Online start-up The RealReal to open its second luxury consignment store, as e-commerce brands keep growing

Key Points
  • Online consignment brand The RealReal is opening its second permanent store.
  • The shop's doors will open later this week on Melrose Avenue in Los Angeles.
  • More e-commerce brands are growing their brick-and-mortar footprint, as resellers like The RealReal are increasingly attracting new customers.
The outside of TheRealReal's new store in Los Angeles on Melrose Ave.
Source: TheRealReal

Online start-up The RealReal launched in 2011 but is just now starting to grow its physical presence, right as a new wave of e-commerce brands looks to take over spaces previously occupied by Toys R Us, RadioShack, Rue21 and other bankrupt brands.

The luxury consignment shop currently has one permanent store in New York's SoHo neighborhood but later this week will open its second permanent location in Los Angeles. It's been testing pop-up shops across the U.S., while a recent Series G round of financing that raked in $115 million will allow the company to open more stores, founder and CEO Julie Wainwright told CNBC.

The expansion for The RealReal comes as both luxury and discount retailers, like Gucci and T.J. Maxx, are viewed as being the top performers and most sought-after businesses in the industry. Other types of retailers such as department stores are struggling to offer shoppers something unique. The RealReal offers the high-end brands desired by luxury shoppers and the treasure hunt experience enjoyed by discount shoppers.

"We wanted to change people's perception of what a consignment business looks like," Wainwright said. "I would say some of the smartest people I know have been buying consignment forever but never talked about it — even some of the richest people I know, because they like good value."

The RealReal's new store in Los Angeles is on Melrose Avenue, settled close to Nordstrom Local, Glossier, Away and a slew of other e-tailers, is a whopping 12,000 square feet. Unlike the company's existing and smaller space in SoHo, this location will feature a 5,500-square-foot portion dedicated to men. It will use about 1,500 square feet to display handbags. There's also a cafe serving coffee, pressed juice, salads and pastries.

The cafe inside TheRealReal's new store in Los Angeles. 

Like many new retail stores today, The RealReal's shop on Melrose Avenue will also house a handful of service components. There will be gemologists and authentication specialists on site for free fine jewelry and handbag valuations. Certain items can be taken to be repaired there. And shoppers will be able to use a curbside service to drop off any items they're wishing to sell.

"This store opens up what we do on the back-end to other people," Wainwright said.

She added that The RealReal is "negotiating in multiple markets right now" for additional stores but wants to find spaces that are big enough, with the right amount of "character."

Other secondhand e-tailers looking to grow in the brick-and-mortar world include Rebag, which just opened its second permanent location in New York earlier this year. Another, ThredUp, has mapped out plans to open roughly 100 stores across the U.S. while Poshmark has toyed with the idea of opening some sort of physical space. The online selling app currently hosts "Posh Parties" in major metros, where it brings sellers and buyers together for a night to chat about trends in the fashion industry and show off new merchandise.

The total apparel resale market, including both brick-and-mortar stores and online sales, is expected to grow to $33 billion in 2021 from $18 billion in 2016, according to a study by retail and tech group Coresight Research. Deborah Weinswig, managing director at Coresight, has said companies like The RealReal could start to pose more of a threat to the likes of T.J. Maxx, Ross Stores and Burlington.

"Off-price retailers do not sell online," Weinswig said. "Hence, online apparel resellers argue that they pose a viable competitive threat for off-price retailers." And as names like Rebag open permanent, physical spaces, that threat only grows larger.