The RealReal is making deep cuts as the resale platform struggles to turn a profit.
The company is planning to let go roughly 7% of its workforce, equating to about 230 employees — a move that would cost the company $1.7 million to $2.2 million in severance payments, employee benefits, and related expenses.
In addition, The RealReal will close its two flagship stores in San Francisco and Chicago, its stores in Atlanta and Austin, Texas, and two consignment offices in Miami and Washington, D.C. The company is also looking to reduce its office space in San Francisco and New York City, according to a filing with the Securities and Exchange Commission.
The decision comes as the company is facing bleak growth prospects in 2023. The RealReal has registered a year-to-date loss of $151.2 million, which marks just a slight improvement over last year, according to Neil Saunders, managing director at GlobalData.
“Although resale remains one of the stars of the apparel market with exceptionally high growth, the current environment is more challenging as consumers are a little more conservative about making purchases,” Saunders told Retail Dive.
"The competitive environment is also tougher with a raft of new resale players, including brands selling directly to consumers. Throw in the higher costs of doing business into the mix and there is a significant threat to The RealReal's quest to move into the black."
The news also follows a year of bad press for the San Francisco-based company. It has received backlash over its toxic culture, questionable authentication process, and move to automate many of its operations, including copywriting, photo retouching, and pricing.
In a recent article titled “The RealReal Is a Total Mess” by Emilia Petrarca for The Cut, Petrarca detailed her experience selling on the platform when it first emerged in 2011 to shopping on the platform today.
“The RealReal was a perfect platform, for a certain type of consumer, for a very long time,” said Petrarca.
"Drops happened twice daily, at 10 a.m. and 7 p.m., and I was loath to miss either because competition was so fierce."
But since the company filed its IPO in 2019, the user experience has steadily declined, with many customers complaining about the quality of products, the prevalence of fakes, and feeling lowballed when trying to sell unwanted goods for cash to The RealReal.
Meanwhile, many employees feel overworked and underpaid “in the face of constant pressure to bring in more merchandise in a shorter time frame — the only way they can earn commissions.”
This shift in focus from customer experience to quantity is a pure play to appease investors, Petrarca noted.
With rising competition from retailers looking to gain more traction with consumers and growth in popularity of other resale platforms like ThredUp or Rebag, The RealReal will need to continue to evaluate its focus and efforts. Food for thought: It may be time to return focus to its customer and the experience they all knew and once loved.
