Luxury resale marketplace The RealReal saw total revenue decrease by 15% to $131 million in Q2, year on year, while its gross merchandise value (GMV) fell by 7% to $423 million.

The company said the numbers had been “driven in part by our purposeful reduction in direct revenue.” It noted that direct revenue made up 16% of total revenue in Q2, compared to 28% during the same period in 2022, leading to higher gross margins — namely 65.9%, an increase of 908 basis points as against the same period of 2022.

“Our strategic shift to re-focus on the higher margin portion of the consignment business is showing results,” said CEO John Koryl, in the company’s latest financial reporting.

“In the second quarter of 2023, GMV and revenue exceeded the mid-point of our guidance, and adjusted EBITDA exceeded the high-end of our guidance range for the quarter.”

The RealReal posted a net loss of $41.3 million in Q2, or -31.6% of total revenue, compared to a net loss of $53.2 million, or -34.4%, in the year-ago period.

Its adjusted EBITDA stood at -$22.3 million, or -17.1% of total revenue, versus -$28.8 million, or -18.7%, in Q2 2022.

The company’s trailing 12 months (TTM) active buyers expanded by 11% year on year to 985,000, while order numbers contracted by 16% to 789,000.

The average order value (AOV) was up by 10% to $537, driven by a year-on-year hike in average selling prices (ASPs) as consumers shifted to higher-value items and reduced lower-value items, partially offset by a decrease in units per transaction (UPT).

“During the second quarter, we continued to transition away from company-owned inventory and consigned items that sell for under $100, which are not profitable for The RealReal. These actions resulted in higher average order value, a higher gross margin rate, reduced company-owned inventory, and a smaller adjusted EBITDA loss compared to the prior year,” said the CEO.

“We view the shift to a higher gross margin rate as a structural change to our business model. Therefore, we believe the changes implemented in 2023 will reset the company to a slightly smaller but more profitable business. With this new margin structure, we expect to return to profitable top-line growth next year and we continue to project that we are on track to achieve adjusted EBITDA profitability on a full-year basis in 2024.”

Founded in 2011, San Francisco-based The RealReal says it has served over 33 million shoppers to date, with 28 million items sold.

Calling itself the world’s largest online marketplace for authenticated, resale luxury goods, it offers free in-home pickup, a drop-off service, virtual appointments and direct shipping.

Its competitors include Vestiaire Collective, The Next Closet, Luxify and Vinted-owned Rebelle.

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