The RealReal CFO Looks to Trim Costs, Sell Higher-Margin Goods

Luxury goods reseller The RealReal is looking to cut costs and sell higher-margin products in an effort to turn its first profit.

That’s according to Chief Financial Officer Robert Julian, who told The Wall Street Journal (WSJ) Friday (Aug. 26) that the company has thus far put been too focused on boosting transaction values.

Instead, said Julian in the report, the focus should have been on selling merchandise that recoups the most profit. His plan is to sell more consignment goods — that is, straight from customer’s wardrobes — and cut back on products bought from wholesalers.

“I would say there’s been massive changes in terms of how we look at the business, how we analyze the business, what we consider to be our key metrics and key indicators,” he saidin the report.

Twenty-eight percent The RealReal’s second-quarter revenue came from direct sales from wholesalers, while 63% was from consignment, the report stated. Shipping costs made up the rest. Julian said that the gross margin on direct sales was 14%, versus 85% for items sold on consignment.

On an earnings call earlier this month, The RealReal reported that its robust top-line growth was not enough for it to surmount a years-long streak of net losses, which were most recently at $53 million. Compounding this is a people problem.

Read more: The RealReal’s Biggest Problem Right Now Is Hiring People

“This is not specific to a price point or a category supply,” Rati Sahi Levesque, the company’s interim co-CEO, told investors. “When I talk about a labor shortfall, I’m talking about people out in the field, our sales team.”

The trouble comes from a lack of sales labor that left The RealReal without supply to sell, along with a demand shift that saw consumers transition from purchasing high-priced fine jewelry and watches to low-priced items such as shoes and clothing.

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