In The RealReal’s quarterly earnings last week, the company touted an impressive figure: gross merchandise value had reached a record $617 million in the quarter, up 22% from the quarter before.
“We’re upleveling the customer experience, deepening trust and compounding our advantages,” company CEO Rati Levesque said on the call. “Our buyers are spending more, our sellers are more engaged, and the platform connecting them gets smarter every quarter.”
That marks four consecutive quarters of GMV growth of over 20% for The RealReal. The RealReal is one of many resale and marketplace-based companies that tout an impressive GMV, a figure that represents the total value of all products sold on the platform. Fashionphile, a competitor, has GMV of over $500 million, while Depop’s GMV is over $1 billion as of February. But does GMV tell the whole story?
Glossy spoke with several experts in the resale and marketplace industry about why GMV is such an important stat, and how it can mask other details about a company’s performance. On the one hand, any successful marketplace does need transaction volume to succeed. But what’s more important is how revenue is derived from GMV. There’s a limit to how much commission a marketplace can charge, as going too high will likely send sellers and buyers to other platforms. Instead, marketplaces and resale platforms are starting to look for alternative methods to bring in money beyond their GMV-derived commission through tactics like selling ads that run within their marketplace or charging sellers for additional features, like shipping and operational support or access to additional buyer data.
Pano Anthos, founder and managing partner of XRC Ventures, which invests in several marketplaces, including the resale platform Croissant, told Glossy that high GMV is not a clear indicator of a company’s success. The RealReal did report revenue growth, as well, which was at a respectable 17%. And high and growing GMV can reflect a company’s size and scale. For example, Vinted, the rapidly growing Lithuanian resale platform, has achieved GMV of over $9 billion as it expands globally. But it doesn’t tell you if a company’s underlying finances are healthy.
“It’s net revenue that matters,” Anthos said. “GMV is often more impressive sounding. It’s 10 times larger than revenue if you only take a 10% cut. GMV hides the net revenue and, sometimes, if your revenue isn’t good, you hype up your GMV instead.”
Neil Shah, co-founder of the livestream shopping app Tilt, told Glossy that the key to turning GMV into revenue is figuring out which side of the business you want to monetize without driving away sellers or buyers.
“Do you charge the seller or the buyer?” Shah said. “Many platforms charge the seller more. We went down the route of charging the buyer a bit more and keeping it very low-cost for the seller. When you’re growing, being seller-friendly is helpful because, without supply, there’s nothing. No transactions can happen. We want to grow by charging our sellers the lowest fees.”
Despite that, 70% of Tilt buyers return week-on-week, per the company. But, Shah said, like many marketplace operators, he doesn’t want his company to be overly reliant on GMV. Instead, he’s hoping that in the coming years, Tilt can get to a place where it derives more revenue from other sources, like charging sellers for additional services and operational assistance.
Other ways to monetize a marketplace that are separate from GMV include serving ads on the platform. Retail media has become a major revenue source for marketplaces like Amazon, which makes nearly $70 billion a year from it. According to Anthos, retail media has incredibly attractive profit margins, upward of 90%. In 2023, The RealReal’s interim CEO John Koryl introduced the first ad sales on TRR’s market, but the channel hasn’t turned into a major revenue source for the company. Retail media went unmentioned on the company’s recent earnings call.
But many of these alternative revenue sources for marketplaces risk alienating either buyers or sellers. Shah said that overloading on ads may bring in money, but it could make the experience feel “spammy” for buyers. Nearly every major resale marketplace, from Vinted to eBay to Depop to Etsy, features paid options and promoted listings.
Meanwhile, Anthos said charging sellers for extra services will only work if sellers desperately want to be on the platform.
“You can charge sellers for access to customer data, stocking fees, shipping support,” Anthos said. “Sellers are always getting hit up for more things like that. There are a ton of ways to generate revenue. The question is, who will pay for it, and who has the negotiating power? If the marketplace has an audience of buyers that sellers really want access to, they will put up with more charges. If a marketplace has a really coveted product, then buyers will put up with more fees to get it.”
Anthos called out that there’s also a newer source of revenue for marketplaces that has been lucrative so far: selling training data to AI companies for their LLMs. These deals are generally not publicized, and their legality is murky, especially in regions with strict data privacy laws like the E.U. But Anthos said he knows many marketplaces are quietly selling this data for quick cash.
“You can get an easy half a million dollars selling anonymized data to an AI company because they’re so desperate for training data,” Anthos said. “There’s a lot of monetization opportunity there, but I don’t know how long it will last.”
