The RealReal will cut operating costs through layoffs and store closures, with plans to eliminate 230 positions, or 7% of its workforce, according to a filing with the Securities and Exchange Commission. The resale company also will shutter two flagship stores, in San Francisco and Chicago, two neighborhood stores, in Atlanta and Austin, Texas, and two consignment offices in Miami and Washington, D.C.
The effort will cost between $1.7 million and $2.2 million, primarily in severance payments, employee benefits and similar expenses. Additionally, The RealReal will reduce the amount of office space it has in San Francisco and New York City.
The RealReal may be charting a new course under CEO John Koryl, who joined the company on Feb. 6, 2023. Koryl’s mission is to streamline “the company’s operations to improve overall client experience, achieve cost savings and lead the company to profitability,” and these cuts may be the first steps in achieving that goal.
The RealReal has struggled to achieve profitability despite strong sales growth over the past several years. Revenue for Q3 2022 was $142.7 million, compared to $118.9 million in Q3 2021, and the net loss for the quarter was $47.3 million, down from $57.2 million in Q3 2021.
The size of the U.S. secondhand market is projected to double between 2022 and 2026, reaching $82 billion, according to research by ThredUP. However, The RealReal is operating in a space that is becoming more and more competitive as mainstream retailers launch or upgrade their own resale offerings to bolster their sustainability bona fides, including:
- Kate Spade New York, which partnered with ThredUP to launch the “Pre-Loved” resale program;
- J.Crew, which launched an online resale program and plans to bring back refurbished versions of its most popular looks for men and women in select stores; and
- Amazon, which partnered with high-end reseller What Goes Around Comes Around to add a dedicated section showcasing vintage luxury accessories and bags that’s featured on Amazon’s marketplace.