Brick-and-mortar has been big for The RealReal, according to the resale platform’s earnings report for the second quarter ending on June 30.
In addition to reporting a record amount of merchandise moving through the platform, with gross merchandise value up 91% compared to the same period last year, and a total revenue increase of 83%, The RealReal also shed light on how its stores have been performing. The company’s 10 physical stores have been one of the main drivers of discovery, with more than 30% of new consignors in the quarter being introduced to The RealReal through a physical location. The company opened three new stores in Austin, Dallas and Atlanta last quarter and plans to open two more this year.
But notably, CEO Julie Wainwright said The RealReal will be pausing retail rollouts after the opening of the next two stores.
“Our retail stores continue to perform very well, particularly in driving new consignor acquisition and supply,” Wainwright said. “Following the expansion of our neighborhood store footprint, we plan to pause our retail rollout to optimize performance and gather data to inform our future rollout strategy.”
Matt Gustke, The RealReal CFO who will depart the company at the end of the year, said that physical stores have been far more effective at customer acquisition than digital marketing has been, describing them as a “surgical tool” the company didn’t have its earlier days.
But those stores come with high price tags for maintenance and costs. Gustke said he hopes that the pause will help bring expenses down to a more reasonable level. But Gustke also said, despite the success, it’s always been the company’s plan to enter physical retail slowly.
“We’re doing exactly what we said we’d do, which was to get to around 10 stores and then give them some time to mature,” Gustke said. “We’re going to optimize them [and] let them develop, and then we’ll come back and reassess what we do going forward. It will take some time to gather data, but the early signs for our stores are all quite good.”
Rather than opening new stores, Wainwright said the next focus will be on letting the existing stores mature as well as expanding its two oldest stores in New York’s SoHo neighborhood and Los Angeles. The bottom floor of the New York store, for example, is being remodeled later this year, and Wainwright said there will be more additions to non-flagship stores as well.
The relationship between resale and physical retail has been evolving in the last year as more resale platforms mature and see the benefit of expanding into physical locations. In addition to brands like Madewell and American Eagle adding resale into their physical stores, The RealReal competitors like Fashionphile have also begun selling pre-owned goods in physical locations. Those stores are particularly helpful for customer acquisition.
“When you open a physical store, you get the halo effect on online sales around it,” said Sarah Davis, founder of Fashionphile, which started selling in Neighborhood Goods in July. “We’ve seen that with our locations, and that’s true for a lot of resale. Having those stores are also good for returns, consigning, customer acquisition and all those other things that are helpful beyond just the sales.”