We recently had the pleasure of sitting down with Julie Wainwright, CEO and founder of The RealReal, to discuss how she is transforming the luxury resale market, how she raised $173 million in capital and what her vision is for the future of The RealReal (therealreal.com).
Tell us about your journey to where you are today. How did you get to be one of the most influential people shaping the global fashion industry?
I came at the concept from a business angle. I was trying to identify an e-commerce business that Amazon couldn’t replicate easily. I also knew that it couldn’t be a third-party sourced product. It had to be something that the competition couldn’t come in and undercut me on. I had an opportunity map and a gap analysis – but no idea for an actual company.
One day, when I was shopping with a girlfriend, she went in the back of a boutique to an area the owner called the vault, and it was all consignment. My friend is a wealthy woman, and I told her that I was surprised to see her shop in a consignment store. She said, “I bought previously owned things in a beautiful environment, and I saved a lot of money. It’s the smart thing to do.” That’s when the lightbulb went off. I went home and looked at my closet, and I had 60 designer pieces that I had never worn or had stopped wearing. That realization changed everything. I thought, “How big is this market? Can eBay do this?” The truth is, if you’re selling luxury goods, you need trust, and eBay’s not set up for that trust.
I decided that my marketplace was any item of value that needed an expert opinion. I opened the business six months after the inspiration struck me. It was that fast, because once I understood where I was going, I knew how to marshal talent and execute.
We’re six and half years old, but it feels like we’re a baby. That’s because at the end of the day, we’re breaking down the old paradigms.
The RealReal started with clothing, but you also carry accessories, jewelry and home items. Did you expect to start with fashion and then expand to other categories?
Yes, always. In order to understand the market, I pulled out my jewelry, watches, art and chairs, and I tried to resell them. I called the art galleries where I had purchased art from the artists. I tried home consignment stores for a couple of chairs. The items cost me thousands of dollars, and I was being offered pennies on the dollar.
I thought, “That’s not right. There has to be a better way to do this.” The truth is, when you’re bound in a brick-and-mortar store, your audience is small. It’s local, and you have space issues, so you always want to move your inventory. Of course, we want to move inventory too, but we don’t want to move it as fast.
You have stated that failure is a part of every life experience and that moving forward and coming out on the other side is a gift that can be extremely liberating. Can you share a bit about how the failures in your professional life have led to your success creating The RealReal?
Ex post facto you see it much more clearly than when you’re going through it. I believe that once you fail publicly, you lose fear. That is a gift – you become emboldened in your choices because fear will always hold you back. If you know that you have been through perhaps the worst situation, it’s more freeing than you could ever believe. When I started this business, I never thought it could fail, and that is a different mindset. You’re always maximizing your potential and not covering your downside. The people you work with see that, and it encourages them to take the right kind of risks.
Can you tell us what the circular economy is and The RealReal’s role in it?
The phrase is so apt to what we do at The RealReal. It means that you’re not adding a lot of energy; you’re not recycling or deconstructing. You’re taking goods that have value and putting them back in the economy for others to share. It’s not the sharing economy, where I have something, and I let you use it. In the circular economy, if you bought something of value and it’s not for you anymore, the item has resale value, and you recirculate it. People can then continue to use an item, and if it’s taken care of, it can go on again. If you buy something that’s been in flow in the circular economy, it’s already a depreciated asset, so it typically won’t depreciate any further. That means that you’re buying things at optimal price, if you don’t mind that someone’s previously owned them. Look at art and what happens at auctions. Those pieces are all previously owned. That’s the circular economy!
It is good for the planet. You’re keeping things out of landfills and preventing items from being melted down and energy applied. We’re partnering with Stella McCartney, an amazing entrepreneur, who is at the forefront of sustainability, to convey that message. When you buy things of value, they have an afterlife, and they should recirculate in the economy. You’re helping the planet as you do that.
You touched on this a little with bricks-and-mortar, but what sets The RealReal apart from other consignors, both online and in-store?
We have a brick-and-mortar store, so we’re similar in that respect. I would say the key differentiator is that we focus on good fit and resale value. In addition, we have an expert behind every item who focuses on authenticating and valuing the piece. We have more than 37 gemologists on staff to identify jewelry, along with watchmakers, home experts and art curators, to name a few. We’ve added trust into the equation, and because we take possession of every item and inspect it, it means we are the only ones with the item. We have unique items that we’ve added value to, and we stand behind the consumer. In addition, we sell all over the world.
No one else does what we do, with the possible exception of the high-end auction houses. Our price points are lower, though. I would say we close a gap. We sit below the high-end auction houses and created a new space where eBay couldn’t play authentically.
The other thing is we make it easy, and we provide service and trust to the consignor. We’ll go to your house and quote prices for you. Because of that, half the consignors we work with have never consigned before. I think by having trust and making sure we take high-quality items, it legitimized previously owned goods in a way that hadn’t been done before. That’s sort of an unintended consequence, but it’s good. We view it as everybody wins – the planet wins.
Switching gears, you talked publicly about how women struggle to be recognized or get funding in Silicon Valley. Why do you think that is?
Let’s talk early-stage funding because that’s where the most discrimination occurs. It’s not blatant, but most of the funding – 98% – is controlled by men, and they’re typically young. When you start a business, you have dreams, ideas and plans, but the person funding must have some affinity because all you are selling is a concept, or maybe six months of business performance. If you’re a young woman selling your idea, it can be difficult for firms without a female partner to relate to you as an entrepreneur, and then they can more easily discredit your idea at the outset. You get more noes as a female entrepreneur, but at the end of the day, you get a lot of noes anyway. I would say the more you push forward, the more likely you are to get a yes.
You can always say it’s based on education or having expertise in an area like computer science, but I’ve met many women with backgrounds in engineering and computer science who are not receiving funding. I think you have to relate to the entrepreneur as an early-stage investor, and there are not enough women. It’s as simple as that.
There are other studies that show that women are given less credibility about getting to profitability. That is because the questions asked of women during fundraising center around whether they will ever be profitable, whereas with the men they focus on how big the business could become. There is an inherent unconscious bias working against women.
You’ve raised a lot of money. How did you do it, and why did you decide to take on the partners you did?
As an entrepreneur, you have to be aware that someone else has the same idea, and if that person has more money than you, you will die. Ideas in early-stage companies can get wiped out very quickly by better execution and more money.
You need to start with an idea that is big and move quickly. The RealReal is a multibillion-dollar worldwide concept, and I had to run fast and hard.
When I went out for funding, all these other resale businesses were getting funded, too. However, we got more traction faster on revenue – our model was different. I was the only woman in my industry raising capital, and I was conscious of this. All these other men were doing eBay fashion verticals. I thought, “If they figure out where the real value-add is, I’m going to be gone because they’re young guys who are going to raise money.” Luckily, they all became like eBay. The RealReal went in another direction.
You’ve had incredible revenue growth. What’s been the secret to the growth?
It comes down to a combination of strategy and great talent. Both things have to work hand in hand, and we have the right mix. We tested the formula, built the team, and then people in the company have a lot of ownership.
How many of your employees are women?
Seventy percent of the staff is women, and 70% is under 35. We still have a lot more men than women on the tech and engineering side, but I would say we’re more diverse than many other companies.
What’s the best piece of advice you have for other women business owners who are trying to grow?
They have to be bold. I would encourage them to dream really big. I can’t emphasize that enough. Don’t give me a single item – give me a whole new system and set of tools.
How many women have started multibillion-dollar businesses in the U.S.? You can almost name them. Why is that? Part of it’s the system. Part of it’s the access to capital. Part of it’s the dream. And part of it’s that you don’t have a support network on your way up. We’re really at the beginning.
You also collect a lot of data at The RealReal. You can predict fashion trends and demographic buying trends. What are you seeing?
Certain designers, such as Lanvin, are declining. After being on a decline, Marc Jacobs has pivoted and is accelerating. Zac Posen is also accelerating. If designers are not selling, we eventually delist them. Donna Karan has been off for a long time because there’s no resale value. Ralph Lauren is pretty much off the list too. That doesn’t mean they can’t come back. The brand just needs to be reinvigorated. It shows that if you’re not a steward of your brand and fail to keep it alive and fresh and worthy, your brand will start sliding. There can be an issue with exclusivity where, when a brand starts producing mass-market items, even if it is still putting out high-end, beautiful pieces as well, it waters down the whole name.
What excites you about what you’re doing?
I’m excited about the relationship with Stella McCartney because it’s so powerful. She’s the first luxury brand that agreed reselling is part of sustainability. It’s part of the circular economy. She’s not afraid that it’s going to replace her sales. She thinks it’s going to enhance sales, and it is right for the planet. She’s always been on the cutting edge.
We’re in a moment for women right now. Are you optimistic for 2018 for women?
I think we’re in a better place than we were. We have a long way to go, but things are moving in a good direction. In my lifetime, I’ve seen things move in a positive direction and take a couple steps backward. Change is hard.
I think the movement taking place today is a positive step. It feels radical right now because the repercussions are so fast. I’m hopeful it will heighten policymakers’ and corporations’ awareness. I don’t know anyone in my peer group who wasn’t sexually harassed. That doesn’t mean we focus on it, but ending it would be amazing. If you shine a light on the issue and keep it in the open, things will change.