RealReal Plans More Stores to Boost Fashion Resale Economy

(Bloomberg) -- Second-hand fashion retailer RealReal Inc. plans to open stores -- often across the street from the same luxury labels it consigns -- to bring people into the resale economy.

Executives are looking to open a few shops each year in large U.S. cities to help harvest goods from people's closets and attract new buyers and sellers. This week, it will open its first store in San Francisco since going public last June, and plans to unveil another in Chicago this summer.

“The flexibility of being able to walk in is something that reduces the friction of consignment,” Mike Groffenberger, head of retail for the company, said in an interview. “In these markets, we see a big bump.”

Used clothing stores normally evoke images of local thrift shops. The RealReal's stores look more like a boutique merged with a bank. Customers can bring in their Chanel bags to be inspected at the luxury consignment station, then peruse a selection of Cartier jewelry to buy in the shopping area.

Each store the RealReal has opened thus far has been on a high-end shopping strip with lots of foot traffic. Chief Executive Officer Julie Wainwright said in February that the three existing stores -- two in New York and one in West Hollywood -- generate about $150 million in value, with more than half of that coming in the form of luxury goods to resell.

On Wednesday, the RealReal will open its 8,000-square-foot San Francisco store in Union Square a few steps away from Salvatore Ferragamo and Fendi shops. In the spring, construction will begin on a 12,000-square-foot space on Chicago's Magnificent Mile, where it plans to open this summer across the street from Louis Vuitton and Gucci.

The San Francisco shop will test ways to “extend the life cycle of luxury,” said Groffenberger, by offering repairs for handbags, shoes, jewelry and watches. Tailors will be on site to handle alterations. The location will also have RealReal's first snack bar, the CafeCafe.

Both new stores will be close to Chanel boutiques. The French fashion house sued the RealReal in New York federal court in 2018 for trademark infringement, accusing the reseller of hawking counterfeit goods and implying to shoppers that it's affiliated with Chanel. The litigation is ongoing.

Secondhand clothing, shoes and accessories are rapidly growing industries, representing a $10 billion market in the U.S., according to market research firm IBISWorld. Even so, investors appear skeptical about RealReal's prospects -- the company's shares have lost more than 30% since the company went public last year.

The RealReal is currently searching for future locations, though executives would not say where. Groffenberger said the process begins with “luxury managers” -- workers who go to consignors' homes to advise them on optimizing sales. These employees are now in 40 U.S. cities.

There are no immediate plans to open permanent stores in shopping malls, though RealReal did test one in Las Vegas in 2018. It may be harder to open in malls, where foot traffic is falling and neighboring luxury tenants may not want a reseller beside them. Leadership won't rule it out, though.

“Never say never,” said Groffenberger. “Logistically, it has its challenges.”

To contact the reporter on this story: Kim Bhasin in New York at kbhasin4@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Anne Cronin

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