$100 million in used Chanel: How The RealReal is changing luxury shopping

February 13, 2015, 5:57 PM UTC

There are plenty of places to buy a used Chanel bag online. There are also plenty of places that will sell you a fake. The RealReal, a luxury consignment site that generated $100 million in sales last year, is not one of those places. The San Francisco Bay Area company prides itself on authenticating luxury goods and weeding out the fakes. (After all, the word “real” is in the name.)

The RealReal has a rigorous authentication process, evidenced by the four-inch thick binders full of specifications for thousands of luxury items that adorn each employee’s desk. The company even holds internal “Find the Fake” contests where authenticators get prizes for identifying tell-tale signs on counterfeits.

But a strict no-fake policy isn’t the only reason for The RealReal’s rapid growth. Unlike most other online marketplaces, the company takes control of its inventory. It provides high-touch services for its sellers, sending drivers to their homes to pick up items for consignment. (The company once returned a pair of $100,000 diamond earrings a seller had inadvertently left in a purse she wanted to sell.) It’s an elaborate process—every item in The RealReal’s warehouses is different. The company turns over its inventory very quickly, with most items selling within 30 days.

Four years in, The RealReal is impacting the way people shop. If a consumer knows she can resell her luxury purchases, she is more likely to make the investment. Beyond that, if she’s going to spend a lot on something, she’s more likely to trade up to brands with the highest resale value. Secondhand items from Chanel, Hermès, Christian Louboutin, and Cartier are worth a lot. Marc Jacobs, Versace, and Givenchy? Not so much.

Julie Wainwright, CEO and founder of The RealReal, says this shift in shopping habits is why luxury retailers like Saks Fifth Avenue and Neiman Marcus have embraced The RealReal by offering gift cards in exchange for consignment on the site. By boosting the value of secondhand luxury goods, shoppers see more value in buying them firsthand.