August 8, 2013, 12:58 PM

How TheRealReal.com manages a complicated order flow for high-ticket items

The designer consignment e-retailer receives 1,000 items per day at its fulfillment center in California.

Lead Photo

Julie Wainwright

Since its founding in early 2011, designer consignment e-retailer The RealReal Inc. has placed a major emphasis on mastering its back-end operations like order fulfillment and inventory management, founder Julie Wainwright says. She contrasts to some other e-retailers who concentrate first on site design, navigation or other customer-facing components of a web site.

The RealReal, which sells online at TheRealReal.com, is No. 554 and the fastest-growing e-retailer in the Internet Retailer Second 500 Guide. The merchant brought in an estimated $15.1 million in online sales in 2012, up from $1.4 million in 2011. The e-retailer continues to grow, Wainwright says. Each day so far in August, sales are up 50% compared with July.

The RealReal business model relies on one-by-one shipments coming in from product consigners, resulting in a complicated process of managing incoming product, inventory and outgoing orders.

The company handles many high-ticket products—some Chanel shoes and dresses are worth $500 or more, for example, and Louis Vuitton handbags can sell for several thousanddollars. Once this year, for instance, TheRealReal received $50,000 worth of designer jewelry that one consigner sent via the United States Postal Service. “We just about had a heart attack when we opened it,” Wainwright says.

Dealing in such high-ticket items increases the pressure on the retailer to accurately manage incoming products, assign them to the correct sellers and correctly process orders going out to customers, Wainwright says.

To ensure incoming and outgoing shipments go smoothly, Real Real’s in-house developers spent more than seven months building its order management system from scratch, and they are still tweaking it on a regular basis, Wainwright says.

This is how it works: In the rear corner of its 35,000-square-foot office and warehouse facility in downtown San Francisco, The RealReal receives about 1,000 high-end handbags, pieces of jewelry and apparel items per day via FedEx and UPS. Most of these come in one by one from individual consigners, who receive a 60%-70% cut when their item sells on TheRealReal.com. Other products come in from boutique owners, designers or from the retailer’s own buyers who personally pick up products from individual consigners in major cities.

Once in the warehouse, each item must be authenticated by staffers trained to spot knock-offs, or unauthorized copies of branded products. Staffers then categorize products  by designer and product type, and bar code each item to match the correct consigner. Next, they photograph each product in the retailer’s in-house photo studio, assign them prices, and then upload product images and descriptions to the e-commerce site.

About 1,000 items ship out per day to online shoppers from the same facility. That entire process is replicated on a slightly smaller scale at The RealReal’s 20,000-square-foot facility in New York.

Successfully managing this complex process is what separates The RealReal from the competition, Wainwright says. “Managing supply,” she says, “is where a lot of my competitors fail.”

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