The CEO of luxury goods reseller The RealReal is defending the company’s authentication process after it was accused of selling counterfeit goods, but she can’t guarantee that 100% of the items sold on the site are real.
“We’re still humans. But I mean, you’re asking me to say do we have .001%? Of course. But that’s not what we focus on,” said CEO Julie Wainwright. “What we focus on is keeping fakes out of the market. Our job is to be the safest place to transact–and we are.”
Wainwright is standing by the company’s authentication process, describing it as “awesome.” This comes after a lawsuit from Chanel, social media posts from fashion experts and a CNBC investigation that raised doubts about The RealReal’s thoroughness. The company is putting authenticity at the center of its pitch to customers, saying it reviews every single item on the site, from Birkin bags to Moschino Jackets to Cartier bracelets.
The RealReal invited CNN to one of its product warehouses to see the authentication process in action and meet with some of its authenticators. The company said it rejected more than 4,000 out of 490,000 items in October because of counterfeit concerns.
The RealReal divides goods into high and low risk categories, sending high-risk goods to a team of trained experts who use technology, research and industry knowledge to look for signs that the item could be counterfeit. Most of this work is done without participation from the luxury brands, though on occasion they will communicate to them about questions and many members of the high risk teams have previously worked for luxury companies.
Kevin Ngo, The RealReal’s senior manager of authentication and brand management, explained how he inspected a Hermes Birkin bag that had come in that morning, checking details like the logo’s fonts and typography, the stitching, zippers and hardware.
Ngo said that on many counterfeit Birkin’s he finds the “P” in the word Paris is wider than the “R,” while on real bags the two are identical, except for the extra downward slant on the latter. He also checks the zipper closely. It should be somewhat rounded but come to a slight point and be affixed perpendicular to the bag, rather than hanging off.
“We are adapting based off of the trends of counterfeits that are being put out there,” he said.
A specialist team of gemologists and horologists check jewelry and watches. They scrutinize individual diamonds, metal settings and fonts and any engravings. For vintage pieces, they’ll search through old advertisements to find photos or motifs from the original items.
Low-risk goods are sent to a team of copywriters. This team’s experience level and qualifications have been the focus of recent investigations from the Capital Forum and CNBC. The company says copywriters receive at minimum 30 hours of introductory training. That compares to thousands of hours recommended by the American Society of Appraisers for a qualified appraiser. There is also a quality control team.
Shoe designer Amina Muaddi said she and her team spotted a pair of flats listed as sold on The RealReal website for $525 and labelled as a resale of one of her designs. The problem — Muaddi had never designed a flat version of that particular shoe. She said she’s not opposed to resales of her products, but she doesn’t want clients to believe they are getting something genuine when they’re not.
Her team emailed the company to let them know, but the company only sent an automated response. A new designer, she said she has had only three collections, and the failure to spot that this shoe design was not genuine revealed to her that The RealReal had not done their research.
“It’s a product that doesn’t even exist,” she told CNN. “It’s not a fake product of a product that exists.” The listing is no longer on the site and she believes all the other listings of Amina Muaddi shoes on The RealReal are her products. The RealReal said it now uses the incident for authentication training with its team.
Last year, luxury brand Chanel filed a lawsuit claiming that at least seven fake Chanel bags turned up on The RealReal. The bags were listed with incorrect serial numbers, counterfeit hardware and “of a quality that is different from that of Chanel’s genuine goods,” the company said. The case is ongoing.
Wainwright believes the lawsuit is motivated by Chanel’s disdain toward the resale business she represents.
“Chanel has been consistently telling us prior to the lawsuit they wanted us to go away. They said to my face I was their worst nightmare. They don’t believe in reselling goods,” she said.
Chanel responded to that claim with a statement, reading in part “the company has brought this lawsuit to reaffirm its commitment to protecting consumers seeking to purchase Chanel products. The only goal is that customers are not deceived or mislead by false marketing or advertising efforts which imply that those platforms can guarantee the authenticity of Chanel products, which is not the case given that several counterfeited items were available among the displayed products.”
Analysts point to the authentication process as a key differentiator between The RealReal and its competition, which includes sites like thredUP and Poshmark. According to a research note from Cowen, The RealReal has developed deep customer trust, with 81.8% of sales volume driven by repeat buyers. This trust depends on the quality of the authentication process and “any mistakes could lead to lower customer satisfaction,” the Cowen report said.
The RealReal’s shares have fallen below their June 28th IPO price over the last several months, and Wainwright blames this on short sellers targeting her and her business.
“I think when you go public, there is a whole other world called short sellers that really actively seek to take you down,” she said. The RealReal has yet to make a profit, but analysts at Cowen say its on track to do so by 2022.