The RealReal's authentication issues continue

The RealReal has found itself in hot water this year over counterfeit items
being sold through their website and store. The company’s CEO Julie
Wainwright has tried to say that there are no fakes on the website, but an
ongoing investigation has found that is not true. CNBC recently obtained
documents called “Copywriting Faux and Tell” that show the company let
hundreds of counterfeit items sleep through the cracks.

Since CNBC released their report on The RealReal’s fakes, the company’s
stock has plunged 20.7 percent. While The RealReal once touted that their
products were thoroughly vetted by an authentication team, but CNBC came to
find that the majority of their products are authenticated by copywriters.
CNBC received a copy of a report called “Copywriting Faux and Tell” from
The RealReal, which is a weekly recap of published and returned counterfeit
products, The report included examples of fake Uggs, Moncler sweatpants,
and a Valentino scarf.

In a press release, The RealReal said in October they processed 490,000
products and caught 4000 fakes among them. The company once advertised that
everything sold on their website is 100 percent real, but since the CNBC
report was released they have removed that from their Facebook page and

Customers losing faith in The RealReal’s authentication process is already
impacting the stock, and is expected to have a further impact on sales.
According to Wainwright, 82 percent of its gross merchandise volume is from
repeat buyers and 81 percent is from repeat consignors. If trust is lost in
the company’s process, they can expect those customers to start looking
elsewhere for heavily discounted luxury goods. Authentication is also a
concern for investors, and could pose problems as the brand looks for new
equity partners. It would behoove them to start revamping their
authentication process, and fast.


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