RealReal share price up 40% after IPO launch on Wall Street

The luxury online consignment store's stock surges after going public.

Trader looking at RealReal IPO Source:Bloomberg

The RealReal share price is surging after the pre-owned goods retailer debuted on Wall Street. The corporation says it’s ‘the world's largest online marketplace for authenticated, consigned luxury goods.’

RealReal IPO details

RealReal raised $300 million in funding before the corporation went public. The company's stock symbol is 'REAL'. RealReal’s shares were priced at $20 when the retailer launched its initial public offering (IPO). RealReal stock is now selling for 40% above its listed IPO price.

RealReal thrives by selling affordable and authentic luxury items

RealReal was founded in 2011 by Julie Wainwright. The corporation resells items like clothes and accessories from luxury brands like Gucci and Cartier for a fraction of the original price. Consignors sell their goods on the website and RealReal makes a 35% commission on each sale.

The name of the company comes from the corporation’s pledge that customers are getting authentic items. Wainwright says RealReal’s 100 authenticators ensure that its items aren’t counterfeit.

‘We’re not an easy place for counterfeiters to do business. We confiscate their goods, and then we work with the police, and we let the brands know that this is a counterfeiter,' said Wainwright.

‘It’s a high take rate, but we’re a high-service model. We do all the work for the consignment, we focus on luxury, and we do the authentication,’ added Wainwright.

The corporation's success with selling affordable luxury goods helped RealReal’s Q1 2019 sales reach $69.3 million, a 49% increase from Q1 2018.

RealReal taps into secondhand boom

RealReal is part of a large trend of customers buying pre-owned goods. According to a BCG-Altagamma report, 50% of shoppers in their 20’s bought secondhand items. Bain and Company reports that the secondhand luxury industry is a $25 billion business. Wainwright believes that millennial shoppers want to save money and be environmentally friendly.

‘When we look at where we’re taking share from and share of wallet, it tends to be the fast-fashion market. Our biggest group of customers and now consignors are now millennials. They’re hyper-conscious about sustainability and the impact on the environment of buy-new,’ said Wainwright.

RealReal faces challenges despite success

While RealReal has success with customers, it still isn’t profitable. The company’s 2018 losses were $75 million and Q1 2019 losses were $23 million. Chanel also brought a lawsuit against the corporation, alleging that RealReal was selling counterfeit Chanel handbags. The company denies the allegations.

What’s next for RealReal?

RealReal may expand beyond the US. Wainwright spoke about possible overseas expansion.

‘We have a huge opportunity in front of us. Two-thirds of it’s [chance for expansion] outside the US, so at some point we’ll go overseas but not in the near term,’ said Wainwright.

RealReal has 11 brick-and-mortar stores and plans to open more consignment shops later this year.


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