For most of its 14 years in business, The RealReal was yet another money-losing online retailer with a growth-at-all-costs mentality, despite being a pioneer in luxury resale. In the past year, the company has turned profitable, with its adjusted EBITDA jumping 83 percent year on year in 2024 to $9 million.
The RealReal’s road to profitability has been smoothed, in part, by a resale boom as rising luxury prices have sent shoppers looking for more affordable secondhand options. But The RealReal is also more disciplined than it’s ever been, says president and chief executive Rati Sahi Levesque. In recent years, it has changed its commission structure to encourage sellers to consign higher-priced items, instead of flooding its marketplace with lower-priced goods to grow sales. It has also integrated artificial intelligence into its authentication process to improve its ability to catch fakes and reduce operational costs.
The RealReal is looking to sustain that momentum, adding more AI capabilities to its operations, launching new tools to acquire more consignors and strengthening its international business. Levesque believes luxury resale’s winning streak isn’t about to end either, despite some younger consumers’ embrace of counterfeits and dupes.
“There’s always going to be people who want the real deal, too, and that’s what we do every day,” Levesque says.
BoF: This year was marked by destabilising trade disruptions that forced brands to raise prices. How have tariffs impacted The RealReal’s growth?
Rati Sahi Levesque: Resale is having a moment, but there’s a lot of factors that are contributing to that. Tariffs are one of them. The inflationary pressures, all of that.
The consumer is just smarter than they’ve ever been, and they’re like, ‘Why wouldn’t I participate in the circular economy?’ Even when they’re buying wedding dresses, they’re now thinking of the secondary market first.
When [consumers] shop in the primary market now, they’re thinking about The RealReal. They actually call us and ask us, ‘What holds its resale value? Is it the Louis Vuitton Speedy or is it the Goyard tote bag?’ They want to understand that before they’re even buying in the primary market.
BoF: The RealReal has been turning a profit in recent years. What have been the biggest profit drivers?
RL: We made some systemic changes to our business. We changed our commission structure, for example. Low-value items under $100, maybe we’re not the place for those items. Maybe you need to take them somewhere else, because it costs us the same amount to process and authenticate low-value as it does mid- and high-value. Our sweet spot is that mid- to high-value product. The other place that we made changes is we were out buying inventory. We went back to our core consignment [model].
BoF: As consumers across income groups confront higher prices, how has their willingness to buy luxury items on the resale market shifted?
RL: Most of our products, you can’t find anywhere else. So it’s not a commodity. These are rare items that people are willing to pay for. People want to make sure that they’re getting value.
In the primary market, a lot of these brands kept pushing the envelope on pricing. Every year, taking their pricing up pretty significantly. At The RealReal, it’s really about what the consumer will pay for something.
We use data to understand how far the consumer is willing to pay for something, and they tell us. We’ll see demand drop, or we’ll see the sell-through go down. Our sell-through is quite high. It’s pretty much [around 75 percent] in 90 days, which is unheard of, because we let the market set the price. It’s not The RealReal sitting here and setting the price, it’s the market, the consumer telling us what they will pay for something.
Most of our products, you can’t find anywhere else. So it’s not a commodity. These are rare items that people are willing to pay for.
BoF: There’s been a rise in younger consumers seeking dupes — less expensive versions of high-end goods — and counterfeits. What has that meant for luxury resale?
RL: There’s always going to be a want for authentic goods. The value play is important, but authenticity is important, too. We do it for a lot of different reasons. Authenticity is one, integrity of the product is another, really preserving the history and heritage of the brands, keeping these brands alive.
BoF: How has the embrace of counterfeits impacted your authentication practices?
RL: We are not new to authenticity. We’ve invested a lot of time and dollars and patent technology around it. I sleep well at night because I know no one does more than us to keep fakes off the market. Some of these brands are authenticated three times, by three different authenticators. Then we’re using technology, something called Vision and Shield, to not only authenticate the consignor but also the product. I’ll use handbags as an example. We now can measure, on a pixel level, the handbags, and know if an item is authentic or fake. It’s this piece of hardware that goes in and takes a picture of it at a microscopic level, and then puts it through the right kind of funnel and say, ‘Hey, there’s something wrong with this, at a microscopic level,’ or ‘This has the wrong metal at the zipper. It’s not real.’
BoF: How will your use of AI continue to evolve?
RL: Now it’s about coverage across all products. It’s also going to be about speed of processing. Some of these items take two or three weeks to process. You can see how now it can take a week to process. Now we’re authenticating all handbags via AI.
We have all this data [from our] 40 million members. Knowing your behaviour, you buy a handbag and your typical pattern is, in six months, you’re wanting to move on from that handbag and buy something else. Then we’d ping you and say, ‘Hey, you can trade up now.’ So that’s something called My Closet that we’re launching. In one click, you’ll be able to re-consign it and actually sell high.
BoF: When is this launching?
RL: Our first part of that was ‘re-consign’ that we already launched, and we’re seeing huge engagement there. My Closet will launch early next year.
Consumers are asking for it. What if you can say to them, ‘You have $30,000 in your closet, you want to go out and buy this Cartier watch, here’s the two things to consign right now that you’re going to get the most dollars for. Maybe this is the right time to consign those things to go buy your Cartier watch.’
BoF: Which regions are driving the most momentum in luxury resale? Which regions are underpenetrated but show a lot of potential?
RL: Well, we are mostly domestic [in the US] right now. We do sell internationally. So Europe is a big piece of that. The Middle East a bit. As well as Australia. Hong Kong is another one. Northern Europe, Europe in general. So that’s where we’re seeing [interest] outside of the US.
We are looking at a cross-border solution right now. We think this could be a big growth driver for us over the years. We sell to a lot of these countries overseas, and now it’s about how we bring in the supply. For example, Japan, we’re now just starting to get products from Japan. We’re also starting to get in product and partnering with [consignors in Japan], with something called an API feed. So they’ll be able to directly post on our site, and we’ll authenticate post-purchase.
BoF: Customer acquisition costs continue to go up. How is that impacting the online resale market? Where are resellers finding their best customers?
RL: It’s about getting smarter around attribution and targeting. What we’ve gotten better at is being able to flag which buyers make the best consignors, and how do we target them, and where are they? A lot of the old-school channels, sometimes radio, TV, direct mail, being able to target certain zip codes. If you’re young and you’re fashionable, usually you’re a consignor of ours because you do like to change out your wardrobe every so often, you do have this love for fashion, and that does become important to our ecosystem. So being able to target those people and getting better at it is really where we’re focused.
BoF: What are some untapped customer acquisition strategies that you’re not investing as much in yet but seem promising?
RL: Another place is the affiliate programme. If you’re a closet organiser or a celebrity stylist, you can earn a few extra thousand dollars every month, because you earn a percentage of every sale of your client’s closet. It becomes interesting for them. We’re definitely seeing something there, and we’re building out what that strategy looks like.
BoF: How do you expect the dynamics in resale to play out in the coming year? Are more brands going to pursue resale on their own, and what does that mean for resale platforms like The RealReal?
RL: There’s room for all of it. That said, we’re really focused. We find that our customer and consignor like the simplicity of our service. They like how easy it is. They like that they can consign all categories, everything, not just one brand. They like the cash versus the site credit. They like the depth of our product and what we sell, because we sell across all categories. That is definitely a competitive advantage for us.
This interview has been edited and condensed.
This article first appeared in The State of Fashion 2026, an in-depth report on the global fashion industry, co-published by BoF and McKinsey & Company.