What changed in this filing

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Item 1. Business

2024-03-01 compared with 2023-02-28 · 52 added, 53 removed, 189 unchanged (36% of the section changed)

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In addition, a meaningful share of our consignors are buyers and vice versa, which creates a differentiated flywheel that enhances the network effect of our online marketplace.

We also operate retail stores, including our larger footprint flagship stores, or Flagship Stores, in Los Angeles, California and New York, New York.

Our Flagship Stores are typically 8,000 to 12,000 square feet with thousands of unique items for sale and are located in highly desirable, densely populated locations with strong foot traffic.

In addition, we operate several smaller footprint neighborhood retail stores, or Neighborhood Stores.

We also operate retail stores, including our smaller footprint neighborhood retail stores, or Neighborhood Stores.

Our Neighborhood Stores are typically 1,800 to 3,500 square feet with items for sale reflecting a selection of the Company's online assortment and are located in areas we have identified as having a large amount of potential customers.

In addition, we operate several larger footprint flagship stores, or Flagship Stores, in Los Angeles, California and New York, New York.

Our Flagship Stores are typically 8,000 to 10,000 square feet with thousands of unique items for sale and are located in highly desirable, densely populated locations with strong foot traffic.

The existing luxury resale market is outdated, fragmented, difficult to access and laden with counterfeit goods.

Primarily due to these challenges, a vast quantity of consignable luxury goods languishes in homes, and buyers can be

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hesitant to purchase pre-owned luxury goods.

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• We offer buyers a vast, yet curated supply of primarily pre-owned luxury goods and instill trust in the buying process.

We build trust in our buyer base by thoroughly inspecting the quality and condition of every item and putting every item through our authentication process.

All consigned items are put through our authentication process and thoroughly inspected for quality and condition, which builds trust in our buyer base.

This trust drives repeat purchases from our buyer base and instills confidence in first-time buyers to purchase pre-owned luxury goods.

• We also operate Flagship and Neighborhood Store s.

• We also operate Neighborhood and Flagship Store s.

Our stores are valuable to us in multiple ways as they help us reach higher value buyers and consignors, increase lifetime value, i ncrease average order value, and lower return rates.

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Consignors may also drop off items at our luxury consignment offices.

Our Flagship and Neighborhood Stores provide an alternative location to drop off consigned items and an opportunity to interact with our authentication experts.

Our Neighborhood and Flagship Stores provide an alternative location to drop off consigned items and an opportunity to interact with our authentication experts.

Consignors may also utilize our complimentary shipping directly to our authentication centers.

• We do the work on behalf of consignors.

Once consigned items reach one of our four authentication centers, we authenticate, write the associated copy, photograph, price, sell and handle all fulfillment and returns logistics, making the consignment process seamless.

Improvements in our automation of pricing, copywriting and photo retouching have improved the efficiency of our operations.

All consigned items are authenticated, written up photographed, priced, sold and fulfilled on behalf of the individual consignor, making the consignment process seamless.

Improvements in our automation of authentication, pricing, copywriting and photo retouching have improved the efficiency of our operations.

• We generate high commissions for consignors.

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Sell-through ratio is defined as GMV in the measurement period divided by the aggregate initial value of

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items added to our online marketplace in that period.

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Buyers access our omni-channel online marketplace through our website, mobile app and retail stores, enabling them to purchase anytime, anywhere.

Our Flagship and Neighborhood Stores also offer our buyers a sophisticated shopping experience, in a beautifully designed space, where they can shop our dynamic curation of authenticated pre-owned luxury goods across all of our categories.

Our Neighborhood and Flagship Stores also offer our buyers a sophisticated shopping experience, in a beautifully designed space, where they can shop our dynamic curation of authenticated pre-owned luxury goods across all of our categories.

• We build trust through our authentication process.

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In 2022, we implemented proprietary AI microphotography to assist in authenticating high-end handbags.

As of 2023, over 50% of handbags are first-pass authenticated using AI microphotography.

Our gemologists and horologists inspect and authenticate fine jewelry and watches, and each piece we sell comes with an authentication certificate.

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Additionally, across all of our categories, our experts leverage proprietary item and consignor risk scoring algorithms to assist in authentication.

For inventory sold through our drop-ship consignment service that does not pass through our authentication centers, our authentication process includes diligence of our partners and procedures for establishing provenance, as well as quality checks and audits.

We have a zero-tolerance policy when it comes to counterfeit goods.

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We believe we are expanding the overall market for both new and pre-owned luxury goods, as the ability to experience and engage with luxury brands through our online marketplace results in an earlier appreciation for high-quality, well-crafted items, and inspires consumers to purchase new luxury items.

As of December 31, 2022, we have partnerships with Stella McCartney, Jimmy Choo, Nanushka, 11Honore and Beckett Collectibles, and we believe our online marketplace cultivates customer relationships for luxury brands.

Our Technology

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Each item we sell is a unique, individual stock keeping unit (“single-SKU”) and is exclusively available on our online marketplace or in our retail stores.

Given the complexity of our inventory model, we developed specialized, proprietary applications to optimize inbound processes, such as authentication, copywriting, photography and photo-editing.

We increasingly use our technology platform to automate pricing, copywriting and photo retouching for goods sold through our online marketplace.

Given the complexity of our inventory model, we developed specialized, proprietary applications to optimize inbound processes.

We increasingly use our technology platform to automate authentication, pricing, copywriting and photo retouching for goods sold through our online marketplace.

Our powerful data analytics capabilities enable us to improve both consignor and buyer experiences.

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Informed by this data, we have developed proprietary machine learning technology and business processes to optimize our operations, including supply sourcing, merchandising, authentication, pricing and marketing.

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Environmental, Social and Governance

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In the first quarter of 2022, we began accepting items in “fair” condition, which tend to be listed at more accessible price points given their level of wear.

In light of recent inflation and macroeconomic uncertainties, demand for items in fair condition is strong.

In 2023, demand for items in fair condition remained strong.

• Sustainability Task Force.

In 2020, we formed a cross-functional Sustainability Task Force to identify projects throughout the organization that have the potential to reduce our environmental impact.

The Sustainability Task Force prioritizes high impact projects, meets bi-weekly and aims to embed a focus on sustainability across the organization.

The Sustainability Task Force prioritizes high impact projects and aims to embed a focus on sustainability across the organization.

In early 2022, we reorganized the Sustainability Task Force into several individual working groups so we could concentrate our efforts on specific, meaningful projects, including preferred materials, transportation optimization, employee travel, employee experience and waste.

Throughout 2022, we provided periodic updates to our executives and the Corporate Governance and Nominating Committee of the Board of Directors on our progress toward achieving our goals and initiatives.

In 2023, the Sustainability Task Force focused on reducing energy expenditures and limiting use of packaging materials.

Throughout 2022 and 2023, members of the Sustainability Task Force provided periodic updates to our executives and the Corporate Governance and Nominating Committee of the Board of Directors on our progress toward achieving our goals and initiatives.

• Sustainability Calculator.

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In April 2019, we became the first company in the resale industry to join the United Nations Climate Change’s Fashion Industry Charter for Climate Action, which aims to limit global warming within the fashion industry and

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inspire climate action.

The charter endeavors to achieve a 50% reduction in carbon emissions in the fashion industry by 2030 and net zero emissions by 2050.

• ReCollection 03 and 04.

• ReCollections.

Through our ReCollection program, we transform unwearable or damaged items into unique, premium luxury upcycled items.

Building on prior years, we released two more ReCollections in 2022.

Our four ReCollections have put approximately 1,000 damaged items back into circulation.

In 2023 and early 2024, we partnered with the Fashion Institute of Technology ("FIT").

As part of a design and upcycling competition, we asked eight FIT students to create one-of-a-kind coats from otherwise unwearable or damaged items.

The reimagined and upcycled coats were debuted and sold in January 2024.

Human Capital Resources

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We support and celebrate diversity, and are committed to providing an equal employment opportunity regardless of race, color, ancestry, religion, sex, national origin, sexual orientation, age, citizenship, marital status, disability, gender identity or expression, or veteran status.

Below is a breakdown of how our team self-identifies as of December 31, 2022 (table does not reflect, of the total individuals surveyed, approximately 3% who chose not to self-identify and approximately 1% who identified as Native American):

Below is a breakdown of how our team self-identifies as of December 31, 2023 (table does not reflect, of the total individuals surveyed, approximately 9% who chose not to self-identify, approximately 1% who identified as Native American, and approximately 1% who identified as Hawaiian or Pacific Islander):

All Corporate Management Executives Board

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DEI Vision and Strategy.

We believe that creating a more sustainable future by growing the circular economy requires us to bring different perspectives together to solve problems in new and meaningful ways.

Furthermore, we believe that a culture of trust, safety and belonging is key to unlocking the power of differences, and leads to creative problem solving and high performing teams.

In 2022, we built on our diversity, equity and inclusion (“DEI”) vision and strategy that was launched in 2021.

We aspire to be designers of an equitable future through our four-pillar strategy:

We believe that creating a more sustainable future by growing the circular economy requires us to bring different perspectives.

We believe that a more sustainable future is an equitable one, and that growing the circular economy requires us to unlock the power of differences and solve problems together in new and meaningful ways.

We aim to design equitable future through our four-pillar strategy:

People, Culture, Commerce and Community.

We continue to assess self-reporting options that reflect our diverse workforce.

Where appropriate, we encourage our employees to share how they self-identify, including gender identity, LGBTQ identity, veteran status, and disability status.

Recently, we introduced the ability for our employees to share preferred pronouns across our technologies, and approximately 62% of our total employee population as of December 31, 2022 has chosen to share their pronouns.

We are committed to building a strong culture of trust, safety, collaboration and belonging to fuel our purpose, people and performance.

Since introducing our diversity, equity and inclusion (“DEI”) vision and strategy in 2021, we have taken meaningful action to follow through on those commitments, keeping our employees' voices at the center of our work, and taking a renewed look at our strategy to ensure continued alignment with our mission.

We continue to assess self-reporting options that reflect our diverse workforce and encourage our employees to share how they self-identify, including gender identity, LGBTQ identity, veteran status, and disability status.

Since introducing the ability for our employees to share pronouns across our technologies, approximately 62% of our total employee population has chosen to share their pronouns as of December 31, 2023 in support of allyship and gender inclusion.

Employee Resource Groups .

Since 2020, our six Employee Resource Groups (“ERGs”) have continued to grow and evolve.

We believe the ERGs help to engage employees and advance inclusion and belonging through education, awareness, career development, and social connection.

In 2022, ERG membership remained strong with over 1,000 employees participating in programs focused on career equity, leadership, cultural competence, financial and physical well-being, destigmatizing mental health, and disability inclusion.

In addition, ERG leaders participated in a leadership development program focused on critical success factors such as ERG Deployment & Engagement, Governance & Leadership, Sponsorship & Support, Career & Community, and Alignment + Impact.

Many of the groups have

implemented learnings by building new committees, improving member recruitment and participation in strategic locations, and hosting impactful first-time volunteer initiatives.

Our ERG groups are leveraging the frameworks from the leadership development program to help shape their 2023 strategic priorities.

In 2022, we conducted our annual employee engagement survey to better understand employees’ sentiment across a range of topics, including DEI, employment satisfaction, level of engagement, and sense of belonging.

There were no significant changes from the prior year.

Based on the 2021 survey results, in 2022 our engagement efforts focused on well-being, leadership, and communication.

In addition, we continued to provide managers with tools and training for mitigating bias in 2022.

We have begun to introduce a platform that provides employees with learning and resources for building awareness of DEI topics (including bias, race, microaggressions, and mental health) and developing inclusive leadership skills.

Our Employee Resource Groups (“ERGs”) help to engage employees and advance inclusion and belonging through opportunities for education, awareness, development, community and social connection.

Since forming in 2020, our six ERGs have continued to mature and progress into impactful communities that strengthen our culture.

In 2023, we welcomed the addition of our seventh ERG, Real Chaverim, a space for our Jewish community and allies to share knowledge and experiences.

In 2023, ERG membership and participation remained strong with over

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1,000 employees participating in programs focused on leadership, culture, well-being, mental health, and community impact.

Our groups collaborated to host compelling conversations with diverse thought leaders and experts, test hybrid and location specific approaches for reaching our distributed workforce, and led several local service projects in our authentication centers during Earth Month in April with community partners.

In 2023, we conducted our annual employee engagement survey to better understand employees’ sentiment across a range of topics and factors;

management, teamwork, alignment, enablement and inclusion were among our top scoring factors.

In 2023, our engagement efforts focused on well-being, leadership, communication, and inclusion.

In 2023, we continued to roll out our DEI learning platform throughout our businesses in 2023, expanding access to individual contributors and enabling more employees to build and develop inclusive leadership skills through self-paced learning to better serve our people, buyers, consignors and communities.

As part of our work to build a culture of trust, we encourage employees to share real-time feedback on culture, bias, discrimination and harassment, or behavior that does not reflect our values and policies through our company-wide employee reporting tool.

Professional Development and Partnerships.

In 2022, we invested in developing a gender- and racially-diverse leadership pipeline.

For example, we introduced a leadership development and coaching program for high performing women.

For our first cohort, we focused on black, indigenous, and people of color ("BIPOC") women in individual contributor and manager roles.

The six-month experience addressed five elements commonly found to impact women’s advancement in leadership (clarity, courage, conviction, commitment, and community) through accessible, self-paced microlearnings and virtual coaching.

Participant assessment scores showed positive scores across all elements.

We also hosted our second summer internship program as part of our work to build a diverse talent pathway, with 76% of participants identifying as women and 84% as BIPOC.

The RealReal, Inc.

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Foundation was founded at the time of our initial public offering in 2019 with the aim of advancing equity in the communities in which we operate through access to education.

Since its formation, the foundation has supported numerous community organizations, including the Success Bound Youth Leadership Academy, the Secaucus Youth Alliance, Enterprise for Youth, and Friendly House.

Following designer Virgil Abloh’s passing in 2022, and as part of our commitment to racial equity, we sponsored the Virgil Abloh™ "Post-Modern" Scholarship Fund, which aims to preserve his vision for a more diverse and equitable fashion industry.

Since its formation, the foundation has provided annual college scholarships and supported numerous community organizations, including the Success Bound Youth Leadership Academy, the Secaucus Youth Alliance, Enterprise for Youth, Friendly House, Education Forward Arizona and the Virgil Abloh™ "Post-Modern" Scholarship Fund, which aims to preserve his vision for a more diverse and equitable fashion industry.

Director Refreshment.

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For example, we support our sales professionals by providing a three-week virtual onboarding sequence conducted through peer-to-peer, facilitated and self-learning sessions, followed by continuous professional development programs.

In 2022, we continued to provide a Manager Development Series open to all people managers across the organization as well as performance management training.

In 2023, we provided a Manager Development Series to people managers in retail, sales and operations.

Our authentication teams receive training based on expertise level.

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Training hours and tenure increase with expertise, with a Graduate Gemologist certification from GIA required in the highest levels of specialty in fine jewelry.

In 2022, authentication managers received an additional 10 classroom hours of manager development training.

Each employee receives training appropriate to the scope and nature of their role.

Our FLSA-exempt employees receive an annual performance review and our people managers have quarterly meetings with their employees to address performance and development, as appropriate.

Our Fair Labor Standards Act-exempt employees receive an annual performance review and our people managers have quarterly meetings with their employees to address performance and development, as appropriate.

As a part of our onboarding program, we have developed an engagement monitoring plan for our employees in the form of personal check-ins and questionnaires.

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In 2022, we implemented the REAL Respect program, which provides community guidelines for our employees, consignors and buyers aimed toward creating a positive and safe experience for all.

In 2023, we launched TRR

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Secure, a smartphone security app that enables field employees to discreetly contact emergency services via multiple channels if they are in a situation that makes them feel uneasy, unsafe or uncomfortable.

We continued to focus on employees’ overall well-being in 2023 through a range of programs that support access to care, along with resources and tools to address the following pillars of wellness:

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As a result of this seasonality, we typically see stronger average order value (“AOV”), and more rapid sell-through in the fourth quarter.

We also incur higher operating expenses in the last four months of the year as we increase advertising spend to attract consignors and buyers and increase headcount in sales and operations to handle the higher volumes from increased demand.

Intellectual Property

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This Annual Report contains additional trade names, trademarks and service marks of others, which are the property of their respective owners.

Solely for convenience, the trademarks, service marks, logos and

trade names referred to in this Annual Report are without the ® and ™ symbols, but such references are not intended to indicate that we will not assert our rights in these trademarks, service marks and trade names.

Solely for convenience, the trademarks, service marks, logos and trade names referred to in this Annual Report are without the ® and ™ symbols, but such references are not intended to indicate that we will not assert our rights in these trademarks, service marks and trade names.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business