The RealReal Layoffs, Store Closings 2023: 6 Locations To Shut Down, 230 Jobs Terminated

The RealReal, a luxury resale and consignment company, is expected to close six store locations and fire 230 employees as it grapples to cut operating expenses.

According to a document filed by The RealReal to the Securities and Exchange Commission, the apparel company announced Wednesday it came up with a plan to reduce operating costs through employment terminations and office space closure.

"The Company is reducing its headcount and rationalizing its real estate footprint," the document said.

The RealReal will close down two of its flagship stores in San Francisco, California, and Chicago, Illinois; two neighborhood stores in Atlanta, Georgia, and Austin, Texas; and two luxury consignment offices in Miami, Florida, and Washington, D.C.

It is also slated to shut down its co-located logistic hubs and trim down its office spaces in San Francisco and New York City.

The RealReal will let go of approximately 7% of its workforce and provide them with severance payments, employee benefits contributions and other related costs worth in total between $1.7 million to $2.2 million.

In November 2022, the company's president, Rati Sahi Levesque, admitted that The RealReal spent too much money trying to sell home, art and kids' items that are too expensive to ship.

Axios reported that the apparel company had difficulty competing with other consignment brands, such as Poshmark and ThredUp.

Adding to the headache of The RealReal is its long struggle to gain profits after posting a $151.2 million year-to-date loss, according to Retail Drive.

GlobalData managing director Neil Saunders pointed to consumers' hesitancy to spend and new resale players as threats to The RealReal.

"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," he added.

Saunders said that in order for The RealReal to return to the competition, it would need a further reduction in its real estate footprint.

Despite the gloomy forecast for The RealReal, the luxury resale industry as a whole is expected to boom in the years ahead.

A study conducted by GlobalData and ThredUp last year revealed that the apparel resale industry will likely more than double by 2026, reaching up to $82 billion.

The study further revealed that 62% of Gen Z and millennial consumers said they look for secondhand items before buying new ones, and almost half of them also consider the potential resale value of the item before purchasing it.