The RealReal's Q1 2025: Unpacking Contradictions in Marketing Spend, Revenue Impact, and Gross Margins

Marketing spend and efficiency, direct revenue impact on GMV and revenue, gross margin trends and expectations, marketing spend and positioning, direct revenue and gross margin trends are the key contradictions discussed in The RealReal's latest 2025Q1 earnings call.



Strong Financial Performance and Growth:
- The RealReal, Inc. reported Q1 2025 revenue of $160 million, up 11% year-over-year, with GMV increasing by 9%.
- This growth was driven by strong supply trends, operational efficiencies, and a focus on unlocking profitable supply through their multichannel approach.

Improved Gross Margin and Direct Revenue Growth:
- Direct revenue increased by 61% compared to Q1 of 2024, with direct gross margins reaching 25.5%, a significant improvement from 3.3% in the previous year.
- The reimagined direct business model, which includes Get Paid Now offerings and strategic inventory management, contributed to this margin improvement.

Increased Supply and New Consignors:
- The number of new consignors reached the highest level in over two years, despite having reached 500 new consignors per quarter last year.
- This growth was attributed to increased marketing efforts, enhanced service offerings, and successful partnerships with stylists and closet organizers, expanding the supply network.

AI and Automation Efficiency:
- The integration of AI technology, especially with Athena, the AI-enabled product intake process, is projected to reduce processing times by up to 20%.
- These initiatives are designed to improve operational efficiency, reduce costs, and enhance the customer experience.