RealReal VS. Reflaunt’s Resale-as-a-Service

Just as The RealReal started appearing on the high-risk list for bankruptcy, Reflaunt announced new partnerships with Balenciaga and Saks Off 5th to offer resale-as-a-service offerings. Maybe you believe in coincidence, but I don’t.

The RealReal and Reflaunt compete in the same $32 billion second-hand luxury market, which Bain reports will grow five times faster than the primary market, growing 65% from 2017 to 2021, while first-hand personal luxury goods up 12%. But these companies operate under completely different business models.

RealReal follows a more or less traditional consignment business model. Individual shippers send items to The REAL, where they can be sold or purchased directly for cash or on-site credit. REAL also offers an optional concierge service, entering the consignor’s closet and hand-picking items. It then authenticates, photographs and lists items for sale on the website, or ships them to one of its 19 stores.

Reflaunt operates very differently under the Resale-as-a-Service (RaaS) model. Essentially, it is a facilitator for brands and retailers to seamlessly integrate resale and recycled fashion directly into their own business models. While it does offer direct consignment sales to consumers through its concierge service and limited direct trade-ins, branding is its main target.

In addition to Balenciaga and Saks Off 5th, it also offers resale services for Net-A-Porter, Harvey Nichols, The Outnet, and more.

That’s how Reflaunt works, with Balenciaga as an example. Balenciaga customers can return their beloved items to the store for credit. Items are then shipped to Reflaunt, where they are authenticated, photographed and priced. The item is then listed for resale on Reflaunt’s global network of resale sites, which includes Tradesy, Vestiare Collective and 28 others. Some brand partners also offer resale merchandise directly from their website.

Difference amplification

The main difference between the two companies is their customers: for The REAL, it’s the consumer; for Reflaunt, it’s the brand. There is a world of difference between the two.

REAL has to go out and find customers and shippers. Reflaunt’s brand partners already have them built in.

REAL requires customers to go through a separate customer journey. Reflaunt broadens the brand’s existing customer journey to include resale. This is a value proposition that brands understand, as their customers are waking up to a circular economy and want to capitalize on the value existing in their own closets.

Reflaun calls it “active consumption,” and by offering RaaS, brands help their customers participate in a circular economy by bringing used items back to the store and earning credit or cash to kick off another customer journey.

“As a retailer, you’re offering customers an additional, positive service that they’re invited to resell before buying a new product,” said Felix Winkler, CCO, who co-founded Reflaunt with CEO Stephanie Crespin in 2018.

“Our view is that resale is going to be a big part of the fashion industry and one of the things that retailers will ultimately offer their customers,” he continued.

Rather than allowing The REAL to profit from the badge value, goodwill and reputation that luxury brands have worked hard to develop over the years, Reflaunt allows brands to put it “all at home”, thereby increasing brand loyalty and ongoing customer engagement .

Reflaunt reports that some brands offer cash back to customers who return items for resale, but more brands give an extra 10% back. About 85% of sellers choose the credit option to reinvest in new purchases, and dealers have a 4 to 7 times longer lifetime value than their average customer.


“We let brands take back control of the used market,” Winkler said. “The brand’s customer relationships are not only maintained, but strengthened. By encouraging customers to make positive changes to the environment and to understand the lasting value of what they buy, their brand reputation is also enhanced.”

Brands have financial incentives to work with Reflaun because they don’t make any profit from resale items on The REAL. “If resale becomes part of a brand’s service, they have an opportunity to create a new source of cash flow,” he said.

But perhaps more importantly, resale offers brands a way to create new circular customer journeys as they help customers engage in a circular economy.

“Brands don’t have many opportunities to engage customers outside of sales. Resale is a great way to re-engage them and increase retention,” he continued.

Reflaunt’s business model also overcomes the authenticity issues that have plagued The REAL since its inception. Brands know what their customers are buying, and fakes are easy to spot.

REAL relies on its authenticators, and they are not always correct. REAL recently settled a $11 million class-action lawsuit filed by shareholders who claimed they were misled in the company’s 2019 IPO about the level of certification it offered.

The problem is solved

In fact, The REAL has become a problem for luxury brands, and Reflaun solves a problem for them. “Reselling can be a challenging new business model for brands whose core business is manufacturing and distributing new products. Reverse logistics is very complex,” shared Winkler.

“And then there’s the tech part. Integrating that into the retailer’s backend is complex. We focus on that. We’ve done all the work, have the expertise and have a tested model that brands can use to incorporate resale into their Models and service products,” he said, adding that prior to Reflaunt, co-founder Crespin founded one of the leading used product markets in Southeast Asia called Style Tribute.

“Stephanie has been in the second-hand trade for decades,” he said.

Which do you choose?

As a private company, Reflaunt doesn’t release figures, but it does show that it grew 25% per month in the last fiscal year and now has a portfolio of more than 40 luxury brands, retailers and resale partners with more than 10% resale volume. billion shoppers around the world. It currently has a strong presence in Southeast Asia and Europe, with rapid growth in North America. It is looking at China, South Korea and Japan as markets for expansion.

As a public company, The REAL’s data is obvious to all. While revenue rose nearly 50% in the six months through June, from $204 million a year earlier to $301 million this year, it was still in the red, with adjusted EBITDA of $64 million over the past six months. It guided for a loss of $240 million to $30 million in the third quarter. In a potentially troubling sign, its average price fell to $486 in the second quarter from $520 last year.

To make matters worse, The REAL has no CEO after founder Julie Wainwright left the company in June. Rati Sahi Levesque, president and chief operating officer, and Robert Julian, chief financial officer, currently serve as joint interim chief executive officers.

While Wainwright has been mum about why she picked up the stick from The REAL, maybe she saw the writing on the wall. It’s a good thing RealReal persists, but its business model isn’t designed for the long-term.

Time will tell that Reflaaunt exists, but it appears to be ready for everything as it doubles down on helping luxury brands embrace circular fashion as part of their business model.

Source link