The RealReal Vs. Reflaunt’s Resale As A Service

Simply concerning the time that The RealReal began to seem on high-risk lists for chapter, Reflaunt introduced a brand new partnership with Balenciaga and Saks Off fifth for its resale-as-a-service providing. Possibly you imagine in coincidences, however I do not.

Each The RealReal and Reflaunt compete in the identical $32 billion second-hand luxurious market that Bain studies grew five-times quicker than the first market from 2017 to 2021, up 65% as in comparison with 12% for first hand private luxurious. However the corporations function below completely completely different enterprise fashions.

The RealReal follows a roughly conventional consignment enterprise mannequin. The person consigner sends an merchandise to The REAL the place it could be bought on or purchased immediately for money or web site credit score. The REAL additionally affords a selective concierge service the place it goes into consigners’ closets and hand-picks gadgets. Then it authenticates, images and lists the gadgets on the market on the web site or delivers it to considered one of its 19 shops.

Reflaunt operates fairly otherwise below a resale-as-a-service mannequin (RaaS.) Primarily it’s a facilitator for manufacturers and retailers to seamlessly combine resale and round trend immediately into their very own enterprise fashions. Whereas it does supply customers direct consignment by its concierge service and direct trade-in on a restricted foundation, manufacturers are its major goal.

Moreover Balenciaga and Saks Off fifth, it additionally affords resale companies for Web-A-Porter, Harvey Nichols, The Outnet amongst others.

Reflaunt works like this, utilizing Balenciaga for example. A Balenciaga buyer can return a pre-loved merchandise to the shop for credit score. The merchandise is then shipped to Reflaunt the place it’s authenticated, photographed and priced. That’s adopted by itemizing the merchandise for resale on Reflaunt’s international community of resale websites which incorporates Tradesy, Vestiare Collective and 28 others. Some model companions additionally supply resale gadgets immediately from their web sites.

Variations magnified

The important thing distinction between the 2 corporations are their prospects: For The REAL, it is customers; for Reflaunt, it is manufacturers. There is a world of distinction between the 2.

The REAL has to exit and supply prospects and consigners. Reflaunt’s model companions have already got them in-built.

The REAL requires prospects to go on a separate buyer journey. Reflaunt broadens a model’s current buyer journey to incorporate resale. That may be a worth proposition that manufacturers perceive as their prospects are awakening to the round economic system and eager to faucet the prevailing worth in their very own closets.

Reflaunt calls it “optimistic consumption,” and by providing RaaS, manufacturers assist their prospects take part within the round economic system by bringing used gadgets again to the shop and getting credit score or money to provoke one other buyer journey.

“As a retailer, you’re offering an additional, optimistic service to prospects the place they’re invited to resell earlier than shopping for new,” mentioned CCO Felix Winkler, who together with CEO Stephanie Crespin co-founded Reflaunt in 2018.

“Our perspective is that resale will grow to be a vital part of the style trade and one of many companies that retailers will finally present to their prospects,” he continued.

Somewhat than letting The REAL revenue from the badge worth, goodwill and repute a luxurious model has labored laborious to develop through the years, Reflaunt lets manufacturers preserve it “all within the household,” leading to better model loyalty and continued buyer engagement.

Reflaunt studies some manufacturers supply money again to prospects who return gadgets for resale however give extra credit score with an additional 10% incentive. Some 85% of sellers select the credit score choice to reinvest in new purchases and resellers’ lifetime worth is prolonged four-to-seven occasions greater than their common buyer.

Taking management

“We let manufacturers take again management of their second-hand market,” Winkler mentioned. “The model’s buyer relationship just isn’t solely maintained however strengthened. And their model repute grows too by encouraging prospects to make a optimistic distinction for the surroundings and perceive the lasting worth of the gadgets they’ve purchased.”

Manufacturers have a monetary incentive to accomplice with Reflaunt as a result of they do not understand any revenue from the resale of an merchandise on The REAL. “If resale turns into a part of a model’s service providing, they’ve a possibility to create a brand new supply of money movement,” he mentioned.

However maybe extra importantly, resale affords manufacturers a strategy to create a brand new round buyer journey as they assist prospects have interaction within the round economic system.

“Manufacturers do not have a lot of a possibility to have interaction prospects past the sale. Resale is an efficient strategy to reengage them and improve retention,” he continued.

Reflaunt’s enterprise mannequin additionally overcomes the authenticity downside that has nagged The REAL since its inception. Manufacturers know what their prospects have purchased and might simply spot fakes.

The REAL depends upon its employees of authenticators who do not at all times get it proper. the REAL not too long ago settled a category motion lawsuit for $11 million filed by shareholders claiming they had been misled within the firm’s 2019 IPO concerning the stage of authentication it supplied.

Drawback solved

In impact, The REAL has grow to be an issue for luxurious manufacturers, whereas Reflaunt solves one for them. “Resale is usually a difficult new enterprise mannequin to implement for manufacturers whose core enterprise is to fabricate and distribute new merchandise. The reverse logistics is kind of complicated,” Winkler shared.

“After which there may be the expertise piece. It’s sophisticated to combine it on the backend of the retailer. We concentrate on that. We have achieved all of the work, have the experience and have a examined mannequin that manufacturers can use to include resale into their mannequin and their service providing,” he mentioned and added that earlier than Reflaunt, co-founder Crespin based one of many main secondhand Marketplaces in Southeast Asia known as Model Tribute.

“Stephanie has been within the secondhand commerce for many years,” he mentioned.

Which do you select?

As a personal firm, Reflaunt would not launch figures, nevertheless it does reveal that it is grown by 25% each month within the final monetary yr and now has a portfolio of over 40 luxurious manufacturers, retailers and resale companions who attain over 100 million resale buyers throughout the globe. It presently has a robust presence in Southeast Asia and Europe, with North America rising quickly. And it’s trying to China, Korea and Japan as markets for enlargement.

As a public firmThe REAL’s numbers are there for all to see. Whereas six-month revenues ending June are up practically 50%, from $204 million identical interval final yr to $301 million this yr, it is nonetheless dropping cash, $64 million in adjusted EBITDA within the final six months. It is guiding for a $24 to $30 million loss within the third quarter. And in a probably troublesome signal, its common worth tumbled to $486 within the second quarter, down from $520 final yr.

Including insult to harm, The REAL is and not using a CEO after founder Julie Wainwright left the corporate this previous June. Firm president and COO Rati Sahi Levesque and CFO Robert Julian are presently serving as co-interim CEOs.

Whereas Wainwright has been mum about why she picked up sticks from The REAL, perhaps she noticed the writing on the wall. The RealReal was a great factor whereas it lasted, however its enterprise mannequin wasn’t designed for the lengthy haul.

Time will inform about Reflaunt, nevertheless it appears to have all of the items in place to make a go of it, because it doubles down on serving to luxurious manufacturers make round trend a part of their very own enterprise mannequin.