quarterly loss, it also saw a record number of active buyers, which rose 33%, as well as record orders, which were up 45% from a year ago.

“Even as we face rising inputs, labor costs and logistics surcharges, our first quarter results reflect that our business model continues to benefit from the competitive advantages that we've developed in our supply chain and our culture of continuous improvement,” Reinhart told analysts on 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 which are eager to burnish their brands and sustainability reputation, especially among younger, more socially minded consumers.

While Reinhart said the present period of inflation could be “clearly seen to be making it harder” on consumers and the impact it was having on discretionary spending, thredUP CFO Sean Sobers also pointed out that those same rising costs — particularly related to shipping and labor — were eating into the reCommerce brand’s gains.

“It remains unclear how rising inflation, year-over-year declines in consumer sentiment, shrinking GDP, recession fears and global geopolitical tensions will impact our consumer in the near and medium term,” Sobers said, adding that thredUP was not immune from the impact of rising input costs. 

Like so many other players in the vast retail category, the reCommerce players — just like most of their customers — are anxiously awaiting some economic relief while attempting to scrimp and hang on until it does.