The RealReal is a US-based online luxury resale marketplace where shoppers can find anything from a Chanel quilted handbag to a Van Cleef & Arpels Alhambra necklace. Having inspired confidence in investors about its prospects, it raised $40m in venture capital funding in April, after attracting $83m previously. The company expects to sell merchandise worth $400m in 2016, a quarter of which will be from its fastest-growing category, fine jewellery and watches. (In comparison, auction house Christie’s sold $624m of jewellery in 2015, online and in physical auctions.)
The site is one of several that are seeking to benefit from the growth of global annual jewellery sales, which, according to consultants McKinsey, will reach €250bn by 2020, up from €148bn today. Those surveyed by McKinsey in 2014 expected online jewellery sales to go from 4 or 5 per cent of the market to 10 per cent by 2020.
These sites are seeking to guarantee value and trust for buyers and sellers alike, and provide alternatives to the online auction group eBay, which does not verify or curate any of its listings.
Coming from a family of jewellery manufacturers and with online retail experience at Groupon and Fab, Tirath Kamdar launched TrueFacet, a consignment site focusing entirely on watches and jewellery, in 2014. He saw an opportunity to bring transparency to the market for second-hand or estate jewellery which traditionally has been dominated by pawn shops, independent stores and dealers. The opportunity is a substantial one, he adds, estimating that the estate jewellery market “is worth more than $15bn in the US alone and three times bigger globally”.
Michael Groffenberger, The RealReal’s senior category director for fine jewellery and watches, agrees that the broader industry has been opaque in its dealings until now, making it hard for owners to assess the value of their unwanted jewellery and for buyers to know whether they are paying a fair price.
Putting the emphasis on creating a full service for sellers and buyers, The RealReal takes possession of all consigned items, authenticating and professionally photographing them before listing them on its glossy site.
The company accepts items via mail, but given the complexities inherent in valuing jewellery and watches, it has opened four valuation offices across the US in the past year. Mr Groffenberger says this face-to-face approach has been worth the investment. “We see higher-value items and higher conversion in customers who come to our offices,” he says.
Prospective consignors meet gemologists, who authenticate and assess the value of an item, giving a much more realistic idea of an obtainable price than if a consignor were to set it themselves on, for example, eBay. In return, consignors pay a 40 per cent commission on items sold, falling to 30 per cent for annual sales of $10,000 or more.
TrueFacet allows customers to send pictures of items through the site or by text message. In return, they receive a real-time valuation from a specially created algorithm that uses internal and third-party data and takes into consideration a piece’s attributes, materials, condition, packaging and popularity.
Once an item is sold, it is sent to TrueFacet’s New York offices for authentication before proceeding to its new home. TrueFacet holds the buyer’s money while it authenticates the piece; if it passes that process, the payment is sent to the seller, less an average of 15 per cent commission on the final sale price. TrueFacet also offers to take charge of the entire listing process in return for an average commission of 20 per cent.
New York-based Del Gatto, meanwhile, seeks to give its sellers the best value by using a hybrid business model. Once an owner receives Del Gatto’s valuation for an item, they have two options: to accept a cheque from the company to purchase it outright or to offer the item on Del Gatto’s marketplace, I Do Now I Don’t, for a 15 per cent success fee (10 per cent for sales of $100,000 or above). I Do Now I Don’t achieves an average sale price of $5,000, compared with an average Del Gatto purchase of $15,000, the company’s founder, Chris Del Gatto, says.
But who are the consumers purchasing from these luxury digital marketplaces? Ayako Homma, senior research analyst at Euromonitor, says millennials are the key consumers. Having grown up online, “they rely on fashion blogs and social media to follow trends in fashion and style”, she says. This consumer is more likely to find products in The RealReal’s under-$1,000 “Editors’ Picks” shop than on I Do Now I Don’t, at least until their income increases.
Mr Groffenberger says the age range of The RealReal’s customers is wider, from 25 to 65. He attributes the growth enjoyed by the watch and jewellery department, at least in part, to its having attracted some of the 4m customers who were already using the site to buy handbags and fashion.
Mr Kamdar adds that search engine-friendly products such as Cartier’s Love bracelet and Van Cleef’s Alhambra collection have been a key factor in TrueFacet’s growth. A Google search for “buy Cartier Love bracelet”, for example, brings up TrueFacet on the first page.
Christie’s jewellery department also seeks to include web-friendly products in its digital sales. Angelina Chen, head of jewellery ecommerce at Christie’s in the US, says the company’s far-reaching resources and mixture of established collectors and first-time buyers mean it does better with more unusual products than the purely digital marketplaces. “Pieces like a pair of 1970s VCA turquoise ear-clips appeal to our sophisticated buyer,” she says.
Sucharita Mulpuru, an ecommerce retail analyst at Forrester, says that now that many of the emerging luxury consignment sites have received their millions in venture capital funding, the pressure is on them to perform. For example, Vestiaire Collective, a French website for second-hand luxury goods, received €33m in an additional funding round in 2015, bringing its total fundraising to €60m.
The problem, as far as Ms Mulpuru sees it, is a classic pre-digital one of supply and demand. “High-end luxury is a very small part of the overall retail market and there are only a finite number of people with the kind of merchandise that other people actually want to buy,” she says.