John Correll spent his early months as CEO of RealReal helping clean out customers’ coffers. The company recently changed its shipping policy for its luxury goods, and Mr. Correll wanted to see how people reacted to it. So he traveled to people’s homes in Orange County, California, Long Island and elsewhere to see what he couldn’t glean from his desk.
In Mr. Correll’s novel, he is “the man who folds things and packs bags because that’s all the value I add – other than listening -“.
It brings a friendly and disarming vibe to his work. But now his job is crucial: He’s responsible for turning around ailing businesses.
RealReal is fueled by customers selling their expensive merchandise to the company. The company, in turn, documents the merchandise and places it on its website or at one of its 25 stores and consignment stores, from Manhattan to Dallas and West Hollywood. When the item is sold, the sender gets a commission. (If the item is not sold within a year, it is either returned to the sender or donated to charity.) The e-commerce reseller was founded more than a decade ago, and shortly thereafter people began asking lofty questions about whether this San Francisco startup could save the retail business.
But since its IPO in June 2019, its stock has fallen 92 percent. As the luxury resale market continued to grow, RealReal suffered from inventory issues and other issues. The company changed its policies due to some customers’ discontent, and has made two rounds of layoffs this year.
Mr Correll said he was focused on better understanding RealReal’s customers – and finding more people willing to hand over their Hermes bags and 14-karat gold diamond necklaces. He described 2023 as “the year of Real Madrid’s reset”.
He sat down with The New York Times, just days after the company reported a loss of $41 million for the quarter ending in July, to discuss how he was trying to give RealReal a makeover, what it was like to follow in the footsteps of the CEO who was the founder and the item he would buy on Immediately if he saw it on the site.
This interview has been condensed and edited for clarity.
You are going after a CEO who is also the founder, so this is always an adjustment for any company in any industry. I think there’s often this feeling of “how do I make my mark because obviously the founder made his mark.” So what was the biggest change you made in the first six months?
I think he has a lot of respect for what’s been done. I realized I had entered a room full of pioneers – and women-led pioneers – with a vision of sustainability in mind. How often do you get this chance? So you have to tread very lightly. You must have a lot of respect for what made them the company you want to join.
When RealReal was founded in 2011, the idea of ​​sending luxury goods without diluting the brand was new to both shoppers and investors. The company’s stock has taken a hit since the IPO as investors finally seem to want a return on investment and see a more firm timeline for reaching profitability.
What does that mean for you? And how is it trying to position the company now that its model is no longer the new idea?
I think, in many ways, the Goal shares have carried over to RealReal. In the IPO, everyone was rewarded for endless growth. As long as revenue was growing 30% or more, you were rewarded by Wall Street. Then covid happened. The scientist said: “No, no, no, we want everyone to be profitable.”
Part of the reason I’m here is to change this story where we can actually continue to grow by double digits. Certainly not at the same pace as 35% to 40% in the past, but we can grow by double digits and we can grow a profitable business.
How will you do that?
We have exited direct merchandise purchasing (direct merchandise purchasing and stocking). We have already reduced the amount of merchandise under $100 that we have on the site. We’ve already tightened our belts in terms of the cost profile. We have to deal with the burden of our accumulated debt.
In November, Real Madrid It has been fixed its shipping policies, which include not accepting merchandise under $100 as the company focuses on sourcing items that offer higher margins; limit direct purchases; And offer lower commissions for low-priced goods. What did you learn from that process?
We had little reaction when we changed our commission structure last November. People started getting their first checks in January and February, and they weren’t signing us that often. The reason for this was because the commission changes were a little too sudden and too much at one time. So we’re doing more of a personal approach.
As long as we can keep that supply growing, we can sustain double-digit growth for our traditional business and we can complement it with these other companies, and we think we’ll meet the new Wall Street expectation that companies like this need to be profitable.
Yes, there are plenty of very worthy competitors playing at similar prices and classes. But has anyone done this across all brands? And with the consistency and comfort that we have? This is the moat we must protect, and we must meet his or her expectations every day. This is what we strive to do.
Transformation is often needed because the company has expanded so much beyond its core customers. Is this how you see what happened with the riyal?
It’s a bit more of a tweaking than undoing. With our existing capabilities and the current business model we have in place, we cannot operate well and profitably with merchandise of less than $100. We’ve also found categories that we’re honestly not good at – we’ve expanded into keepsakes, expanded into art and home, We stretched out to the kids – and we had to back off. Honestly, most of them are gone.
The truth is, we are absolutely at our best when it comes to jewelry, watches, ready-to-wear, handbags, and shoes.
When you were talking to customers, what was their biggest frustration with RealReal that surprised you?
I think it’s all about teaching what we do and don’t. And understand how we got to the price.
In the past, it could have been: “I’ve lost a lot of merchandise. It’s burned. What happened to this?” or: “It’s taking too long for merchandise to arrive at the site.”
Many of those have mostly gone too far. Now, it’s really become, “You used to take this designer, and you’re not going to do that anymore. Why don’t you do that? In an ideal world, we’d say, ‘Okay, we’d take everything.'” But there is an economic reality, right?
I’ll give you an example. Some of the jeans brands we used to sell for over $100. Now you can’t get the same return for them. So instead of bothering you with us taking them and selling them for a lot less than you want, we’re just telling you now that we don’t take them.
What is RealReal’s plan to use AI?
The first was the endorsement of the goods. The second is the pricing of goods. The place where we spend more time now is where we can, when eating, start out good and there we can say, “Have we seen that good before?” “I already recognized the pattern so now I don’t have to write the whole copy. I don’t have to take all the measurements unless we realize it has been changed.
It still needs to go through authentication, but we can send it down a different path where instead of every piece we receive being a one-off, we suddenly start to put things together. We can do these kinds of things and reduce operating costs.
Boobies have become a bigger conversation in the industry this year. Before you were in the company, there were reports of RealReal selling counterfeit goods on its platform. How do you currently guard against that?
It’s basically an arms race in a lot of ways. How do we stay ahead of the super fakes? We hire people, and we invest in technology. We partner with brands wherever we can to find out the best way to ensure it is genuine and to do so in a cost effective manner. It’s not just visual. It’s the touch, it’s the smell, you name it. We have to use these tools we have at our disposal to make sure that we stand out against the highly counterfeited products.
You know, the sneaker industry has gone through a lot of fakes and obviously there’s a lot of money in fake handbags, but people don’t fake ready-to-wear as much. So we can really focus on the areas where people can make the most money with non-genuine goods. So, this is where we spend our time and energy to outdo everyone else.
There have also been complaints from customers about merchandise being sold on the RealReal website at a price that was not agreed upon.
What we need to do is make sure that we put the right items in when agreeing to the price. We only do this for certain categories of merchandise. And if this is your first time casting, that’s a lot. We always try to be completely honest and as clear as possible.
What we need to do is make sure we don’t take this item in advance. So the best thing to do is take it to the store and have a discussion with an expert. In the absence of that, what we have to do is send those goods back to the sender so that they are happy and we can sell the other goods in a win-win way.
Is there an item or brand that if you find it on RealReal you will buy it no matter what?
I am constantly looking for watches and shoes on our site. I’m always on the lookout for Dior or Louis Vuitton sneakers. There is always that hour that you can never find and you are always looking for it. I love very traditional watches, but there’s a Cartier Rolex from the ’70s that if it shows up on RealReal, it’s just one of those things where you’re like, “Oh, maybe I should get that.”
You are based in Dallas and also spend a lot of time in San Francisco. But when you visit New York City, do you have a store that you always visit?
Bergdorf. That was probably too easy so can I have two?
Yes.
My second is Keith. I just love their take on fashion. I also love that the brand is going off a bit with unique collaborations. I think there was this sober way of “we only do it this way; we only do it this way”. We’re just on Fifth Avenue; We do just that. I really like this migration where everyone is doing different things to introduce their brands to new customers. I have great respect for brands that take risks and do a lot of testing, just like we do.