A luxury resale marketplace, The RealReal has decided to wind down its beauty business as it shifts focus towards its core luxury consignment operations. Amid economic uncertainty and increasing competition in the secondhand market, the company is reallocating resources from its direct business, including beauty, to prioritize growth in its luxury consignment segment.
As part of this strategic move, The RealReal plans to cut operating costs through layoffs and store closures. According to a filing with the Securities and Exchange Commission, the company will eliminate 230 positions, or 7% of its workforce. Additionally, it will shutter two flagship stores in San Francisco and Chicago, two neighborhood stores in Atlanta and Austin, Texas, and two consignment offices in Miami and Washington, D.C.
This decision comes under the leadership of CEO John Koryl, who joined the company on February 6, 2023. Koryl's mission is to streamline the company's operations to improve overall client experience, achieve cost savings, and lead the company to profitability. These cuts may be the first steps in achieving that goal.
Despite strong sales growth over the past several years, The RealReal has struggled to achieve profitability. Revenue for Q3 2022 was $142.7 million, compared to $118.9 million in Q3 2021, and the net loss for the quarter was $47.3 million, down from $57.2 million in Q3 2021.
The RealReal operates in the $32 billion secondhand luxury market, which grew five times faster than the primary market from 2017 to 2021. However, the company faces stiff competition from other players like Poshmark, Vestiaire Collective, Tradesy, Rebag, Lampoo, Vinted, thredUP, and Fashionphile. As mainstream retailers launch or upgrade their own resale offerings to bolster their sustainability credentials, The RealReal must adapt and innovate to stay ahead in this increasingly competitive space.
By winding down its beauty business and focusing on its core luxury consignment operations, The RealReal aims to strengthen its position in the market and work towards achieving profitability.
