The RealReal, the prominent luxury consignment marketplace, has reported a significant acceleration in growth, attributing a 22% year-over-year increase in Gross Merchandise Volume (GMV) to a comprehensive, year-long overhaul of its core operations centered on artificial intelligence. This strategic pivot, described by CEO Rati Levesque as ‘compounding rather than incremental,’ has permeated every facet of the business, from authentication and pricing to the member experience, driving enhanced efficiency and profitability across the platform.
AI-Powered Precision in Pricing and Intake
At the heart of The RealReal’s substantial AI investment lies its sophisticated pricing algorithm. This advanced system meticulously evaluates over 100 data points per item, including crucial metrics such as page views and how frequently shoppers add an item to their favorites. This data-driven approach enables the algorithm to set initial prices and manage markdowns over time with unparalleled precision, all without human override. Levesque emphasized that this AI pricing system is specifically ‘built to protect sell-through rates’ even as the company experiences a strategic mix shift towards higher-value items.
Complementing the pricing intelligence is Athena, the company’s AI-powered intake system. Athena automates critical authentication and cataloging steps that previously demanded manual attribution, thereby streamlining a labor-intensive process. This automation is rapidly scaling, with the system on pace to process close to half of all items by the end of the current year, a substantial increase from 35% at the end of 2025. The company has also begun extending Athena’s capabilities to higher-value items that previously required manual handling, a move Levesque termed ‘the next phase of the system’s rollout,’ signaling further operational efficiencies.
Financial Performance Reflects AI’s Impact
The strategic integration of AI is visibly translating into robust financial performance. For the second quarter, The RealReal reported GMV of $617 million, marking a 22% increase year over year. Revenue also saw a healthy rise of 17% to $193 million. Gross margin expanded by 10 basis points to 74.4%, with gross profit reaching $143 million, up 17% from the prior year.
CFO Ajay Gopal highlighted the positive impact on unit economics, despite a declining take rate. Sales of items above $1,000 surged by 36% in the first half of the year, indicating a successful shift towards higher-value inventory. While higher-value items typically carry a lower percentage take rate, Gopal clarified that this mix shift is ‘driving take rate down even as profit dollars per transaction rise,’ indicating stronger absolute margins on these premium goods. The technology, particularly Athena, is also ‘removing multiple dollars in processing cost per unit while also increasing speed to sell,’ a combination that allowed operating expenses to leverage ‘roughly 470 basis points year over year’ even amidst significant volume growth.
Average order value (AOV) for the quarter rose 13% to $659. The company’s take rate, however, declined 200 basis points year over year to 35.9%, a direct consequence of the strategic shift towards higher-value inventory and its associated lower percentage take rates, as explained by the company’s focus on absolute profit dollars per transaction.
Enhanced Discovery and Customer Experience
Beyond internal operational efficiencies, AI is also reshaping the customer journey and item discoverability on the platform. The RealReal has initiated testing of a conversational shopping agent, developed in partnership with Google. This innovative tool is designed to interpret highly specific shopper queries, such as a search for ‘a dress for a fall wedding in upstate New York,’ a level of specificity that traditional keyword searches often struggle to match, according to Levesque.
Furthermore, AI is now automatically enriching every listing with crucial data points like occasion, collection, and current trends. This information, which previously required manual entry, significantly enhances inventory discoverability both on and off the platform, streamlining the shopping experience and connecting buyers with desired items more efficiently. Levesque noted that this automation makes inventory more discoverable, improving overall platform utility.
Strategic Growth Initiatives and Outlook
While AI underpins much of the recent success, The RealReal is also pursuing other strategic growth avenues. Its Real Partners referral program has proven highly effective, bringing in consignors whose average consigned value is four times that of a typical new consignor. The company is also expanding its international dropship program, having onboarded two large Japanese vendors and new partners in France and Italy during the quarter, reflecting an asset-light approach to global supply expansion.
The strengthening of the company’s buyer-to-seller flywheel is evident, with 44% of new consignors in the quarter originating from The RealReal’s existing buyer base, an increase from 40% two quarters prior. Physical retail expansion continues, with plans to open a first Boston-area store this fall and an additional neighborhood store in the Los Angeles market, bringing the total store count to 20 by year-end. The company also highlighted its ability to attract high-value consignments, citing a single consignor bringing in a $2.5 million Patek Philippe watch during the quarter, an example Levesque cited of the trust the company has built with high-value sellers.
Looking ahead, The RealReal has provided third-quarter guidance, projecting GMV between $610 million and $620 million, which would represent 17% to 19% growth year over year. The company concluded the quarter with a solid cash position of $134 million in cash, cash equivalents, and restricted cash, providing a stable foundation for continued investment and growth.
The RealReal’s strategic investment in artificial intelligence is clearly yielding tangible results, driving both top-line growth and operational efficiencies. By integrating AI into its core processes, from item intake and pricing to customer discovery, the company is not only accelerating its financial performance but also solidifying its position in the competitive luxury resale market through enhanced precision, scalability, and an optimized customer experience.
