Editor’s Note: This story was updated on March 27, 2023 to include comments from The RealReal.
As it continues its laser focus on profitability, luxury resale platform The RealReal is “deemphasizing” the direct sales side of its business to focus on its more profitable consignment operation. The first casualty of this shift in strategy will be the beauty category, which the platform plans to sunset after selling through existing inventory, a spokesperson shared with Retail TouchPoints.
“As you’ve heard us say over the past few months, we’re prioritizing our efforts on growing our luxury consignment business,” said a company spokesperson in comments shared with Retail TouchPoints. “With that, we have been deemphasizing the direct side of our business, including our beauty category, which is a smaller piece of our marketplace.”
The RealReal first started selling beauty products in 2018, expanding beyond its core consignment business and into the direct sale of new products. Now beauty has all but disappeared from the site, with the exception of a Beauty on Sale section where most products are now available at a discount.
The luxury beauty category has become increasingly crowded in recent months, with competitors such as Farfetch and Moda Operandi joining the mix. At the same time, The RealReal has been under increasing pressure from shareholders to become profitable as its share price has nose-dived.
As the company spokesperson pointed out, beauty is a relatively small piece of The RealReal’s marketplace and not a very profitable one at that. Newly appointed CEO John Koryl said during the company’s Q4 2022 earnings call that the “profitable consign business is growing very healthily, and the unprofitable direct business is shrinking.”
Koryl, who joined the company on Feb. 6, 2023, is on a mission is to streamline the company’s operations after another disappointing quarter, when net losses totaled $47.3 million despite strong sales growth over the past several years.
The company has laid out an aggressive strategy to reach profitability by 2024, and in November 2022 during the company’s Q3 2022 earnings, then Co-Interim CEO Sahi Levesque indicated that that goal might be reached sooner than expected. Other cost-saving initiatives have included the elimination of 230 positions, or 7% of its workforce, as well as the closure of four brick-and-mortar stores, two consignment offices and a reduction in its office space in San Francisco and New York City.