Last week, The RealReal announced major layoffs and store closures in order to shore up profitability. Plus, Kering announced a new head of brand safety role, and Etsy was accused of being a haven for counterfeiters. Don’t forget to subscribe to the Glossy Podcast for interviews with fashion industry leaders and Week in Review episodes, plus the Glossy Beauty Podcast for interviews from the beauty industry. –Danny Parisi, sr. fashion reporter
The RealReal’s ongoing journey toward profit
In July 2022, luxury consignment company The RealReal announced it would be shifting its priorities to make profitability its immediate goal. Last week, the company revealed more the details of its plans to achieve that status: cost-cutting. The RealReal is laying off 230 employees; closing four stores, including two flagships, as well as two consignment drop-off spaces; and eliminating an undisclosed amount of office space.
On the Glossy Week in Review podcast on July 29 last year, Jill Manoff and I discussed the end of the era when brands could go years without ever turning a profit. Interest rates have changed, along with the economy, and investors are much more ruthless about wanting to see actual returns on their investments sooner rather than later.
That means companies like The RealReal, which hoped to grow large first and profitable later, are suddenly finding themselves needing to rapidly adjust their balance sheets. It’s much easier to lower costs than to boost revenue on command, leading to some of the many layoff rounds we’ve seen across the fashion industry and other sectors.
But resale is a particularly logistically complex business and reducing the headcount may make it even more difficult for companies to be successful.
Kering hires a brand safety chief
Last week, we got to see the direct impact that last year’s Balenciaga controversy had on the brand’s sales. As Balenciaga nurses its wounds and Gucci shifts creative directors, French conglomerate Kering is understandably anxious about upholding its image.
We learned last week that Kering is creating a new executive role, yet to be filled, that will be in charge of brand safety. The new hire will review all ad campaigns across the company’s portfolio, which includes Bottega Veneta and Saint Laurent, to make sure they don’t cause any more PR disasters.
Etsy accused of being a haven for counterfeiters
On Thursday, research firm Citron Research publicly accused Etsy of being one of the world’s largest platforms for counterfeit goods. The accusation sent the company’s stock price plummeting almost 9%.
The meat of the accusation centers on the ability for sellers to buy brand names as ad words. Citron cited the example that a search for “Disney” on Etsy brings up dozens of obviously non-Disney-affiliated merchandise listings. The same goes for other terms like Nike.
While Citron’s report implies that Etsy is breaking the law by allowing this, it’s actually a legal gray area that hasn’t quite been cleared up yet. Etsy is a platform and, for now, is protected by safe harbor laws stating that it’s the sellers who are liable for counterfeit claims, not Etsy. But a recent lawsuit between Christian Louboutin and Amazon last month may change that, as the E.U.’s highest court ruled that platforms should be held liable.
For now, the result of the E.U. decision merely reads as a suggestion by the high court to the Luxembourgian court where the suit was filed. But if it becomes widespread legal precedent, platforms like Amazon and Etsy could indeed be in much more trouble.
Etsy’s statement on the matter is that it has expanded its internal team dedicated to removing counterfeits and that counterfeit goods remain prohibited by the platform’s terms of service.