The RealReal’s Biggest Problem Right Now Is Hiring People

With The RealReal’s active buyers up over 20%, gross merchandise value (GMV) rising 30%, orders jumping 40% and total revenue rising nearly 50%, one might assume that all was well at the self-titled “largest online marketplace for authenticated, resale luxury goods.”

But that assumption, however, would be drastically wrong, as the San Francisco-based high-end reseller’s strong top line growth was insufficient to overcome its multiyear streak of net losses that it said were most recently at -$53 million and made worse by an acute people problem.

“This is not specific to a price point or a category supply, when I talk about a labor shortfall, I’m talking about people out in the field, our sales team,” Rati Sahi Levesque, The RealReal’s interim co-CEO, told investors on the company’s second-quarter earnings call Tuesday (Aug 9).

The Great Resignation 2.0

Specifically, the company characterized its problems as stemming from a lack of sales labor that left it without supply to sell, as well as a demand shift that saw consumers go from buying high-priced fine jewelry and watches to low-priced items like clothing and shoes.

To make matters worse, the company said its supply and demand problems happened faster than anyone anticipated and resembled a return to pre-COVID habits and numbers.

“Early in Q2, we saw a Great Resignation Part Two,” Sahi Levesque said, highlighting a trend that also included the sudden and unexpected departure of The RealReal’s founder and longtime CEO Julie Wainwright during the second quarter.

“We entered the quarter needing more salespeople, and this hiring challenge was exacerbated by a higher-than-normal attrition in our sales force,” she added before highlighting the company’s proactive, multipronged strategy to address its labor shortfall, which includes over 200 job postings — many offering $5,000 cash sign-on bonuses —  listed within the past month.

In addition, The RealReal said it is attacking its people problem via the hiring of a new chief revenue officer, increasing compensation in select key markets, and using technology that enables consignors to self-serve the merchandise they’re looking to sell.

“We believe these actions are meaningful steps in addressing the underlying labor shortage and position us well for a step-up in supply for the fourth quarter of 2022,” the company’s statement concluded.

Still Growing Rapidly

While it would be easy to pile on a money-losing company whose stock has fallen 80% in a year and spent the entire second quarter below $4 per share, The RealReal still has plenty of positives to crow about.

“We’re still growing quite rapidly,” interim Co-CEO and CFO Robert Julian said on the call, acknowledging that even with headwinds and its lowered Q3 guidance, a projected 20% to 23% increase in GMV “is not a bad growth rate.”

Other areas of promise include the company’s level of repeat buyers, who have consistently accounted for 80% to 85% of GMV for the past several years, as well as an average order value that’s hovered close to $490 for four of the past six quarters.

Despite widespread belt-tightening and a spate of clearance sales to offload unsold inventory at retailers including Walmart and Target, The RealReal’s record roster of nearly 900,000 active buyers tacked-on another 160,000 — or 22% more shoppers — in the past year, including a sequential increase of 60,000 — or 8% more — in the past three inflation-ravaged months alone.

“We continued to see strong demand in our business, especially for women’s apparel, shoes and handbags,” Julian said, before adding that the company was monitoring the economic situation and taking proactive steps to manage costs and cash flow by reducing discretionary spending and slowing hiring for open support roles.

“However, we are confident about our long-term strategy and prospects,” Julian concluded, “and we continue to project that we are on track to achieve adjusted profitability on a full-year basis in 2024.”

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