What changed in this filing

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Item 1. Business

2025-02-21 compared with 2024-03-01 · 66 added, 117 removed, 124 unchanged (60% of the section changed)

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We offer a wide selection of authenticated, primarily pre-owned luxury goods on our online marketplace bearing the brands of thousands of luxury and premium designers.

The top-selling luxury designers on our online marketplace include Cartier, Chanel, Christian Louboutin, Gucci, Hermès, Louis Vuitton, Prada, Rolex, Tiffany & Co.

and Valentino.

The top-selling luxury designers on our online marketplace include Cartier, Chanel, Christian Dior, Gucci, Hermès, Louis Vuitton, Prada, Rolex, Yves Saint Laurent, Tiffany & Co.

and Van Cleef & Arpels.

We offer products across multiple categories including women’s fashion, men’s fashion, jewelry and watches.

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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 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.

We operate neighborhood retail stores which are typically 1,800 to 3,500 square feet with items for sale reflecting a selection of the Company's online assortment.

These smaller footprint neighborhood stores are located in areas we have identified as having a large amount of potential customers.

In addition, we operate several larger footprint 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The existing luxury resale market is outdated, fragmented, difficult to access and laden with counterfeit goods.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.

Primarily due to these challenges, a vast quantity of consignable luxury goods languishes in homes, and buyers can be hesitant to purchase pre-owned luxury goods.

We are transforming the luxury resale experience by addressing these challenges.

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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 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.

• We also operate store s.

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

We also benefit from increased brand awareness that accelerates overall market growth.

Our Competition

We compete with vendors of new and pre-owned luxury goods, including branded luxury goods stores, department stores, traditional brick-and-mortar consignment stores, pawn shops, auction houses, specialty retailers, discount chains, independent retail stores, the online offerings of traditional retail competitors, resale players focused on niche or single categories, as well as technology-enabled marketplaces that may offer the same or similar luxury goods and services that we offer.

As the market evolves, new competitors may emerge, including traditional retail competitors who expand their offerings to include resale.

We are able to compete for consignors based on our strong market positioning, diverse category and brand offerings, rich data and technology, and advanced authentication capabilities and expertise.

Our full service, multi-channel approach provides consignors with convenient consignment options.

For more information regarding risks of competitive factors impacting our business, see the information in “Item 1A:

Risk Factors”.

Our Consignors

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Our sales professionals remove friction from the consignment process and build lasting relationships with our consignors.

In 2023, approximately 85% of our gross merchandise value ("GMV") came from repeat consignors.

In 2024, over 80% of our gross merchandise value ("GMV") came from repeat consignors.

Our unique service model incentivizes consumers to consign by making the process easy.

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We remove friction from the consignment process by providing multiple consignment methods.

We offer concierge at-home consultation and pickup, and virtual consultations with consignors via online face-to-face platforms.

We offer concierge at-home consultation and pickup, and virtual consultations with consignors.

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

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.

Our retail 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 service to send items directly to our authentication centers.

• We do the work on behalf of consignors.

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• We generate high commissions for consignors.

Our scale and global reach combined with our technology-driven online marketplace and proprietary data enable consignors to realize optimal value for their pre-owned luxury goods.

In November 2022, we launched a pricing tool for our consignors that provides transparency and detail on commission rates for specific categories and other aspects of the take rate structure.

Our scale and broad reach combined with our technology-driven online marketplace and proprietary data enable consignors to realize optimal value for their pre-owned luxury goods.

In November 2022, we launched a pricing tool for our consignors that provides transparency and detail on commission rates for specific categories and other aspects of the take

rate structure.

Our consignors can earn up to 90% of the proceeds from the sale of their consigned items in commissions and achieved an overall commission rate of approximately 62% in 2024.

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Our consignors are generally paid after an item has sold, however, we also offer trade-in terms and “Get Paid Now” options to both businesses we purchase items directly from and individuals who consign their items with us.

“Get Paid Now” is a program whereby items are evaluated, authenticated and priced and the business or consignor receives payment based on this process in advance of the sale of the item.

“Get Paid Now” is a program whereby select items are evaluated, authenticated and priced and the business or consignor receives payment based on this process in advance of the sale of the item.

• We drive rapid monetization.

Our online marketplace efficiently matches supply with demand resulting in sales velocity of approximately 54% and 58% of the products on our online marketplace sold within 30 days, in 2023 and 2022 respectively.

In addition to sales velocity, we measure the ratio of demand versus supply in a given period, which we refer to as our online marketplace sell-through ratio.

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.

In 2023 and 2022, our online marketplace sell-through ratios were 92% and 91%, respectively.

Our online marketplace efficiently matches supply with demand finding optimal balance between sales velocity and consignor earnings.

We sell approximately 50% of the products on our online marketplace within 30 days of being listed for sale.

In addition, we measure the ratio of demand versus supply in a given period, which we refer to as our online marketplace sell-through ratio.

Sell-through ratio is defined as GMV in the measurement period divided by the aggregate initial value of items added to our online marketplace in that period.

Our online marketplace sell-through ratio in 2024 was approximately 85%.

We make it easy for buyers to shop our vast, yet curated selection of authenticated, primarily pre-owned luxury goods.

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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 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.

Our retail 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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We believe we have the most rigorous authentication process in the resale luxury goods marketplace.

We have highly trained gemologists, horologists, brand experts and art curators who collectively inspect thousands of items each day.

We have highly trained gemologists, horologists, and brand experts who collectively inspect thousands of items each day.

All items pass through a rigorous brand-specific authentication process before they are accepted for consignment.

This process includes, among other things, inspecting the item for attributes such as appropriate brand markings, date codes, serial tags and hologram stickers.

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.

We use proprietary artificial intelligence ("AI") microphotography to assist in authenticating multiple categories, including high-end handbags.

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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Our Technology

Technology powers all aspects of our business, including our complex, single-SKU inventory management system.

Technology powers all aspects of our business, including our complex, individual stock keeping unit (“single-SKU”) inventory management system.

Our supply comes from thousands of individual consignors and businesses across the United States.

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.

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.

Our online marketplace generates and aggregates hundreds of millions of unique data points, including data from approximately 1.1 billion views of items by potential buyers on our online marketplace in 2023, which we refer to as item views, and approximately 37.5 million item sales since our inception.

Given the complexity of our inventory model, we developed AI enabled, specialized, proprietary

applications to optimize inbound processes.

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

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

Our online marketplace generates and aggregates hundreds of millions of unique data points, including data from approximately 44.5 million item sales since our inception.

Each consigned item also has up to 50 unique attributes.

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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Intellectual Property

Our intellectual property, including copyrights and trademarks, is an important component of our business.

We rely on trademark, copyright, trade secrets, patents, patent applications, confidentiality agreements and other practices to protect our brands, proprietary information, technologies and processes.

We primarily rely on copyright and trade secret laws to protect our proprietary technologies and processes, including the algorithms we use throughout our business.

Our principal trademark assets include the registered trademark “The RealReal” and our logos and taglines.

Our trademarks are valuable assets that support our brand and consumers’ perception of our services and merchandise.

We also hold the rights to the “therealreal.com” Internet domain name and various related domain names, which are subject to Internet regulatory bodies and trademark and other related laws of each applicable jurisdiction.

We continually review our development efforts to assess the existence and patentability of new intellectual property and intend to pursue patent protection to the extent we believe it would be beneficial and cost-effective.

We control access to and use of our intellectual property through confidentiality procedures, non-disclosure agreements with third parties and our employment and contractor agreements.

We rely on contractual provisions to protect our proprietary technology, brands and creative assets with consignors and buyers.

Historically, we have observed trends in seasonality of supply and demand in our business.

Specifically, our supply increases in the third and fourth quarters, and our demand increases in the fourth quarter.

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

Environmental, Social and Governance

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We aspire to operate our business with positive social and environmental impact.

Our board of directors and its committees provide oversight on certain human capital matters, including our diversity and inclusion programs and initiatives.

As noted in its charter, our Compensation, Diversity and Inclusion Committee is responsible for reviewing and recommending to our board of directors compensation plans, policies and programs intended to attract, retain and appropriately reward employees, as well as provide oversight of the Company’s policies, programs, and initiatives focusing on leadership and workforce diversity and inclusion.

Our board of directors and its committees provide oversight on certain human capital matters.

Our Corporate Governance and Nominating Committee provides oversight of the Company’s policies, programs and initiatives focusing on social responsibility, including environmental, sustainability, social and human rights matters.

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Recent sustainability efforts include:

• Fair Condition Program.

This new program has enabled us to offer more secondhand, luxury items and has the effect of increasing the total number of consigned items in the circular economy.

To aid buyers in assessing the condition of items in our online marketplace, we assign items a condition level.

• Fair and As-is Condition Programs.

These programs have enabled us to offer more secondhand, luxury items and have the effect of increasing the total number of consigned items in the circular economy.

aid buyers in assessing the condition of items in our online marketplace, we assign each item a condition level.

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 2023, demand for items in fair condition remained strong.

In 2023, with demand for items in fair condition remaining strong, we began accepting items in “as-is” condition.

Items in “as-is” condition might show extensive signs of wear and may require repair.

Even if an item requires repair, it is still likely to displace the purchase of a brand-new item and avoid unnecessary waste.

• Sustainability Task Force.

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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.

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.

In 2018, we launched our Sustainability Calculator on National Consignment Day as a tool to quantify the positive impact consignment has on the planet.

We developed the Sustainability Calculator to measure the greenhouse gas emissions and water footprint reduction of consignment as compared to producing new products.

• National Consignment Day.

We founded National Consignment Day as a national recognition day that occurs on the first Monday of October.

National Consignment Day celebrates the positive impact consigning has on the environment.

• Carbon Neutral Pledge.

In November 2019, we were the first company to take the pledge in the CEO Carbon Neutral Challenge issued by the CEO of Gucci.

We pledged to be carbon neutral in 2021, and we reached that goal in 2020 (Scope 1, Scope 2 and certain Scope 3 emissions).

Our path to carbon neutrality included implementing reductions and annually offsetting emissions that cannot be eliminated.

• United Nations Climate Change’s Fashion Industry Charter for Climate Action.

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.

• ReCollections.

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

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.

The Sustainability Task Force, through several individual working groups, has concentrated its efforts on specific, meaningful topics, including preferred materials, transportation optimization, employee travel, employee experience, reducing energy expenditures, limiting use of packaging materials, and waste.

In 2024, the Sustainability Task Force was reorganized to expand its capabilities and increase its membership, and focused on projects related to packaging, employee engagement, and energy efficiency at our authentication centers.

Human Capital Resources

Our employees are guided by our mission to empower consignors and buyers to extend the life cycle of luxury goods.

We are part of a diverse global community, and we aim to reflect that diversity within our team.

We believe diversity and inclusion foster a collaborative culture, which fuels our ability to innovate as we work to create a more sustainable future.

We proactively seek feedback and guidance from our employees, who we see as our partners in building a strong organizational culture.

As of December 31, 2024, we had 3,011 full-time equivalent employees.

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We consider our relations with our employees to be positive.

Diversity and Inclusion

We work to inspire and empower our employees to think creatively and authentically, share their ideas, bring their whole selves to work, and strive for greatness every day.

We are proud to have a diverse team, and we recognize there is opportunity for us to continue improving representation, particularly among our senior leadership.

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, 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

Black 15 % 13 % 7 % 0 % 13 %

Hispanic/Latinx 31 % 16 % 16 % 4 % 0 %

Asian 7 % 12 % 11 % 11 % 0 %

Two or More Races 4 % 6 % 4 % 4 % 0 %

White 33 % 42 % 50 % 63 % 87 %

Female 66 % 67 % 62 % 48 % 50 %

DEI Vision and Strategy.

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

We 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.

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

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 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 .

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 2024, 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.

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

In 2024, 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.

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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.

When searching for new directors, our board of directors has committed to including in any pool of director candidates for consideration highly qualified candidates who would bring racial, ethnic, and/or gender diversity our board of directors if chosen.

Talent Development and Training

We believe that the training and developm ent of our employees is critical to our long-term success.

We offer a variety of employee training programs in addition to the DEI programs discussed above, including onboarding, technical skills training, product and services training, and managerial soft skills training.

These programs include training specific to each of our business functions, enabling us to provide our consignors and buyers with a consistent luxury experience.

We believe that the training and development of our employees is critical to our long-term success.

We offer a variety of employee training programs, including training specific to business functions, enabling us to provide our consignors and buyers with a consistent luxury experience.

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 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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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.

In 2023, we launched TRR Secure, a smartphone security application 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 2024 through a range of programs that support access to care, along with resources and tools to address the following pillars of wellness:

physical, mental/emotional, financial, and community.

Historically, we have observed trends in seasonality of supply and demand in our business.

Specifically, our supply increases in the third and fourth quarters, and our demand increases in the fourth quarter.

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

Intellectual Property

Our intellectual property, including copyrights and trademarks, is an important component of our business.

We primarily rely on copyright and trade secret laws to protect our proprietary technologies and processes, including the algorithms we use throughout our business.

Our principal trademark assets include the registered trademark “The RealReal” and our logos and taglines.

Our trademarks are valuable assets that support our brand and consumers’ perception of our services and merchandise.

We control access to and use of our intellectual property through confidentiality procedures, non-disclosure agreements with third parties and our employment and contractor agreements.

We rely on contractual provisions to protect our proprietary technology, brands and creative assets with consignors and buyers.

Corporate Information

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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