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The RealReal is joining the ranks of ecommerce platforms making significant cuts.
The luxury resale marketplace announced in an SEC filing on Thursday that it will lay off 230 people, or 7% of its workforce. The bulk of the job cuts are expected in the first quarter.
The company is also reducing its real estate footprint. It will close flagship stores in San Francisco and Chicago, as well as two neighborhood stores in Atlanta and Austin. Luxury consignment offices will close in Miami and D.C. The company will also exit co-located logistics hubs, and reduce its footprint at offices in New York and San Francisco.
“The company will continue to evaluate its real estate presence as it deems appropriate to create efficiencies and to address trends in the marketplace and macroeconomic factors,” the SEC filing states.
The company has continued to post impressive sales growth, as it helps to power a wave of demand for digitally-powered resale from consumers who are more comfortable with secondhand goods, and seeking out circularity in the face of climate change..
But the company has struggled with profitability. It recorded losses of $151.2 million in the current year, said GlobalData, which was only slightly better than the year before.
“Today’s job cuts and the closure of some physical locations in the form of stores and consignment offices are a recognition of the growing external challenges and that tougher action is needed to balance the books,” said GlobalData Managing Director Neil Saunders. “Riding the wave of high growth in resale is no longer enough to satisfy some investors who want to see that revenue growth will eventually lead to profits.”
Saunders cautioned that these actions alone may not be enough to move the company into the black, and “further steps may need to be taken across the year ahead.”
The RealReal follows a number of ecommerce platforms conducting layoffs to start the year in the midst of a wider pullback in tech, and reports of softer consumer demand. Amazon, BigCommerce, Wayfair and eBay are all among the companies reducing headcount.
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Labor disputes on the West Coast could cause further disruption heading into peak season.
When the first half of 2023 is complete, imports are expected to dip 22% below last year.
That’s according to new data from the Global Port Tracker, which is compiled monthly by the National Retail Federation and Hackett Associates.
The decline has been building over the entire year, as imports dipped in the winter. With the spring, volume started to rebound. In April, the major ports handled 1.78 million Twenty-Foot Equivalent Units. That was an increase of 9.6% from March. Still it was a decline of 21.3% year over year – reflecting the record cargo hauled in over the spike in consumer demand of 2021 and the inventory glut 2022.
In 2023, consumer spending is remaining resilient with in a strong job market, despite the collision of inflation and interest rates. The economy remains different from pre-pandemic days, but shipping volumes are beginning to once again resemble the time before COVID-19.
“Economists and shipping lines increasingly wonder why the decline in container import demand is so much at odds with continuous growth in consumer demand,” said Hackett Associates Founder Ben Hackett, in a statement. “Import container shipments have returned the pre-pandemic levels seen in 2019 and appear likely to stay there for a while.”
Retailers and logistics professionals alike are looking to the second half of the year for a potential upswing. Peak shipping season occurs in the summer, which is in preparation for peak shopping season over the holidays.
Yet disruption could occur on the West Coast if labor issues can’t be settled. This week, ports from Los Angeles to Seattle reported closures and slowdowns as ongoing union disputes boil over, CNBC reported. NRF called on the Biden administration to intervene.
“Cargo volume is lower than last year but retailers are entering the busiest shipping season of the year bringing in holiday merchandise. The last thing retailers and other shippers need is ongoing disruption at the ports,” aid NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “If labor and management can’t reach agreement and operate smoothly and efficiently, retailers will have no choice but to continue to take their cargo to East Coast and Gulf Coast gateways. We continue to urge the administration to step in and help the parties reach an agreement and end the disruptions so operations can return to normal. We’ve had enough unavoidable supply chain issues the past two years. This is not the time for one that can be avoided.”