#THE REAL REAL MODEL FREE#

Founder and CEO Julie Wainwright first rose to prominence as the CEO of, the ill-fated e-commerce company that became the poster child of tech bubble excess in the late-90’s. This voting power is especially important because shareholders have reason to be skeptical of REAL’s leadership. Public shareholders get to have an equal voice in corporate governance. While most companies now go public with dual-class share structures that give insiders and early investors extra voting rights, REAL has just a single class of voting stock. REAL’s corporate governance also separates it from many other recent IPO’s.

Public Shareholders Have Rights – A Break from Recent Norms

Still, there’s at least some reason for investors to hope that this company is better equipped to handle a recession. As with so many other recent IPO’s, I’ve never seen this company operate during an economic downturn, so I have no real idea how it will perform. Of course, it’s also possible that the overall decline in spending on luxury goods during a recession would more than offset this substitution effect and be a net negative for REAL. At the same time, the company could also get a large influx of new sellers needing extra cash as well. Shoppers that normally buy new luxury items might substitute and buy used during a recession. While luxury goods manufacturers struggle during economic downturns, REAL’s consignment business could actually benefit from poor economic conditions. It’s possible that this business is simply not a profitable space, which would explain why so few other firms have filled this niche. However, the company has yet to show significant concrete progress towards achieving profitability. It fulfills an underserved niche and has relatively little direct competition. REAL seems like it should have a profitable business model. Overall, REAL’s after-tax operating (NOPAT) decreased from -$47 million in 2017 to -$66 million in 2018, but its NOPAT margin improved slightly from -35% to -32% over the same time. REAL says that it expects operations and technology expenses to decrease as a percentage of revenue over the longer term, but Figure 2 shows that they’re currently not making any progress towards that goal. REAL Adjusted Gross Margin New Constructs, LLC However, if I include operations and technology expense as part of cost of revenue, its “Adjusted Gross Margin” declined from 22% in 2017 to 15% TTM.įigure 2: REAL Gross Margin and Adjusted Gross Margin: 2017-TTM By reporting these costs separately, REAL makes its gross margin look higher and presents a potentially misleading picture of its path to profitability.įigure 2 shows that REAL’s gross margin has stayed consistent at ~65% since 2017. I would argue that many of these costs are directly related to the delivery of REAL’s service and should be included in cost of revenue. “Operations and technology expense principally includes personnel-related costs for employees involved with the authentication, merchandising and fulfillment of goods sold through our online marketplace, as well as our general information technology expense.” Instead, they are reported as “Operations and Technology” expenses. What’s more, many of the above costs are not reported in cost of goods sold. It pays the cost of authenticating, merchandising, shipping, and accepting returns for all the items it sells. While REAL gets to keep a much larger portion of the money spent on its site than its peers, it also has to spend much more to earn that revenue.

#THE REAL REAL MODEL FREE#

At our 19 retail locations, including our 16 shoppable stores, customers can sell, meet with our experts and receive free valuations.REAL Take Rate Vs. We do all of the work for consignors, including authenticating, using AI and machine learning to determine optimal pricing, photographing and listing their items, as well as handling shipping and customer service. We make selling effortless with free virtual appointments, in-home pickup, drop-off and direct shipping. As a sustainable company, we give new life to pieces by thousands of brands across numerous categories-including women's and men's fashion, fine jewelry and watches, art and home-in support of the circular economy. We have hundreds of in-house gemologists, horologists andīrand authenticators who inspect thousands of items each day. With a rigorous authentication process overseen by experts, The RealReal provides a safe and reliable platform for consumers to buy and sell their luxury items. The RealReal is the world’s largest online marketplace for authenticated, resale luxury goods, with more than 25 million members.

The real real model