• by Sarah Mahoney , Staff Writer @mahoney_sarah, March 28, 2022

The RealReal, the luxury resale site, is strutting its fashion-forward plans on the runway. In its annual investor meeting, it announced forecasts projecting that it will reach $5 billion in gross merchandise value by 2025. By then, it will also have more than $1.5 billion in revenue and earnings of $100 million, the company projected.

These goals are ambitious, considering it is forecasting gross merchandise value of about $2 billion for fiscal 2022 and a loss of between $80 and $100 million. (GMV is the total value of the clothing, jewelry, watches, handbags and other items it sells.)

But with its fast growth rate -- and the rapid increase in the overall luxury resale market -- the San Francisco-based company has plenty of believers.

“TheRealReal’s investor day showcased a deep bench of talent, fresh perspectives, and a differentiated marketplace model,” writes Mark R. Altschwager, an analyst who follows the company for Baird. “We like the company’s focus on expense discipline and came away with increased confidence in [its] path to profitability,” including marketing efficiencies.

Altschwager, who rates the company as likely to outperform competitors, adds that the RealReal is better able to fend off other resellers with its new Authentication Center. As if to underscore the point, the D2C company hosted the event at its Arizona facility, demonstrating the progress it’s made in ferreting out the fakes that are a continual thorn in the industry’s side.

The RealReal is the world’s largest online marketplace for used and authenticated luxury goods. In addition to its 25 million members, it operates 19 retail locations. While its focus is fashion and jewelry, it also sells art and home items and has invested heavily in AI that determines the best ways to price, photograph and list items.

It’s not just the RealReal that stands to gain from the boom in resale sales -- at all price points.  Gen Z embraces the market as more sustainable, flocking to sites like ThredUP and Poshmark. And individual brands, including Patagonia, H&M and Levi’s, are finding new ways to sell used clothing to eager young audiences.

But luxury resale is growing even faster. A recent study from McKinsey estimates that it hit between $25 billion to $30 billion in 2020 and predicts an annual growth rate of between 10% and 15% for the next 10 years. McKinsey says digital platforms, such as the RealReal, already have between 25% and 30% market share but are growing much faster. It estimates they are expanding at about 30% a year.

While about 75% to 80% of luxury buyers want only new things, that’s changing fast, McKinsey says. In watches, for example, it estimates resale will account for about a third of all sales by 2025.

About 41% of buyers say they choose resale because it offers rare or exclusive items, and 41% say the draw is its lower economic index. Only 35% say it’s to save money.