Hot Brands, 2021: The RealReal Redefines Luxury


Luxury is taking on a new meaning heading into 2021, and The RealReal may be leading the way. The chic secondhand e-tailer's fortunes are rising fast, not just among discerning young affluents, but Wall Street watchers as well.

The brand's cachet has grown considerably, even as much of the luxury world has fallen apart. Of course, not all The RealReal’s appeal is related to the pandemic. Well-heeled millennials have been demanding greener fashion choices for years.

But COVID-19 changed everything. With fewer international trips, vacations, parties and special occasions -- not to mention shuttered boutiques -- people had fewer reasons to shop for something swanky. Yet all those fashionistas, stuck at home in their yoga pants, also had time to get even more comfortable with buying expensive goods online.

And while that's not such good news for the luxury brick-and-mortar stores, it's meant brisker business for The RealReal. Baird, the investment company, just began following the e-tailer, initiating its coverage with the conviction that The RealReal will outperform competitors in the months ahead.

"The RealReal is a compelling open-ended growth story with a path to profitability as it unlocks supply in a large and growing addressable market," writes analyst Mark Altschwager, who covers the company for Baird.

"We see several structural forces in place to drive robust growth in the secondhand resale industry: accelerating adoption of online spending on luxury goods, a greater focus on sustainability among consumers and brands alike, and a rise in specialized marketplaces, including The RealReal, that are unlocking supply and reducing frictions in the buyer/seller experience."

He notes that while the luxury resale market is still relatively small, at less than $10 billion, there is still plenty of room to grow into the massive $300 billion market of luxury goods.

The company's stock has been rising due to Wall Street's interest and its recent announcement that holiday sales had been coming on strong.

The San Francisco-based company says it saw record monthly new and repeat buyers in November, with the number of new buyers rising 24% from the prior year. "While COVID-19 continues to present challenges to our supply acquisition, especially in the fine jewelry and watch category, we are optimistic that category mix will normalize as we emerge from the pandemic," says Julie Wainwright, founder and CEO, in that announcement.

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