For most of its first decade, The RealReal’s mission was to find as many new resale buyers and sellers as possible, whatever the cost. Its new objective: make the most of the customers it has.

In an interview with BoF, John Koryl, who took over as chief executive in February, laid out a strategy built around convincing the site’s users to send in more Birkins, Cartier watches and other big-ticket items. Once they do, The RealReal will offer services like a dedicated “concierge” to walk them through the selling process, a feature it will begin to roll out Tuesday, and other offerings aimed at convincing sellers to search their closets for more high-end goods to sell.

Customers turning to The RealReal to offload their Reformation dresses or anything else valued at under $1,000 will have access to many of the same perks. They just won’t receive as much for their pieces as they used to under a new commission structure that went live in November to howls of protests from longtime sellers.

Koryl, who joined after the commission revamp and previously held senior roles at Canadian Tire Company and Neiman Marcus, said the commission structure will continue to evolve. That and other changes to come are part of a bigger project — making The RealReal profitable for the first time in its 12-year history.

“This isn’t a reinvention,” he told BoF. “All of this is a tweaking of what’s been done.”

But in another sense, the strategy under Koryl marks a pivot from how The RealReal has operated since its founding by Julie Wainwright in 2011. From the start, the goal was to create and then dominate a market for secondhand luxury fashion, which Wainwright in interviews defined as occupying the space between eBay and Sotheby’s. The RealReal would be the best reseller with the best service — it was among the first to offer at-home pickup for online consignment — and the deepest assortment of vintage Dior and last season’s Gucci, at the best prices.

It succeeded, mostly. In the US, The RealReal is the favoured resale destination for fashion aficionados looking for a treasure hunt or to clean out their closets. Revenue topped $600 million last year.

But offering a white-glove resale experience proved expensive: the company posted a $196 million loss last year. The bill for those years of rapid growth has come due in other ways; customers have complained about lost goods, delays and poor customer service. Resale platforms of all types have never been able to shake concerns about counterfeits, no matter how much money and technology they pour into the authentication process. The RealReal’s stock, which priced at $20 in its 2019 initial public offering, trades at $1.15 today, close to a level where it could face delisting. Wainwright stepped down as CEO last June.

Koryl and chief operating officer Rati Sahi Levesque are now tasked with finding a way for The RealReal to turn a profit while maintaining growth, all with a ticking clock: Several competitors facing a similar dilemma have been acquired at valuations that were down sharply from their peak.

Koryl said the concierges, dubbed RealService, will help with retention, while the focus on more-expensive listings will help with margins. So will investing in automation to set prices and authenticate products. He’s also looking at new revenue streams, including product warranties and monetising product data, such as analysis on why some items retain more value in the secondary market. The impact on revenue and profit will be visible in the second half of 2023, he added. The RealReal hopes to reach profitability by the first quarter of 2024.

Investors are waiting to see if the new measures pay off. The stock hasn’t budged from its lows. The company predicts first-quarter revenue to be in the range of $135 million to $145 million — down from $147 million a year earlier. Analysts on average are predicting just 4 percent revenue growth this year, compared with a 29 percent increase last year, but see losses narrowing.

“The amount of hyper-growth that The RealReal went through, there were some mistakes along the way,” Koryl said. “Yes, we have to find new ways of monetisation ... yes we have to put more automation around authentication, but the core business model of what we’re doing has held up in crazy times since its founding.”

Fine-Tuning Consignment

The RealReal has long touted its consignment experience, offering services for customers hoping to offload pre-owned pieces. But it hasn’t always run smoothly. In recent months, users have griped about lost items, processing delays, mislabeled listings and prices that didn’t make sense. An August New York Magazine headline summed up the platform’s strengths and weaknesses: “The Real Real Is a Total Mess. And I Can’t Quit It.”

RealService is The RealReal’s answer to those complaints. The concierge programme will advise sellers through the entire process, from authentication to pricing, whether they list one item or 100. The company had tested out the service among a number of consignors late last year, and found it improved customer satisfaction.

“The level of service needed for our sellers was much higher than we anticipated,” Levesque said. “Because we were growing so quickly, I don’t want to say we lost sight of our seller experience but we had to be very reactive.”

The RealReal also unveiled Tuesday its new data centre, which will educate consignors on what brands and specific pieces retain resale value and what’s hot on the platform. In addition, the company introduced a handbag pricing tool that gives sellers an estimate of what their item will fetch.

Low-Cost Growth

The new commission model will reduce inventory, ideally by reducing the number of unprofitable items sellers send in, such as keychains and other trinkets from luxury labels, or items made by less desirable brands. The Nothing is set in stone, Koryl said.

“We made commission changes and did we get those exactly right? No. I call it a Goldilocks situation,” said Koryl. “Was it too hot in the past and too cold what we did? We’re going to have to find just right, and it won’t be just right for everyone.”

The RealReal has also greatly reduced the number of what it calls “direct buys,” where it purchases brands’ inventory at wholesale prices. Beauty, which relied solely on direct buys, is being wound down.

Other recent cost-cutting measures include the shuttering of four retail stores and a headcount reduction of 230, or about 7 percent of its workforce, the company announced last month.

“We’re calling this the ‘reset’ year, where we’re still growing,” said Levesque. “But we’re getting rid of unprofitable growth.”

New Revenue Streams

Another critical component to The RealReal’s path to profitability will be introducing new revenue streams, an idea that the company revealed in a letter to shareholders last fall.

Possibilities include return insurance — the platform currently doesn’t allow returns on items that have been marked down — product warranties, on-site advertisements and data monetisation.

“The other thing we haven’t done is monetising the deep rich data we’ve collected,” said Koryl. “Is it advertising on our own site? Putting that data together and packaging that up for people in the luxury market? That incremental revenue could flow directly to the bottom line and will help put us on a profitability curve.”

“Getting [to profitability] will take a lot of tweaks to pricing and new revenue opportunities,” Koryl said. “But we have a lot of levers to pull to get there.”

Technology will reach an inflection point in the fashion industry this year, as the development of artificial intelligence (AI) accelerates and the hype around web3 transitions to more realistic applications focused on utility, creativity and community. Concurrently, a global economic downturn is impacting growth opportunities and putting more pressure on businesses to ensure digital and physical retail ecosystems are optimised for success.

As a result, retailers need to be laser-focused on the path to purchase, balancing exploration of new tech-driven opportunities with investing in the channels, functionality and solutions that are driving results. Up to 73 percent of consumers plan to delay discretionary expenditure, trade down brands and seek savvier retail experiences, reconciling their fiscal caution with their spending impulses by being highly selective about which brands and experiences to engage with, according to BoF and McKinsey’s State of Fashion Report 2023.

“Start with consumer empathy — understand the individual experience, and then move as fast as technology will allow you,” said Maju Kuruvilla, chief executive at checkout technology company Bolt during the BoF Professional Technology Summit in New York. “The technology that is available today is amazing, whether AI or web3, there are many options to connect or activate consumers. Do not wait 12 to 18 months to implement change, because the world will be a very different place then.”

This is all the more important as privacy regulations and technological changes reduce the effectiveness of paid digital marketing, despite the fact that costs have grown dramatically. In 2022, customer acquisition costs rose on average 70 percent on TikTok and 39 percent on Meta platforms, according to The State of Fashion 2023 report. In response, business leaders are expecting internal data collection strategies to pick up the slack and enable deep customer profiling and behaviour analysis.

Indeed, this is increasing the pressure on technology leaders to integrate new technologies like AI, experiment in emerging web3 channels and refine increasingly atomised retail ecosystems, by optimising the path to purchase as much as possible. Coresights Research in partnership with Bolt found that today, 76 percent of online shoppers abandon their carts at checkout — a poor ROI on increasingly expensive marketing and brand expenditure.

To discuss this inflection point in the industry, BoF and Bolt hosted an executive roundtable during the BoF Professional Summit in New York last week, welcoming executives from Ralph Lauren, Tapestry, Michael Kors, Nordstrom, Farfetch, Saks, Rag & Bone, Proenza Schouler and Urban Outfitters.

Here, BoF shares anonymised insights from attendees from the conversation, conducted under the Chatham House rule, on driving growth through technology in turbulent markets, the channels that matter most and why customer-centricity is more critical than ever.

Invest in Product to Drive Growth

Referring to the importance of technological investment in nurturing returning customers, one attendee said “You do not want to pay to have your consumer come back — they should want to come back, and that will only happen if you invest in better experiences than those at your competitors.”

If you can get a rapid iterative approach and feedback, that gets you to a place where you are interacting and adapting to the customers’ changes.

“Right now, the battle is in personalisation, including how well can you personalise the path to purchase, and make sure that you understand your customer and have the technology to do so. Beyond that, focus on the end-to-end journey, down to making payments, which at present is quite inefficient with fraud being an especially big deal,” they added.

Trial New Solutions Quickly

“Speed matters now more than ever,” one participant said of trialling and adopting innovation to the consumer journey. “It is harder now because [business functions are] busy with their own things, and [when approached with a new idea they might] say, ‘Don’t come back and talk to us until August of next year’ — that is a long time.”

They further added businesses must minimise “the latency between seeing a signal and [identifying] where we can win quickly.” Companies should look to experiment with different tools and refuse the temptation of assuming they themselves can predict the future or the needs of various cohorts of customers.

Analyse and Adapt Your Attribution Model

As one event attendee mentioned, successful attribution “is not about being right, [but] being less wrong,” meaning that your attribution model should be under constant evaluation, with ingrained agility.

“If you build [your attribution model] yourself, you drag all of that upfront work with you, [when] you need to be able to change it quickly every time the market changes. Ultimately, we have to think about the journey in the same way our customers think about the journey.”

Training executives to be customer-centric is a more important solve than the specifics of digital.

One example of an evolving attribution model came from “Amazon, [which] completed a long-term-value (LTV) study and found that a customer who checked out of the Amazon site with a bottle of wine had the highest LTV — you would never have guessed that, no human would have ever guessed that. If you are trying to be predictive yourself, you are doing it wrong — that capability builds over time. If you can get a rapid iterative approach and feedback, that gets you to a place where you are interacting and adapting to the customers’ changes.”

Avoid Generational Bucketing

One participant highlighted the importance of creating unique consumer journeys, as opposed to assuming consumers’ preferences based on generic data like age. “We are assuming that generations are all the same, saying ‘younger generations behave in X way’. We need to step out of assuming that everybody in a generation acts in a consistent way.”

They added: “We also have to recognise that the value exchanges [for personal data that customers are willing to enter into] are very personal and not a generational point, which adds a huge amount of complexity. There is no easy way of solving that problem, but the insight of starting with not just a customer-centric view, but an individual view of each customer, is critical to personalisation.”

“The way that younger consumers shop is constantly changing, it is not a binary. Executives need to think like the consumer, they need to put themselves in their shoes [to understand] how they shop. While I am sure everyone in retail is striving to reach the Gen-Z consumer, we are also striving to reach all the other consumers — Gen-Xs, Millennials [...] Training executives to be customer-centric is a more important solve than the specifics of digital.”

This is a sponsored feature paid for by Bolt as part of a BoF partnership.