The RealReal reported what it calls “another quarter of strong growth,” during which it generated $105 million in revenue, and its highest quarterly gross merchandise volume to date, with the total value of pre-owned luxury goods sold increasing by 91 percent on a year-over-year basis to $350 million and 53 percent compared to the same period in 2019. Additionally, the San Francisco-based luxury resale pioneer revealed that it “achieved its highest quarterly additions of both new and repeat consignors to its marketplace” during the second quarter of 2021, and it was on the receiving end of 673,000 orders during the 3-month period, an increase of 53 percent compared to Q2 2020 and 33 percent from Q2 2019.
As for the value of orders during the quarter, The RealReal reported that the average order value (“AOV”) was $520, an increase of 25 percent year-over-year and 15 percent compared to pre-pandemic Q2 2019. The rise in AOV was primarily driven by a 17 percent year-over-year increase in average selling price, as tied to the “strength in the watch and fine jewelry categories and strong demand in high-value handbags.” This further carries on the trend of the reseller’s customers buying bigger ticket items in the wake of the pandemic, prioritizing the likes of hard luxury and handbags over apparel and footwear, for instance.
What might be the most striking takeaway from the Q2 report, however, is The RealReal’s net loss for the period, which amounted to $70.7 million, and “includes a charge of approximately $11.0 million that was recorded as an accrued legal settlement.” The RealReal did not reveal what the settlement stems from, but did reveal recently that it is close to settling the lawsuit filed against it in November 2019 by a number of shareholders, who have accused the company, an array of its executives, and its big-name initial public offering (“IPO”) underwriters of misleading investors about the nature of its authentication process leading up to and in the wake of its June 2019 IPO, thereby, “artificially inflating” the price of the company’s Nasdaq-traded shares and then damaging those same shareholders “when the artificial inflation dissipated.”
In a filing late last month, counsel for lead plaintiff Michael Sanders sought to stay deadlines in the case, alerting the court that the parties had reached “an agreement in principle to resolve” the case. In a since-approved stipulation and proposed order staying motion deadlines dated July 28, lawyers for both sides revealed that while the parties “were unable to resolve this matter at the mediation, after weeks of continued settlement discussions under Judge Phillips’ guidance, [they] accepted a mediator’s proposal and reached an agreement in principle to resolve this action on July 27, 2021, subject to certain matters including formalizing the final terms of settlement.”
The stipulation further stated that the plaintiffs will file a motion for preliminary approval of the settlement within 60 days of the court entering its approval.
The reseller is also still facing off against Chanel, which filed a trademark infringement and counterfeiting suit against it in November 2018, arguing that despite “advertis[ing] … authentic, secondhand luxury products, including purportedly authentic CHANEL-branded products, that it obtains from third-party consignors,” The RealReal sold eight “CHANEL-branded products, including handbags” that it “purport[ed] to be genuine but [were] in fact counterfeit.”
In addition to its practice of allegedly offering up fakes, Chanel has taken issue with The RealReal’s “advertising and marketing practices,” claiming that the company “has attempted to deceive consumers into falsely believing that [it] has some kind of approval from or an association or affiliation with Chanel or that all CHANEL-branded goods sold by The RealReal are authentic,” which Chanel claims is not the case. “There is no – nor has there ever been – any approval by or association or affiliation between Chanel and The RealReal,” Chanel asserted in its February 2019 amended complaint, arguing that The RealReal “understands that the value of its CHANEL-branded inventory … is enhanced if consumers believe that Chanel has a business relationship or affiliation with The RealReal, and that Chanel approves and/or confirms the authenticity of the products The RealReal sells.”
The RealReal has “unequivocally rejected” Chanel’s allegations from the outset, and characterized the lawsuit as “nothing more than a thinly-veiled effort to stop consumers from reselling their authentic used goods,” aimed at “prevent[ing] customers from buying those goods at discounted prices,” and thereby, “stop[ping] the circular economy.”
Amid that closely-watched case, Chanel and The RealReal agreed to temporarily put court proceedings on hold in order to participate in a private mediation. In an order dated April 5, Judge Gabriel Gorstein of the U.S. District Court for the Southern District of New York issued a joint stipulation and order staying proceedings in the case for three months in an attempt to get the high fashion titan and the luxury reseller to settle their ever-escalating legal differences out of court and without the need for a trial.
As of July 1, the stay was further extended through September 20, which suggests that the two sides are still working on a potential resolution to the case.
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