Real Real Vs. Reflaunt resale as a service

As The RealReal began appearing on high-risk listings, Reflaunt announced new partnerships with Balenciaga and Saks Off 5th for a resale-as-a-service offering. Maybe you believe in coincidences, but I don’t.

The RealReal and Reflaunt both compete in the same $32 billion second-hand luxury market, which Bain reports will grow five times faster than the mainstream market from 2017 to 2021, up 65 percent. But the companies operate in completely different business models.

Real Real follows a more or less traditional commodity trading model. The individual consignor ships the item to REAL where it can be sold or bought directly for cash or site credit. Reilu offers a select concierge service with access to concierge closets and hand-picked items. He then checks it, takes photos and lists the items for sale on his website or delivers them to one of his 19 stores.

Reflaunt operates on a Resale as a Service model (RaaS.), essentially a facilitator for brands and retailers to seamlessly integrate resale and circular fashion into their own business models. While it offers direct-to-consumer through its concierge service and direct marketing to a limited extent, brands are its primary target.

In addition to Balenciaga and Saks Off 5th, it also provides resale services to Net-A-Porter, Harvey Nichols, The Outlet and others.

Reflaunt works like this, using Balenciaga as an example. A Balenciaga customer can return a pre-loved item to the store for credit. The item will be shipped to Reflaunt where it will be verified, photographed and priced. It then lists the item for resale on Reflaunt’s global resale sites, including Tradesi, Vestior Collective and 28 others. Some brand partners offer items for sale directly from their website.

Differences are evident.

The key difference between the two companies is their customers: for REAL, consumers; For Reflaunt, it is brands. There is a world of difference between the two.

REAL needs to go out and generate customers and referrals. Reflaunt’s brand partners have already introduced them.

REAL requires customers to go through a different customer journey. Reflant expands the brand’s customer journey to include reselling. That’s the value proposition brands are realizing as customers wake up to the circular economy and want to tap into the value available in their own closets.

Reflaunt calls it “positive consumption,” and by offering RaaS, brands can help customers participate in the circular economy by bringing used items back to the store and earning credit or cash back to start another customer journey.

CCO Felix Winkler, who co-founded Reflaunt with CEO Stephanie Crespin in 2018, said: “As a retailer, we are providing an additional positive service to customers who are invited to resell before buying new.

“Our view is that resale will become an important part of the fashion industry and one of the services that retailers will ultimately provide to their customers,” he continued.

Instead of working hard to build the REAL badge value, goodwill and reputation of a luxury brand over the years, Reflaunt allows brands to keep it “all in the family”, resulting in greater brand loyalty and continued customer engagement.

Reflaunt reports that some brands offer refunds to customers who return items for resale, but also offer credit with an additional 10% incentive. Some 85% of sellers choose the loan option to reinvest in new purchases, and sellers’ lifetime value is four to seven times higher than their average customer.

control

“We let brands control their second-hand market,” Winkler said. “The brand’s customer relationships have not only been maintained but strengthened. And by encouraging customers to make a positive difference to the environment and realize the sustainable value of the goods they buy, their brand will grow.

Brands have a financial incentive to partner with Reflaunt because they don’t realize any profit from the resale of an item on Real. “If reselling is part of a brand’s service offering, they have the opportunity to create a new source of cash flow,” he said.

But perhaps more importantly, resale offers brands to create a new customer journey as it helps customers participate in the circular economy.

“Brands don’t have much opportunity to engage customers beyond the sale. Reselling is a great way to win them back and increase retention,” he continued.

Reflaunt’s business model also overcomes the authenticity problem that has plagued Real since its inception. Brands know what their customers have bought and can easily spot fakes.

REAL always relies on their staff of verifiers who they don’t really understand. REAL recently settled an $11 million class action lawsuit filed by shareholders who claimed they were misled about the level of assurance it provided in the company’s 2019 IPO.

The problem is solved

In reality, The REAL has become a problem for luxury brands, but Reflaunt solves one for them. “Resale can be a challenging new business model to implement for brands whose core business is manufacturing and distributing new products. Reverse logistics is very complex,” shared Winkler.

“And then there’s the technology part. It’s complex to integrate on the retail backend. We’re going to focus on that. We’ve done all the work, we have the expertise and we have a proven model that brands can use to incorporate resale into their models and offerings. They are called

“Stephanie has been in the undercover business for decades,” he said.

Which one do you prefer?

As a private company, Reflaunt doesn’t release figures, but says it grew by 25% month-on-month in the last financial year and now has more than 100 million repeat sales across more than 40 luxury brands, retailers and retail partners. consumers around the world. Currently, it has a strong position in Southeast Asia and Europe, North America is growing rapidly. And it is looking to make China, Korea and Japan expansion markets.

As a public company, the REAL numbers are all there to see. While revenues for the six months ending in June were up nearly 50%, from $204 million to $301 million in the same period last year, it’s still losing money, with $64 million in adjusted EBITDA over the past six months. It is guiding for a loss of $24 million to $30 million in the third quarter. And in a potentially worrying sign, the average price fell to $486 in the second quarter, down from $520 last year.

Adding insult to injury, The REAL is without a CEO after founder Julie Wainwright left the company last June. The company’s president and COO Rati Sahi Levesque and CFO Robert Julian are currently serving as co-interim CEOs.

While Wainwright remains mum about why she picked up the sticks from The REAL , she probably saw the writing on the wall. Reel was a good thing while it lasted, but the business model was not designed for long.

Time will tell about Reflaunt, but it seems that luxury brands are set to copy everything because it doubles as helping circular fashion become part of their own business model.