Online consignment changes the game for used goods

The new fashion season is here, and with holiday shopping in full swing, lots of people will be trading up, and maybe cleaning out their closets. Used clothing was once relegated to garage sales or Goodwill, but in recent years, online consignment businesses have cashed in on clothing cleanouts, creating a marketplace for old clothes, shoes, jewelry and accessories. 

At The RealReal, a San Francisco–based luxury online resale site, the cast-offs include Prada, Gucci, Balenciaga, Cartier and Jimmy Choo. The warehouse is enormous and filled to the brim with millions of dollars in clothing and jewelry. Founder and CEO Julie Wainwright started The RealReal in 2011 because she believed luxury buyers would jump at an easy — and discreet — way to unload last season’s looks, and more mainstream shoppers would be eager to pick them up at a discount.

"Fifty percent of our consigners have never consigned before — so I would say we’re actually changing the way that people look at the value of things in their home," Wainwright said.

For sellers looking for a return on the high-end goods they're looking to get rid of, The RealReal pays sellers up to 70 percent of the sale price, and accepts items Fedex-ed to their warehouse through a free online download system. For consignors with the most valuable goods, the company will dispatch one of its luxury managers to individual homes for white glove service. 

Designer shoes packed in boxes at the RealReal offices. (Molly Wood/Marketplace)

And the clothes and jewelry sold through the site moves fast, rotating out about once every two weeks. The RealReal's cut — about 20-40 percent of each item sold, depending on its value — will bring in around $200 million this year in revenue and should be profitable next year.

That is, if the competition in second-hand retail doesn't get too stiff. Online consignment has become a hugely competitive arena online. Sites and apps like ThredUp, SnobSwap, Tradesy and of course, The RealReal itself, has pulled in millions of dollars in funding. According to Matthew Wong, an analysts at CB Insights, the market for secondhand retail "definitely looks a bit bloated" and that there will likely be "opportunities for consolidation and acquisitions later on."

Wong said that a few companies have risen to the top, like The RealReal and its lower-end competitor, ThredUp, with over $80 million in funding each. But the funding is not a guarantee of success, and differentiation will be key in maintaining a steady stream of business. 

The RealReal sets itself apart by aiming for total authenticity and luxury — their staff includes authenticators and gemologists who examine the valuable goods as they enter their warehouses and photographers who stage and shoot the clothing. 

At The RealReal's offices, Meaghan Wallace, a gemologist at The RealReal, authenticates a vintage sapphire and diamond bracelet and values it at $18,000 — a steal, since she said the original owner paid $45,000.

The bracelet will be photographed, listed online and put back into the fingerprint-sensored vault with The RealReal’s other jewels to stay safe until it sells.

One of the many expensive jewelry pieces at RealReal. (Molly Wood/Marketplace)

Additional production by Eliza Mills.