Dive Brief:
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As part of its effort to focus on its consignment business, The RealReal is winding down its beauty sales, a company spokesperson confirmed by email. Women’s Wear Daily first reported the news.
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“We’re prioritizing our efforts on growing our luxury consignment business, and deemphasizing the direct side of our business, including our Beauty category,” the spokesperson said. “That category is a smaller piece of our marketplace. We'll continue to sell through the existing inventory and sunset the category.”
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The RealReal added beauty to its offer five years ago. In February, The RealReal Chief Financial Officer Robert Julian said Q4 gross margin improved significantly thanks to a “combination of profitable consignment revenue growing 27% and unprofitable direct revenue shrinking 27%.”
Dive Insight:
The RealReal is scrambling to right its trajectory after struggling to achieve profitability for years. The luxury resale site may be at risk of bankruptcy, although its loss narrowed in its most recent quarter.
Under newly arrived CEO John Koryl, in addition to evaluating its business segments and dispensing with unprofitable areas like its beauty sales, the company has reined in its expenses. Earlier this year, the company took several steps to slash costs, including laying off 7% of its workforce (about 230 employees), permanently closing four stores and two consignment offices, and reducing its office space.
Koryl, whose retail experience includes Canadian Tire Corporation and Neiman Marcus, replaced founder Julie Wainwright after her abrupt departure last year.
If these moves can gain traction before the retailer runs out of cash, it could pull through with a winning business thanks to the demand for high-end secondhand goods, according to Wedbush analysts Tom Nikic and Austin Borina. The company continues to gain customers, with its number of active buyers up 25% year over year in the fourth quarter, Koryl told analysts.
“All in, we continue to believe that [The RealReal] has ‘a reason to exist,’ as many consumers yearn to buy luxury goods below full-retail price,” Nikic and Borina said.
