‘The Moat That We Have to Protect’: The RealReal’s C.E.O. on Reviving the Brand

John Koryl spent his first months as chief govt of the RealReal serving to to wash out clients’ closets. The firm had just lately modified its consignment coverage for the posh items it supplied, and Mr. Koryl wished to see how folks have been reacting to it. So he traveled to folks’s houses in Orange County, Calif., Long Island and elsewhere to search out out what he couldn’t glean from his workplace.

In Mr. Koryl’s telling, he’s the “guy who folds things and packs the bags because that’s about all the value — other than listening — that I add.”

He brings an affable, disarming high quality to his work. But his job now’s exceedingly essential: He is chargeable for turning round a flailing enterprise.

The RealReal is fueled by clients promoting their costly wares to the corporate; the corporate in flip authenticates the products and places them on its web site or in certainly one of its 25 outlets and consignment shops, from Manhattan to Dallas and West Hollywood. When the merchandise sells, the consignor receives a fee. (If the merchandise doesn’t promote inside a yr, it’s both returned to the consignor or donated to charity.) The e-commerce reseller was based over a decade in the past, and never lengthy afterward folks started to ask lofty questions on whether or not this San Francisco start-up might save retail.

But since going public in June 2019, its inventory has declined 92 %. As the posh resale market continues to develop, the RealReal has struggled with stock and different points. The firm modified insurance policies to the disappointment of some clients, and it has carried out two rounds of layoffs this yr.

Mr. Koryl stated he was specializing in higher understanding the RealReal’s buyer — and discovering much more folks prepared to consign their Hermes baggage and 14-karat-gold diamond necklaces. He known as 2023 the RealReal’s “reset year.”

He sat down with The New York Times, a number of days after the corporate reported a $41 million loss for the quarter by way of July, to debate how he was making an attempt to offer the RealReal a brand new look, what it was wish to comply with within the footsteps of a chief govt who was the founder and the merchandise he would instantly buy if he noticed it on the location.

This interview was condensed and edited for readability.

You are coming after a C.E.O. who was additionally the founder, in order that’s at all times an adjustment for any firm in any business. I feel usually there’s that feeling of “how do I make my mark because obviously the founder made theirs.” So what’s the most important change that you simply’ve made in your first six months?

I feel it’s having a variety of respect for what has been performed. I spotted I walked right into a room of a bunch of pioneers — and female-led pioneers at that — with a sustainability imaginative and prescient in thoughts. How usually do you get that chance? So you must tread very frivolously. You need to have a variety of respect for what made them the corporate that you simply wished to affix.

When the RealReal was based in 2011, the concept of consigning luxurious items with out diluting the model was a novel one for each consumers and traders. The firm’s inventory has taken a success since its I.P.O. as traders appear to be lastly wanting a return on funding and see a extra agency timeline for reaching profitability.

What does that imply for you? And how are you making an attempt to place the enterprise now that its mannequin is now not the brand new thought?

I feel, in some ways, the objective posts moved on the RealReal. At the I.P.O., everyone was being rewarded for countless development. As lengthy because the income was rising 30 % or extra, you have been being rewarded by Wall Street. And then Covid occurred. The world stated, “No, no, no, we want everybody to be profitable.”

Part of the rationale I’m right here is to show that story round the place we will really proceed to develop double digits. Definitely not on the identical 35 % to 40 % tempo of the previous, however we will develop double digits and we will develop a worthwhile enterprise.

How will you try this?

We’ve gotten out of direct purchase merchandise [purchasing the merchandise outright and storing it]. We’ve actually minimized the quantity of merchandise below $100 that we’ve on the location. We’ve actually tightened our belts by way of the associated fee profile. We have to handle our debt overhang.

In November, the RealReal overhauled its consignment insurance policies, which incorporates now not accepting merchandise below $100 as the corporate focuses on buying objects that present greater margins; limiting direct buys; and providing decrease commissions for lower-priced objects. What did you study from that course of?

We had a little bit little bit of a response once we modified our fee construction final November. People began getting their first checks in January and February, they usually weren’t signing with us as a lot. It was as a result of the fee adjustments have been a little bit too abrupt and an excessive amount of at one-time. So we’re doing extra of the customized strategy.

As lengthy as we will preserve that offer rising, we will preserve the double-digit development of our conventional enterprise and we will complement it with these different companies, we predict we are going to meet Wall Street’s new expectation that corporations like this must be worthwhile.

Yes, there’s a variety of very worthy rivals enjoying at related value factors, related classes. But has anyone performed it throughout all of the manufacturers? And with the consistency and comfort that we’ve? That’s the moat that we’ve to guard, and we’ve to satisfy his or her expectations daily. That’s what we’re striving to do.

A turnaround is commonly wanted as a result of an organization has expanded too far past its core buyer. Is that the way you see what occurred with the RealReal?

It’s a little bit little bit of tweaking greater than pulling again. With our present capabilities and the present enterprise mannequin we’ve, we will’t function properly and profitably with lower than $100 merchandise. We additionally discovered classes that actually we weren’t excellent at — we prolonged into memorabilia, we prolonged into artwork and residential, we prolonged into children — and we needed to pare again. Honestly, they’re, for essentially the most half, gone.

The actuality is, we’re completely at our greatest with jewellery, watches, ready-to-wear, purses, footwear.

When you have been speaking to clients, what was the most important frustration they’d in regards to the RealReal that shocked you?

I feel it’s throughout training of what we do and don’t take. And the understanding of how we arrive at a value.

In the previous, it could have been: “You’ve lost too many goods. I’ve gotten burned. What happened to this?” Or: “It’s taking too long for the merchandise to get onto the site.”

A number of these have gone away for essentially the most half. Now, it’s actually, “You used to take this designer, you won’t anymore. Why won’t you?” In an ideal world, we’d say, “OK, we will take everything.” But there’s an financial actuality, proper?

I’ll offer you an instance. Certain manufacturers of denims we used to have the ability to promote for over $100. Now you simply can’t get the identical return for them. So as an alternative of upsetting you by us taking them and promoting them for means lower than you need, we’re simply telling you now we don’t take them.

What’s the plan for the RealReal to make use of synthetic intelligence?

The first was authenticating the merchandise. The second was pricing the merchandise. Where we’re spending extra time now’s the place can we, at consumption, begin with an image of and proper there we will say, “Have we seen this good before?” “I already recognize that pattern, so now I don’t have to write all the copy. I don’t have to take all the measurements unless we perceive that it’s been altered.”

It nonetheless must undergo authentication, however we will ship it down a distinct lane the place as an alternative of every piece that we obtain being a one-off, now rapidly we’re beginning to batch issues collectively. We can do these sorts of issues and cut back operational prices.

Dupes have grow to be an even bigger dialog within the business this yr. Before your time on the firm, there was reporting in regards to the RealReal promoting inauthentic objects on its platform. How you’re at present guarding towards that?

It’s mainly an arms race in some ways. How can we keep forward of the tremendous fakes? We rent folks, we put money into know-how. We associate with the manufacturers wherever we will to determine one of the best ways to make it possible for is an genuine good and do it in a price efficient method. It’s not simply visible. It’s contact, it’s odor, it’s you identify it. We have to make use of these instruments in our toolbox to ensure we keep forward of the tremendous fakes.

You know, the sneaker business went by way of huge fakes and clearly there’s some huge cash in purse fakes, however folks aren’t faking ready-to-wear as a lot. So we will actually focus on the areas the place folks can take advantage of cash with inauthentic items. So that’s the place we spend our time and power staying forward of everybody.

There have additionally been buyer complaints about items being offered on the RealReal for a value that was not agreed upon?

What we have to do is be certain we put the best objects on value approval. We solely try this for sure lessons of merchandise. And if it’s your first time consigning, it’s so much. We at all times try to be as completely upfront as a lot as we presumably can and make it as clear as we presumably can.

What we have to do is make it possible for we don’t take that merchandise upfront. So one of the best factor to do is take it right into a retailer and have a dialogue with an skilled. In the absence of that, what we have to do is ship that merchandise again to the consignor in order that they’re completely satisfied and we will promote the opposite items in a win-win vogue.

Is there an merchandise or a model that in the event you discovered it on the RealReal you’ll buy it it doesn’t matter what?

I’m always taking a look at watches and footwear on our web site. I’m at all times looking out for Dior or Louis Vuitton sneakers. There’s at all times that watch that you could by no means discover and also you at all times search for. I just like the very conventional watches, however there’s a Cartier Rolex on the market from the ’70s that if that ever got here up on the RealReal, it’s simply a kind of issues that you simply’re like, “Ooh, I might have to have that.”

You are primarily based in Dallas and also you additionally spend a variety of time in San Francisco. But whenever you go to New York City, do you may have a retailer that you simply at all times go to?

Bergdorf. Maybe that was too straightforward so can I get two?

OK.

My second is Kith. I simply love their deal with on vogue. I additionally love that the model steps out a little bit bit with distinctive collaborations. I feel there was this staid means of “we only work this way; we’re only on Fifth Avenue; we only do that.” I actually like this migration throughout the place everyone’s doing various things to introduce their manufacturers to new clients. I’ve only a wholesome respect for manufacturers that take dangers and do a lot of testing, identical to we do.