It's hard to imagine how Rati Levesque and Julie Wainwright, the founder and chief merchant behind the e-commerce consignment platform TheRealReal, could be any more different. Yet this boomer/millennial, introvert/extrovert, tech/brick-and-mortar-retail odd couple has presided over a startup that is making huge strides since its inception in 2011. Last year, TheRealReal doubled its revenue to over $100 million. The site has amassed more than 3.5 million monthly users and ships about 15,000 items per week.
This isn’t easy in a crowded market space occupied at one end by eBay and on the other by a host of smaller competitors such as Threadflip, Snobswap, and Vaunte, which traffic in gently used, high-end designer apparel and luxury accessories.
The U.S. leads the world in the personal luxury goods market with about $74 billion in spending according to research from Bain & Company. That doesn’t mean there’s enough wealth to go around. Growth of luxury spending has been steady in the years since the recession, but Bain’s report indicates that it’s slowed to about 2%.
Pam Danziger, founder of Unity Marketing, who studies consumer spending in the space, says, "While it is true that affluents and high-net-worth individuals are feeling wealthier these days, in this post-recession era, that does not necessarily translate into higher earning for luxury brands." Danziger believes the "wealth effect" is going in reverse. "Positive changes in affluents' perceived wealth is only making them hold tighter to their gains rather than spend freely on goods and services," she says.
What’s more, Danziger argues, is that going head-to-head with eBay presents a twofold challenge. "Not only do you have to compete with this bad boy for customers," she says, "but you also have to compete with them for the best product consignments."
Wainwright believed TheRealReal’s model—one that blended disparate elements of e-commerce and physical retail—was up to the task. But she needed a partner who could complement her expertise. Where in the world could she find such a person?
Wainwright, a 57-year-old baby boomer, has had a long career in tech that pre-dates the dotcom 1.0 era. She’s held a number of CEO roles, including those at Berkeley Systems, Reel.com and Pets.com. A diminutive dynamo with a blonde bob, Wainwright powers through work and life on four-inch heels and is prone to effusive conversation sprinkled with frequent bursts of laughter.
Levesque, 33, was born with entrepreneurial leanings. She used to own a brick-and-mortar boutique in San Francisco’s hipster enclave Russian Hill, where she curated a selection of current designer clothing along with select luxury and vintage consignment merchandise. Levesque is a tall brunette who projects a reserved calm that belies an intense work ethic infused with an intuitive sense for how shoppers consume and purchase luxury.
Despite the differences in background and style, when the two were introduced by mutual friends, they hit it off. Wainwright had recently launched TheRealReal. "The timing was perfect," says Levesque, who was just breaking even on her store as the rent continued to climb. Companionship aside, Levesque had the right stuff to be TheRealReal’s chief merchant.
It was only a matter of weeks before Levesque shuttered her shop and began working from Wainwright’s home. She describes being in Wainwright’s dining room as they strategized how to grow the nascent company. "I worked by myself for five years," she says. "It was nice to be with someone else."
Wainwright brought knowledge of how to structure an e-commerce company to that dining room table, but says Levesque knew how to use the technology because she’d spent so much of her life shopping online, even when she owned her store. Counting pennies, says Wainwright, also came naturally to Levesque, thanks to having managed her own books and learning firsthand how to budget from her family’s restaurant business.
Levesque says that Wainwright’s open approach to sharing information came as a surprise at first. She’d learned from her parents’ business that you don’t always offer information to staff. Now she says she has a greater appreciation for the level of trust and teamwork that results from open communication.
Wainwright intuited early on that despite being a web-based retailer, TheRealReal needed to provide what’s known in industry parlance as a high-touch shopping and selling experience. That means a team of expert salespeople will actually come to your home and evaluate the items in your closet. Should you not be inclined to get a personal visit, you can have your items picked up or ship them yourself, and TheRealReal’s authenticators will get to work appraising their value and setting a price to sell. All photography is handled by the company and the merchandise is sold through a combination of flash and perennial sales.
Danziger says this kind of personal service doesn’t exist on eBay, and that the giant marketplace is too big and doesn’t have the best reputation for selling the real thing. "It calls for competitors to gain credibility as carefully curating and authenticating the merchandise."
That’s not all that flies with this customer base. TheRealReal’s shoppers tend to be women between the ages of 25-45. It’s a group that is comfortable pairing jeans from Zara with a Chanel bag, reads Vogue and consults fashion bloggers, and consumes mobile and social branding as well as bus ads. Wainwright leaves the outreach to these prospective consumers to Levesque and her team of 40 creatives.
From watching old movies to scouring Instagram feeds, Levesque is constantly striving to bridge the old and new, physical and virtual to appeal to shoppers and keep them engaged. Though she says TheRealReal has no trouble selling a $10,000 Rolex, and Wainwright confirms that 50% of the goods that come in are sold within three days (although a stash of Birkin bags worth between $10,000 and $15,000 nearly sold out in 24 hours), the challenge is always how to make classic luxury goods trendy and relevant.
Some others might rely heavily on social, but Levesque contends that isn’t dynamic enough. TheRealReal’s editorial piece, a lookbook that comes out at least once per month, offers shoppers a way to see how the pieces can be worn with their existing outfits. Flash sales—previously the domain of dedicated sites like Gilt—have also proven effective when selling contemporary mid-tier luxury brands. So much so that there have been times when a customer was reduced to bawling because she’d missed out on a particular item. "We have a waiting list now," Levesque says.
On the supply side, the consigners keep coming back because of what Wainwright built in to the business from the beginning. "We are not a peer-to-peer marketplace," Wainwright explains, referring to eBay and sites such as ThredUp. Doing that would have been equal to creating a fashion vertical for eBay, she says, one that had limited potential to scale. Digging deep into her own previous e-commerce forays, Wainwright relies on data for every aspect of the business. Data analysis helps set resale prices, so consigners are getting a fair market price.
"My whole focus was to remove the friction," she says, "because everyone wants to make money from stuff hanging in their closet."
It keeps them coming back, as well as influences their own shopping behavior. Wainwright has observed that customers are buying certain brands new because they know they can recoup 60% to 80% of the retail value. As much as 20% of TheRealReal’s consignments are from buyers who bought an item and sold it back to the site in six months.
Continuing to bridge the digital divide between consumers and consigners is key as TheRealReal strives to meet its growth goal of doubling revenue again in 2015. The site is building out its men’s and art channels and will be introducing home goods into the consignment mix soon. How Levesque and Wainwright navigate this new terrain will be as different as their individual personalities. But Wainwright points out one very important element they have in common. "Our values are the same," she says. "If you have shared values nothing else really matters."