Interview: How The RealReal Leverages Circular Luxury Apparel For A Sustainable Future
Ahead of his appearance at Shoptalk, The RealReal's head of omni-channel, Michael Groffenberger, caught up with PSFK to share his insights on the future of luxury consignment, as well as how consumers are increasingly turning to more sustainable, economic and eco-friendly options
Today's consumers are increasingly conscious of the impact their purchases have on the greater environment, and of the entire lifecycle of their goods beyond just the purchase and use phases. Accordingly, luxury consignment store The RealReal aims to enable a truly circular economy within this space, helping consumers to buy more sustainably when it comes to fashion as well as investing in items that retain value.
Further, the brand strives to encourage fashion designers to create high-quality items that can be recirculated, aligning with and supporting shifting values among consumers and producers. PSFK caught up with The RealReal's head of omni-channel, Michael Groffenberger ahead of his appearance at Shoptalk to learn more about what he will share at the event, as well as how the company is working towards a more sustainable future for consumers, the apparel industry and the environment alike.
Could you describe the consumer and luxury industry trends you've noticed lately, and that you're leveraging at The RealReal?
For starters, the consumer mindset has changed. Luxury buyers are making purchases knowing they can earn back a significant portion of the original cost when they are done with them. They have learned they can leverage the ROI on their luxury purchases, and take those earnings to purchase the newest styles in the primary market. Our job is to educate the consignor on what brands hold resale value (which can shift from season-to-season or year-to-year) so they are well-informed when shopping brands in the primary market. It’s the new luxury life cycle and a key driver of the circular economy for fashion, particularly for millennials and Gen Z.
Consumers are also becoming more eco-conscious and gravitating toward companies and practices that share those values. Many consignors have ‘graduated' from shopping fast-fashion, which is harmful to the environment and doesn't hold resale value in comparison to buying designer fashion that is more sustainable and earns you cash back when consigned. Consigning and/or shopping resale is good for the planet, and more and more consumers are taking to it—especially younger generations.
The modern definition of luxury is changing, as consumers demand accessibility and engagement over exclusivity. Are there any gaps you've noticed in terms of what today's consumers want out of luxury retail, and that The RealReal is trying to fill?
We’ve seen a major behavior shift with consumers, where they’re now prioritizing sustainability, transparency and value. In fact, 80% of consignors and customers say The RealReal has changed the way they shop. They’re checking resale value of brands on our site before shopping retail. They make purchases now knowing they will eventually consign them and make a significant portion back on the original cost.
Our job is to educate the consignor on what brands hold resale value and what does not (which can shift from season-to-season or year-to-year) so they are informed when shopping brands in the primary market. It’s the new luxury life cycle.
What was the motivation behind founding the company?
The idea for The RealReal was born after Julie was out shopping with a friend: Her friend purchased items from a consignment rack in the back of an upscale boutique. Julie never knew her to shop consignment or buy from online resale websites. When she asked her friend why, she said she trusted the shop owner, the shop was beautifully curated, and she was getting amazing deals on Louis Vuitton and Gucci. It changed Julie’s perception of consignment. The lightbulb went off, and she did extensive research of the luxury and resale markets, and even tested resale methods herself.
There was a massive market opportunity to create a beautiful shopping experience, preserve the romance of luxury brands, ensure authenticity and remove barriers to consignment—not to mention the business model would be impervious to the likes of Amazon and Alibaba. In December of 2011, Julie had her “aha!” moment. By early March, she picked out a name, registered the business and raised capital. In June 2011, she opened the doors. She went from running the business out of her house to renting a warehouse and setting up a true office where all items would be processed and authenticated.
Your site describes the company as believing in the life cycle of luxury. Could you expand upon what this means, and how you enable it?
Resale is all about extending the lifecycle of goods, keeping them out of landfills and putting into into the hands of new owners—it’s inherently sustainable. That’s why resale is emerging as a key player in the circular economy. For The RealReal, we’re all about bringing awareness to the circular economy by educating consumers on how to think more sustainably when it comes to fashion and by buying items that retain value. At the same time, we’re encouraging fashion designers to produce high-quality items that can be recirculated.
Primary market brands are warming up to this idea of resale propelling the circular fashion economy. Stella McCartney has been ahead of her time in recognizing this partnership and the sustainability aspect of circular economies. In fact, we just extended our year-long partnership with Stella, where her shoppers who consign with us receive $100 store credit to shop at Stella stores or online.
That added incentive is helping to drive circularity and generate more awareness for sustainable models. For example, the RealReal has saved 88 million driving miles in energy and greenhouse gasses since our inception—that’s huge! We’ll continue putting real weight behind expanding perceptions of resale and sustainability in 2019 and hope other brands will join us.
The RealReal started as online-only. Could you describe the journey from digital-native to having physical outposts? At what point did the company decide to invest in store experiences, and how have they benefited your retail strategy?
We first took The RealReal offline when we opened our luxury consignment offices (LCOs). They were a strategic step to support our mission to remove the friction from consignment and make it as easy as possible for consignors. Their primary function is educating consumers about the value of their luxury goods, particularly in categories like fine jewelry and watches. By enabling our consignors to directly engage with our experts, there’s great transparency around value and the process of consigning.
The LCOs were so successful that we’ve expanded to nine LCO locations across the country today. It was a natural next step to think about ways to create an offline experience for our buyers as well. We tested the concept with an initial pop-up store in NYC and saw significant lift there as well as the other markets we tested, so we opened up permanent stores in NYC and LA—both of which include LCOs, so there’s a rich experience for both buyers and consignors.
The stores have been an accelerator for our business. In addition to increasing our brand awareness, they’ve also increased our average order size, attracted new customers and consigners and reduced returns.
What does your New York consignment location offer, to shoppers as well as the business? How did you decide to go from popup to permanent?
Our New York location is a full retail store, so it goes far beyond what our luxury consignment offices offer. We found that the in-store experience really crystallized the entire business and brought our brand to life. Given its success, it was a natural next step to make our SoHo popup a permanent store. It gives shoppers access to our in-store experts, they can drop off consignment, send items to the store to try on, and see in person the high quality and beauty of the items. We also layer experiences into the luxury shopping experience, from free valuations to personal styling to refreshments in our cafe to expert workshops.
How do you engage consumers? We see more and more brands turning to social media, influencers and social commerce generally. What's your main strategy?
We’re active on social media, with a focus on educating and inspiring. We showcase our experts in action, workshops we host, and services and products we offer. Social media presents a channel for us to engage with our existing community and also expand to reach new potential customers and sellers— it’s not just transactionally about buying and selling.
We get a lot of questions on social from potential consignors and customers, so it’s also a way for us to welcome them into the brand community we’ve built and be a resource to address common questions about what items we accept, how to consign with us, etc. We also collaborate with social influencers to reach new audiences.
What do you plan to share at your upcoming Shoptalk appearance? More broadly, what's next for The RealReal, and for the future of luxury consignment generally?
Our mission is to extend the life cycle of luxury items and contribute to sustainability in the fashion industry. We’re the leader in luxury consignment, but we’ve only scratched the surface. The apparel industry is still the second largest industrial polluter next to oil. We’d like to see more luxury brands exploring circular economy models and tapping into resale. Our hope is that the work we’re pioneering, whether creating the first major resale/luxury brand partnership with Stella McCartney or creating a sustainability calculator to quantify the positive impact of consignment on the planet, will inspire others to think more responsibly about how we produce and consume fashion.