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The RealReal Inc REAL Stock Quote

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Morningstar‘s Stock Analysis REAL

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While Cash Burn Poses Genuine Concerns, The RealReal's Long-Term Opportunities Remain Attractive

Sean Dunlop Equity Analyst

Business Strategy and Outlook

| Sean Dunlop |

The luxury apparel resale space has been chronically underserved, with an inefficient network of brick-and-mortar boutiques capturing the bulk of sales volumes over the last decade. The market that arose from that model was heavily fragmented, bound by retail catchment area, and featured high frictional costs, high commissions, and slow turnover—a far cry from other durable asset classes like cars, homes, and collectibles, which have long enjoyed more effective used marketplaces. The RealReal's business model exists to serve this end market more efficiently, with white-glove inventory sourcing (40% of inventory comes from in-home visits), faithful authentication protocols, and an online marketplace leading to step-change improvements in platform depth, turnover, and vibrance. We view the firm's strategy as sound and believe that ongoing investments in fulfillment efficiency, brick-and-mortar stores, and diversified supply sourcing represent a solid roadmap toward profitability and (potentially) excess returns.

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Business Description

The RealReal is the largest luxury resale platform in the U.S., generating $1.48 billion in 2021 gross merchandise volume and addressing a niche (personal luxury resale) that had previously been serviced by inefficient upscale boutiques and local pawn shops. The firm generates revenue via consignment and first-party sales on its online marketplace, and through direct sales across its brick-and-mortar footprint. With a hands-on approach that actively sources inventory and authenticates every item on its platform, The RealReal is able to justify much higher take rates than peers, working out to roughly 25% of gross merchandise value (or 35% of net merchandise value, which excludes returns, cancellations, and first-party sales).

55 Francisco Street, Suite 600
San Francisco, CA, 94133
T +1 855 435-5893
Industry Luxury Goods
Most Recent Earnings Jun 30, 2022
Fiscal Year End Dec 31, 2022
Employees 3,355

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