Pent-up demand is helping The RealReal grow
Although many shops had to pivot to online sales during the pandemic, one online company is riding the wave of pent-up demand and investing in more brick-and-mortar stores as its business returns to normal faster than it expected.
“Our business started picking up again in December, and it’s just increased,” said Julie Wainwright, founder and CEO of The RealReal. “So I’m feeling very optimistic.”
The RealReal is a consignment website where people list their unwanted luxury goods — most items are used, but others still have tags on them — so that others can purchase them.
The company is investing in brick-and-mortar stores, opening in small neighborhood locations like Brooklyn, Dallas and Palo Alto, California. Buyers and consigners can stop by to shop and drop off their items for sale.
“Marketplace” host Kai Ryssdal spoke with Wainwright about how pent-up demand during the pandemic has helped her business grow. The following is an edited transcript of their conversation.
Kai Ryssdal: Why do you think — other than the general economy improving, right — I mean, you guys did not do so badly during the pandemic. And I wonder why you think that is?
Julie Wainwright: Actually, we did have a hard time. Let me just give you some stats.
Ryssdal: Did you? All right.
Wainwright: Oh, yeah, it was pretty hard for us. So prior to the pandemic close downs, we were up about 40% versus a year ago. So we ended up in April, for example, being down 45%. So we have an 85% swing on our business overnight, and we had to furlough or layoff over 1,000 of the 3,000 employees. What we’re seeing is as the city’s open up, our businesses returning to normal faster than we anticipated. So, right now, we’re up almost three times versus year ago.
Ryssdal: So, look, that’s a good problem to have, right, being up three times? But how do you handle swings like that? It must make you, as the boss, lose a whole lot of sleep.
Wainwright: You know, honestly, this growth is what we were built for. And I think you got a little taste of that when we were together in 2018 in our Secaucus warehouse, but then we had 9 million members on our site. Now we have 21 million. So we’re more built for growth. And it feels good. And everyone’s pretty excited.
Ryssdal: You were saying, before we turn on the microphones, you were saying you were just come across the picture of us together in late 2018. And you said, ‘it’s amazing how we’ve changed.’ Tell me how you’ve changed. Because we walked through that warehouse, and you had, you know, validators and verifiers and your shipping people. And it was it was a pretty streamlined operation. How have you changed things?
Wainwright: Oh, we still have that. But now we’re just opening our 700,000-square-foot facility in Phoenix, and the one you were in was 110,000. Now we’ve automated a lot. So what has changed is we’ve been using machine learning and [artificial intelligence] to automate some of the features. So pricing is first set for about 90% of our products by machines and then human overview. So it has gotten more automated. But I think in general, the business is scaled pretty excitingly.
Ryssdal: But wait, let me ask you about that. Because you know, being built for growth and opening a 700,000-square-foot facility carries with it some risk. And I imagine you, as the person making these decisions, you have to be pretty confident in your growth projections to be doing that, especially at a time like this.
Wainwright: I think you know, in general, our business was growing before the pandemic. There’s absolutely nothing systemic that would change that as people get more vaccinated and things open up. That combined with long lines outside our stores, to consign or buy, which are just accelerating, gives me a lot of great indications.
Ryssdal: Can we talk actually stores for a second, as opposed to the big warehouse, sort of distribution centers that you guys run? You’re opening more of them. And I want to know why you’re investing in brick and mortar.
Wainwright: We are opening more. I think since you and I talked, we’ve opened 11. And we’re going to probably have about 13 by the end of July. And what we find is people that actually shop both in the store and online spend about three times as much. We sell higher-value things when people can touch it and ask questions. Now, it’s counterintuitive, because retail is pretty decimated, especially the smaller stores. But it makes sense for our business. And we’ve seen a lot of people excited to get out and shop again. I think we’re going to see a nice resurgence for everyone that has the capital to open retail stores again.
Ryssdal: You know, it strikes me that what you’re describing to me about your business and how it’s popped, it’s literally the manifestation of pent-up demand, right? We’ve been talking about pent-up demand in this economy since, I don’t know, January-ish. And you’re it right now, right? People want nice things, they want the things that you sell, and they want to go out and get them.
Wainwright: You know, without a doubt, and apparel is starting to pick up, which was a key leading indicator for us. Look, you know, we’re public now, we weren’t public when we first met. And we kept telling our investors, ‘We’re not a pandemic-friendly business’ because we have to go into people’s homes. We have people that have to touch things in the op centers, but we believe we’re going to be a pandemic recovery story. And you know, early days, but it certainly looks that way.
Stories You Might Like
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
