Second Hand Luxury Electric Business The Realreal Is Traced To Identify The Existence Of Serious Potential Problems

The RealReal, which is known for its authentic identification, has recently been identified as a serious threat to the identification process of counterfeit goods. Affected by this negative news, the market value of The RealReal has shrunk by 1/4 in the past 20 days.

In November 5th, CNBC (US consumer news and business channel) released its first report. CNBC interviewed nearly 36 former employees of The RealReal and obtained some internal documents. The survey shows that on the The RealReal platform, not all products will be certified by experts, and a large part of the verification work will be completed by copywriters.

A 2018 company's internal flow chart shows that The RealReal has received second-hand luxury products: all products of Chanel (Chanel) are identified by professional teams; Prada (Prada) handbags, purses and bags are also identified by professional teams, while shoes and clothing are identified by copywriters; Hermes (Hermes) clothing and shoes, and Gucci (Gucci) hats, scarves, belts and shoes are also identified by copywriters; and Dior (Dior) brands are only identified by professional teams, and the rest are identified by copywriters.

The copywriters said they had received almost no training in identifying fake goods, but were employed to write descriptions for the goods on the website. Generally speaking, the luxury industry does not have any formal training or certification for luxury operators.

And The RealReal strictly stipulates the business indicators of copywriters. Internal documents point out that if the daily workload of copywriters is not up to 50% of the prescribed level, they will be subject to disciplinary action. For example, a document marked "updated in February 1, 2019" says that the daily workload of the 8 hour work system is 105, and the daily workload of the 10 hour working system is 131. This means that due to the pressure of work, it is difficult for them to examine the products carefully.

CNBC also reviewed nearly 1400 consumer reviews and found that fakes, damage and bad customer service were the most common complaints. For example, the size is wrong, or the photos on the website are misleading, and are not consistent with the actual appearance of the merchandise.

　　 After the release of the report, The RealReal responded by acknowledges that there may be a fake on its website. He also said that his copybook should receive at least 30 hours of luxury identification training, and the copywriter only assessed the "low risk" brand. High risk products, such as Hermes Birkin bags, will be sent to professional certifications.

"We are looking for perfection, but it may not be perfect every time," Julie Wainwright, founder and chief executive of The RealReal, said in a statement.

In November 12th, Julie Wainwright said in an interview with CNBC that the company is using artificial intelligence and machine learning to update its operation mode and thoroughly reform its product certification process to prevent and eliminate counterfeit products on the website. By the first quarter of 2020, the authentication mode will be very different.

"We use data, technology and manual combination to drive the authentication process," she said. What we need to do now is to authenticate the objects and extract all attributes by AI after taking pictures. Copywriting posts are no longer written, they will be transformed into testing posts.

The RealReal said its certification team handled more than 490 thousand items last month and screened about 4000 fake products. About 140 products passed the authenticity authentication, but failed to enter the platform because of the quality.

But the The RealReal's counterfeit storm has not been able to quell this. In November 21st, CNBC also published an internal document entitled "Copywriting Faux and Tell", which records the counterfeit luxury goods released and returned every week on the The RealReal platform, proving that its copywriters have made serious mistakes in the inspection process.

The document covers hundreds of fake products from the first quarter to the third quarter of 2019, totaling 227 pages. For example, a copy of the so-called Louis Vuitton hairpin was allowed on the copywriter, but Louis Vuitton did not produce this hairpin. In addition, there are UGG decorated with the wrong logo and bow tie; a Moncler sports pants marked as "t shirt"; a Valentino scarf with incorrect production area; and a pair of Jimmy Choo shallow shoes with "Jimmy Ghoo" logo. There is also a Gucci belt without any trademark, and the copywriter describes the "GG" logo as "garish gold". Other product problems include: "poor quality screws", "incorrect hardware on the bag", "wrong font", "loose inner stitches", "strong chemical smell" and so on.

　　 The RealReal was first established in 2011, and was first launched in June 28th this year. The company said it has sold more than 11 million 500 thousand items since its inception.

Julie Wainwright has repeatedly vowed in an interview with CNBC that "every commodity has been inspected and certified before the shelves". "There is no fake on our website." On the Facebook page, The RealReal declared: "every product has an expert behind it, and we ensure that every item we sell is 100% authentic." It also employs over 100 geminologists, horologists and brand experts, as well as hundreds of trained appraisers.

But in November 5th, when CNBC first reported the existence of counterfeit goods, The RealReal deleted the "100% real" formulation on the company's website.

As early as last year, French classic luxury brand Chanel filed a lawsuit against The RealReal and accused her of selling fake goods, saying that The RealReal sold at least seven counterfeit Chanel handbags. The federal court in southern New York is now hearing the case.

In April of this year, Chanel opened fire on The RealReal again, claiming that the latter emphasized their merchandise "100% is genuine" in the advertisements to consumers. However, their appraisal expert team's identification was only a "subjective opinion" without any decisive persuasion. Only Chanel's internal appraisal team had the ability to identify the authenticity of the products.

In addition, Graham Wetzbarger, the chief certification officer of The RealReal, abruptly left in October. Graham Wetzbarger is a representative of the Certification Department. He has appeared in many videos of the platform to publicize the authentication steps of luxury goods and the authenticity of The RealReal. But Graham Wetzbarger said his departure had nothing to do with the The RealReal's holiday selling crisis.

Some investors worry that the sale will seriously affect the credibility of The RealReal. At the end of 6 this year, The RealReal was listed on Nasdaq for the first time. On the first day of listing, The RealReal opened at $28, closing 44.5% higher than the issue price, at 28.9 US dollars, with a market value of US $2 billion 390 million. As of Monday's opening, the company's share price fell by 25% to $16.36, compared with $21.73 before CNBC's first announcement of its sale in November 5th, and its market value shrank to $1 billion 400 million.

However, according to Julie Wainwright, 82% of The RealReal's GMV (total turnover) comes from repeat customers, and 81% comes from repeat sellers, which shows that the company has a high degree of trust. A report by Cowen Equity Research estimated that the US $200 billion worth of luxury goods could be resale, and said The RealReal is still the only consignment platform currently available to provide large-scale luxury certification, and The RealReal continues to invest in counterfeit product testing.