It’s been a rocky period for luxury. Is it resale’s time to shine?
This quarter, tariffs and low consumer sentiment hit luxury brands’ bottom lines. But at The RealReal, revenue hit $165 million in the second quarter of fiscal 2025, increasing 14 per cent year-on-year, beating company and analyst expectations — as well as the performance of leading companies operating in the primary market. It reported gross profits of $123 million, a $15 million increase on the year prior.
“It feels really good for the team and for the company to show that resale can be profitable; that resale can be sustainable financially and that the volumes are there,” says The RealReal CEO Rati Levesque. “Our growth playbook around retail sales and marketing are coming together and really accelerating the momentum that we’re seeing.”
It’s been a long, slow process, Levesque says. The RealReal has been on rocky ground since its 2019 IPO, a sign of resale’s growth and profitability challenges. The pandemic took a hit on revenues, and The RealReal remained loss-making for the three years that followed. The company became profitable for the first time in the fourth quarter of 2023. This was the year the company refocused on luxury consignment, discontinuing its beauty offering and reducing its acceptance of lower ticket items. Still, the company saw negative growth for a period, before returning to positive growth in 2024. Revenues were up 9 per cent in the first quarter of fiscal 2025.
“There’s no silver bullet,” Levesque says. “As you reinvest, as you put time and money into the business, things don’t happen overnight. Things take time and you just have to keep chugging away at it.” Through investments in marketing (from out-of-home activations to the retailer’s Gen Z-focused Substack) and restructuring to increase efficiencies, The RealReal has arrived at a place where analysts are optimistic about its continued growth. After shedding value since its IPO, shares have risen 33 per cent in the past month.
Wells Fargo analyst Ike Boruchow maintained his buy rating. “We continue to like what we see from The RealReal. At a high level, the model has course-corrected, margin structure has shifted and its topline is back to double-digit growth — and accelerating,” he wrote in a note following the earnings. “Resale is a clear winner in today’s macro [environment], and we remain bullish.”
There’s been a wider culture shift at play, too, Levesque says, which has bolstered the company’s progress. High earners are now more inclined to look to resale, boosting The RealReal’s profile and profits, she says. In 2023, 47 per cent of consumers earning over $100,000 bought secondhand items — higher than the 43 per cent average, according to a Pymnts survey. “There is a culture shift that we’ve helped pave the way for, that we’re excited to capitalise on, too,” says Levesque, noting the uptick in consumers that check resale prices before purchasing on the primary market.
Already, Gen Zs are primed for these habits, with 82 per cent exhibiting this behaviour, according to The RealReal’s research. Sixty-eight per cent of younger generations shopped secondhand apparel in 2024, up 3 percentage points from 2023, per Thredup’s 2025 resale report, while 48 per cent say that the secondhand market is the first place they look. Already, more than half of The RealReal’s customers are Gen Zs and millennials, and Gen Z is the fastest-growing cohort. But as consumer confidence wobbles amid tariff and cost of living concerns, and resale competition stays strong, can The RealReal continue on this growth trajectory?
Headwinds or tailwinds?
Since President Donald Trump’s tariffs were introduced, experts have yo-yoed about whether tariffs will help or hurt the resale market. Some say that secondhand will see an uptick as consumers seek more affordable options (that are already in the country), while others flag that circular fashion will face its own set of challenges, from increases in logistics and tech costs to the basic fact that a majority of its stock is imported product. Though Levesque notes that there’s no way to know for sure, she’s leaning towards the latter.
The RealReal is well — and uniquely — placed, she says, because of where it sits at the intersection of luxury and value. “Our buyer tends to be more resilient because of it,” Levesque says. Right now, The RealReal consumers are buying lots of jewellery and branded handbags — high-value items, she says, meaning that at least a portion of those shopping at the retailer are less sensitive to the current macro environment. Plus, because The RealReal doesn’t buy product, the company isn’t squeezing its margin, Levesque adds.
The CEO notes that if prices on the primary market increase, then The RealReal’s “probably will” too — but the retailer will still be a value play, she flags. (Prices are based on factors including market trends, item condition and the brand’s resale value, per the brand.) Even if prices go up, they’ll rise less than primary market items (and they’re cheaper by virtue of being secondhand). “[Brands] are worried about their supply chain, whereas all of our product comes from people’s closets,” Levesque says. “It’s domestic closets, [the] $200 billion [worth of clothing] trapped in people’s closets. So we’re not concerned about tariffs.”
Consumers are leaning this way. Fifty-nine per cent said that if new government policies around tariffs and trade make apparel more expensive, they’ll seek more affordable options like secondhand, per Thredup; the percentage reaches 66 among younger generations. McKinsey also found that Gen Z consumers are much more likely to purchase secondhand in response to tariff news.
Another hot topic Levesque isn’t worried about? AI. She is excited about both the ability for The RealReal to harness the tech — even more than it already has — and also about how people’s algorithmic fatigue may direct them to secondhand shopping.
Tech-wise, The RealReal is using AI to drive efficiencies: the company’s 320 basis points in operations improvements was all down to AI, Levesque says. The company has implemented AI throughout the business, from its sales team to its authentication and pricing divisions. This year, The RealReal launched Athena AI, a tool that uses image recognition to authenticate items. By the end of the year, almost half of The RealReal’s products will move through this tech. “It’s making sure our experts get their eyes on the items that are high risk,” she says.
The tailwinds from consumers looking to hone more individualistic style are less concrete, but Levesque sees value in this moment, too.
“With AI and how transactional the world is headed in so many ways, these one-of-a-kind items that you can’t find anywhere else, these items with imperfections — [there’s] this want to look more authentic and unique versus everyone else,” she says. “If an algorithm spits out a style at you that everyone’s wearing, whatever that item is, I think people are going to want to feel more authentic to who they are.” Already, consumers are grappling with this desire, seeking ways to break out of algorithmically defined style ruts.
This, too, is driving consumers to platforms like The RealReal, Levesque says, as shoppers look for unique pieces they won’t find amid the infinite scroll of an Instagram feed or an e-commerce site. “That cultural shift also maps back to all the tech in the world,” she adds.
Now, being based in Silicon Valley, top of mind for Levesque is how tools like ChatGPT and Claude AI will impact how consumers — especially Gen Z — shop. “It’s very far from where it needs to go to really understand your personal style and recommend you items, but the way we market has changed, a lot of it has moved to AI,” she says. “So versus SEO [search engine optimisation], it’s moved to GEO [generative engine optimisation, or AIO] — and we’ve had to evolve in that way. We’ve had to evolve the way we think about our marketing strategy and our relevancy in some of these channels.”
Though Levesque believes there’s time before AI tools will completely upend how consumers discover and shop, The RealReal is staying alert and agile. “Being a data-led company, we really focus on doing both art and science, testing and learning and always evolving,” she says.
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