Secondhand clothing is booming right now. This online store wants to cash in

Got a designer bag in your closet? One chain hopes you’ll walk into one of its new shops and give it up for the right price.

Demand for secondhand goods is booming right now, and online luxury reseller The RealReal is looking to cash in.

So it’s taking an approach to boost supply that isn’t typical in an industry where a bulk of sales are happening online: it’s opening up more stores in the hopes of attracting people who want to resell the luxury items in their closets.

The RealReal, whose ecommerce marketplace has over 20 million members, has opened five new stores since November, in locations such as Palo Alto, Brooklyn and Greenwich, Connecticut.

The goal is to open a total of 10 stores by the end of the second quarter this year.

The company is taking a different approach with the new stores. Unlike its existing flagship stores in cities like New York, San Francisco, Los Angeles and Chicago, which are 6,000 to 12,000 square feet in size, these stores are significantly smaller — around 2,000 square feet.

The company has also scouted specific neighborhoods where it thinks it has the best shot of reaching people who want to consign items.

The RealReal is customizing each new “neighborhood store” to match the spirit of the community they’re based in. This is being done through both the decor and the merchandise, Courtney Hawkins, vice president of retail at The RealReal, said in an interview.

A store in Brooklyn, for instance, captures the New York City borough’s vibrant art scene, she said. “We commissioned a handpainted mural by a local artist for the store,” she said.

A store in Palo Alto features a black and white collage depicting the evolution of technology, while one in Newport Beach has a 1960s-70s “SoCal modern aesthetic vibe.”

Secondhand clothing has been a hotspot, with estimates for it to grow to $64 billion in sales by 2024 from current sales of $28 billion.

As demand surges, The RealReal is looking for ways to boost its own supply. One way is to make the consigning process easier.

The company conducted a study in 2020 that showed sellers liked the option of bringing in their merchandise to a store for evaluation and drop off. In fact, as much as 30% of new consignors came from its retail locations in December, said Hawkins.

“They were doing this as they did errands, or a quick grocery run,” she said.

Not your average thrift store

Items in each store are curated to meet the taste and preferences of local consumers, said Sasha Skoda, head of women’s merchandise at The RealReal.

“Our team of data analysts look at things like designer, price and style preferences of shoppers,” said Skoda.

While vintage and bohemian pieces, and designers like Isabel Marant are popular at its store in Brooklyn, Skoda said the Newport Beach shop is stocked with products in bold colors and logo-heavy merchandise.

“The Bay Area isn’t known for fashion in the same way as New York or LA. The brands that do well at the Palo Alto store cater to comfort and the outdoors, like Canada Goose,” she said.

As consumers clear out their closets of high-end brands they no longer desire, they bring them to be evaluated by The RealReal’s in-house team.

Once the consigned merchandise is authenticated, The RealReal’s team decides if a particular item should be sent to one of its stores based on how it fits into the merchandising strategy, and all in-store products are also shoppable online.

Hawkins said the stores also provide services like free appraisals on consignment items, cleanings, repairs and bespoke alterations.

“This is really an opportunity to change the perception of resale by creating an elevated luxury experience,” said Hawkins.

Will it work?

It’s an opportune time to open up new stores, Hawkins said. With many retailers shuttering stores in the pandemic, she said landlords have been very willing to offer short-term leases for vacant shops sitting in their neighborhoods.

“The reason [landlords] are willing to talk to us is that we are able to draw foot traffic, and they see the value in that,” she said.

Retail analysts are bullish on the RealReal’s store expansion as a way to stock up on inventory.

“Historically, The RealReal has been supply constrained, not buyer constrained, as the company sells nearly everything that it lists,” said Aaron Kessler, analyst with Raymond James. “We believe having stores in key neighborhoods close to their client base (e.g. Palo Alto, Brooklyn, etc) can provide a more efficient way to obtain supply versus the company’s White Glove service of sending luxury managers to peoples’ home [for product evaluation].”

The company’s White Glove service entails one of its luxury managers going to a person’s home, consulting with them on what to consign, offering an estimated price for the items and collecting them.

The RealReal temporarily suspended the service last year because of the pandemic and is offering at-home appointments again in select markets with safety measures in place.

The company’s move to open more stores also sets The RealReal apart from its competitors as most don’t operate physical stores to complement their online businesses, said Neil Saunders, retail industry analyst and managing director of GlobalData. Other resellers such as Poshmark, OfferUp and Mercari don’t have physical stores, while ThredUp does operate a few stores.

“Having more physical stores will help The RealReal pull in more shoppers and differentiate itself from an increasingly crowded space of resellers, many of whom are ecommerce-only businesses, said Saunders.

Correction: An earlier version of this story misstated how many stores The RealReal has opened since November.