Reversing a previous effort to bulk up staffing, The RealReal on Wednesday said it will cut operating expenses through layoffs and store closures. The moves will cost some $1.7 million to $2.2 million, mostly in severance payments, employee benefits and related expenses.
The apparel resale company will let go of about 230 employees, or 7% of its workforce, according to a filing with the Securities and Exchange Commission.
Two flagship stores in San Francisco and Chicago, two neighborhood stores in Atlanta and Austin, Texas, and two consignment offices in Miami and Washington, D.C., will shutter, per the filing. The company will also reduce its office space in San Francisco and New York City.
The RealReal’s chief executive John Koryl arrived just last week — ending an eight-month search after founder Julie Wainwright’s abrupt departure last year — and is now wasting little time attempting to right the ship.
The company operates, mostly online, in the runaway resale segment, which is garnering more attention from consumers. And, increasingly, from retailers, as the topic dominated the National Retail Federation’s recent industry conference. Research from GlobalData and ThredUp found that the market in the U.S. could more than double by 2026 to reach $82 billion, and WD Partners has found that shoppers are eager to find used goods in most categories.
But The RealReal has long struggled with profitability, and its year-to-date $151.2 million loss is only a slight improvement over last year, according to emailed comments from GlobalData Managing Director Neil Saunders. The retailer landed on Retail Dive’s bankruptcy watch list last year.
“Although resale remains one of the stars of the apparel market with exceptionally high growth, the current environment is more challenging as consumers are a little more conservative about making purchases,” Saunders said. “The competitive environment is also tougher with a raft of new resale players, including brands selling directly to consumers. Throw in the higher costs of doing business into the mix and there is a significant threat to The RealReal’s quest to move into the black.”
The RealReal may be in a bind, however. In part due to the unique logistics of resale — unlike most of retail, sourcing secondhand goods is more difficult and complex than selling them — brick and mortar is by far more lucrative than e-commerce for this market, WD Partners also found.
In any case, more steps may be needed if The RealReal is to finally move into the black, according to Saunders. That could entail further reduction in its physical store footprint. The company in its filing Wednesday said that it “will continue to evaluate its real estate presence as it deems appropriate to create efficiencies and to address trends in the marketplace and macroeconomic factors.”