The RealReal Sharpens Focus on Consignment, Shrinks Direct Business

The RealReal is reportedly shifting resources from its direct business to its luxury consignment business.

One casualty of this move is the beauty products category. The luxury reseller and retailer is winding down its offering in this category after five years, The Business of Fashion reported Thursday (March 23).

The RealReal will sell down its inventory of beauty products and then exit the category, according to the report.

Reached for comment by PYMNTS, a The RealReal spokesperson said: “As you’ve heard us say over the past few months, we’re prioritizing our efforts on growing our luxury consignment business. With that, we have been deemphasizing the direct side of our business, including our beauty category, which is a smaller piece of our marketplace. We’ll continue to sell through the existing inventory and sunset the category.”

The RealReal CEO John Koryl said during the company’s most recent earnings call that the company — which had just posted a $196 million annual loss — should be viewed as a “bifurcated business” in which two-thirds of the business is still growing while the other one-third is not.

“The overall growth rate is really two different stories,” Koryl said during the Feb. 28 call. “The good consign business, the profitable consign business is growing very healthily, and the unprofitable direct business is shrinking.”

In other recent changes aimed at driving profitability, The RealReal updated its commission structure in November to limit the consignment of lower value items and increase the supply of higher value items.

It also reduced its workforce by 7% and shrank its real estate footprint by closing two flagship stores, two neighborhood stores and two luxury consignment offices.

Koryl joined The RealReal as CEO and board member Feb. 6, and the company said at the time that he would be “hyper-focused” on improving the customer experience, achieving cost savings and leading the company to profitability.

During the earnings call held later that month, Koryl told investors that the company’s money-losing days were numbered.

“I have no illusions that The RealReal’s path to profitability will be achieved overnight, or with only minimal effort,” Koryl said at the time. “But based on what I’ve seen in my first month … I am confident we can achieve profitability in the near future.”

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