As consumers across income groups feel economic pressure, luxury secondhand marketplace The RealReal is seeing its customers continue to spend but demand more value for their dollar.
The company shared in its second-quarter 2024 earnings results Tuesday (Aug. 6) that active buyers increased by 9% year over year to 381,000, and orders rose by 4% to 820,000. Average order value remained stable at $538, bolstered by more units per transaction but dragged down lower average selling prices, as shoppers demanded better bargains.
“We saw some compression in prices driven by a preference towards more discounted products,” Chief Financial Officer Ajay Gopal told analysts on a conference call. “This started late in Q2 and has continued into July… Our guidance for the rest of the year reflects a balanced view on how this dynamic is going to play out in the second half of 2024.”
The company is protected from some of the pullback that businesses that cater to lower-income shoppers may see, he added.
“We are a full-category luxury marketplace, and in doing that, we serve a more resilient customer,” he explained.
These higher-income customers are disproportionately increasing their adoption of secondhand retail channels. The “Persistent Inflation Rekindles Consumer’s Interest in Secondhand Stores” installment of the PYMNTS Intelligence “Consumer Inflation Sentiment Report” series drew from a December survey of over 2,300 U.S. consumers to understand how rising prices have affected resale purchasing. The findings revealed that 43% of consumers purchased a secondhand product in 2023.
Among consumers earning more than $100,000 annually, this figure increased to 47%, with this group also showing the highest increase in the adoption of secondhand retail channels throughout the year.
While eCommerce drives much of The RealReal’s business, the company has opened a handful of stores, including most recently a Chicago location. These boutiques do more than just sell items; they serve as touchpoints for consignors and buyers, offering a tangible brand experience.
“Early indications point to the Chicago store attracting new consignors and bringing more high-value supply,” CEO John Koryl told shareholders in a letter.
Consumers continue to seek on-site shopping experiences. PYMNTS Intelligence’s 2024 Global Digital Shopping Index: U.S. Edition found that three-quarters of shoppers prefer to engage with the physical store at some point during their purchasing journey. Plus, nearly a third of consumers are Click-and-Mortar™ shoppers, preferring to engage both digitally and physically in the course of their purchase.
The RealReal’s forward-looking statements for Q3 and the full year 2024 provide a cautious yet optimistic outlook. The company expects continued growth in gross merchandise value (GMV) and revenue, driven by investments in sales, marketing and technology.
In the quarter, the company saw year-over-year improvements in sales and profitability. Revenue rose to $145 million, an 11% increase year over year, driven by a 17% lift in consignment revenue. GMV climbed 4% to $441 million. The RealReal reported a net loss of $17 million, an improvement from the $41.3 million loss in the same period last year.
“We believe this demonstrates the success of our strategic initiatives, highlights the resilience of our go-forward business model and positions us to capitalize on the expanding total addressable market for luxury resale,” Koryl said in the letter.
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