The RealReal CEO Rati Sahi Levesque: Resale, Robots, and the New Luxury Consumer
In a Nutshell
The RealReal CEO Rati Levesque reports four consecutive quarters of 20%+ growth and doubling EBITDA margins, driven by AI-powered single-SKU authentication and robotics that cut handling touches. 80% of Gen Z/Millennials now check resale prices before buying luxury, turning $200B in idle closet assets into a flywheel where nearly half of consignors started as buyers. Blackstone’s David Levine confirms e-commerce penetration hit 24% ($7T globally), pushing warehouses near cities and power supply for robotics to become the new supply-demand bottlenecks.
These notes were generated by AI and may contain inaccuracies.
Christine Anderson hosts Inside Blackstone, bringing together data and insights from portfolio companies to provide a fuller picture of the real economy. The show includes the Monday Morning Meeting with Martin Brand, the Economic Weather Report with Winfield Sickles, a feature interview with The RealReal CEO Rati Levesque, and The Debrief with David Levine on e-commerce trends and retail real estate.
Martin Brand oversees Blackstone's flagship private equity funds and addresses investor concerns about software amid the SaaS apocalypse. He explains that many software companies have strong future prospects due to agentic use of software, as AI agents require software tools just like humans. Software is splitting into winners and losers, with code no longer serving as a reliable moat. Software companies will serve two types of users: humans and AI agents. CEOs must focus on building for agent users as first-class users, since progress in AI is rapid. Jensen Huang noted that agents will need many tools, creating opportunities for software companies. The key differentiator between winners and losers is management willingness to take risks and move beyond traditional pricing models like per-user, per-seat, per-month pricing toward outcome-based pricing for agentic users.
Despite volatility in global bond markets, US economic data showed resilience supported by strong investment, consumer activity, stable inflation, and a balanced labor market. Second-quarter US GDP was revised higher, driven by consumer and business spending, with third-quarter GDP estimates tracking near 4%. Business investment rose at nearly double-digit annual rates, powered by record capital expenditures. Consumer spending growth accelerated to its strongest pace in more than a year. Friday's jobs number came in below expectations but, combined with dovish Fed speak, reduced market expectations for an October Fed rate hike from 70% to 20%. AI investment continues expanding, with AMD acquiring physical AI startup World Labs for approximately $8 billion less than three years after founding. Micron reported third-quarter revenue five times higher year-over-year, with management stating they have no visibility into when memory chip supply will catch up with surging demand.
The 10-year US Treasury yield broke through 5.3%, reaching its highest level in nearly a quarter century. France's 10-year government bond yield topped 5% for the first time since 2002. Core inflation continued moderating at a 2% annualized pace over the last three months. The primary factor driving higher cost of capital is strong economic growth catalyzed by AI infrastructure investment crowding out capital, combined with government deficit concerns worldwide.
Rati Levesque, CEO of The RealReal, wears a necklace purchased on the platform. She grew up in San Francisco above her parents' restaurant, entered finance after college, started a boutique, then became employee number one at The RealReal. She now leads the world's largest luxury resale marketplace. 80% of Gen Z and Millennial consumers now check the resale market before buying luxury goods. When the company started 16 years ago, there was stigma around resale, but celebrities and influencers now request to be dressed by The RealReal for events, including Lena Dunham and Marisa Tomei for the Olympics. Press coverage now lists The RealReal as the source rather than brand names.
The RealReal positions itself between eBay and Sotheby's, taking the top off eBay and the bottom off Sotheby's and Christie's for consignors. The company has achieved four quarters of double-digit growth exceeding 20%, with expanding EBITDA margins doubling this year. Resale has become a permanent part of the fashion ecosystem rather than a trend.
Rati operated a boutique in Russian Hill, San Francisco, where rent increases and low margins made the business difficult. She supplemented income by sourcing vintage items, observing customers gravitating toward vintage racks for value. She met Julie Wainwright and became employee number one, initially working from Julie's house with products in the living room. Rati drove around calling friends for vintage luxury pieces, processing items one by one. The company prioritized well-made luxury items, taking possession to build consumer trust and transparency. This approach remains a deep competitive moat. The company now processes over 600,000-700,000 unique units monthly.
Early market research revealed consumers valued uniqueness and authenticity alongside price. Most items cannot be found elsewhere, representing limited editions even at original production. Consumer behavior shifted toward checking resale prices before primary market purchases. Early investor conversations questioned why women would consign items or buy used clothing, overlooking that bodies, tastes, and trends change. Most customers now check The RealReal for resale prices before primary market purchases.
The secondary market offers value through bargains, authenticity, and uniqueness. Younger demographics seek items authentic to their identity rather than conforming to others. Gen Z represents the fastest-growing segment, followed by Millennials. These consumers view checking resale prices as second nature. They value community, authenticity, and trust, areas where traditional retailers may lack strength.
Since 2020, vintage demand increased approximately 430%. Many items appreciate above original purchase prices, functioning as investment pieces. The company is launching My Closet, a fashion portfolio tool providing data on closet value, trade-up recommendations, hold decisions, and sell suggestions. With 45 million members and nearly 50 million items sold, the platform possesses extensive data to empower consumer decisions in primary markets.
Approximately $200 billion of luxury goods sits in US closets. Consumers can engage luxury managers, visit one of 20 store locations, or check the site for valuations. Many are surprised by item values, even unbranded pieces. The sales team compensation aligns with merchant insights and consumer behavior shifts. Phoebe Philo items currently hold strong value. The Row, Kallmeyer, and Colleen Allen have entered top 10 brands. Discovery on the platform is significant.
Consumer data shows money earned through resale returns to primary market purchases rather than cannibalizing retail. The circular economy creates additional reasons for primary market shopping since items can be resold afterward. Consumers are becoming more educated before purchases. RealReal-ers engage on both sides of the marketplace, buying and consigning. Nearly half of consigners were buyers first, creating a flywheel effect. The company maintains relationships with primary market brands whose consumers check resale prices before purchasing.
The most expensive item sold was a $2.5 million F.P. Journe watch. The consigner did not know the watch's value until authentication. She reinvested proceeds according to her needs. The authentication process involves watchmakers and creates memorable consigner experiences.
Unlike traditional retailers with inventory depth, each RealReal item arrives and ships individually. Early investment in technology and AI addressed single-SKU processing complexity. The company authenticates items using patented technology developed with University of Arizona, the largest gemological lab, to authenticate and measure diamonds. Gemologists' productivity increased through this technology. Watch authentication requires opening pieces to identify aftermarket parts. Handbag authentication involves tactile testing and metal verification. Hundreds of thousands of counterfeit items have been confiscated, with some cases involving local authorities.
Logistics strategy focuses on last-mile delivery speed and efficiency. Single-SKU constraints prevent depth across multiple warehouses, requiring disciplined transportation and last-mile strategies. Recent automation testing significantly reduced handling touches. Items now move directly into technology systems or large boxes, proceeding to auto-packing and shipping with minimal human intervention. Technicians now focus on quality control rather than manual handling. Two years ago, multiple touches occurred including binning, picking, packing, and loading. Current systems use robots for pick-packing and shipping, with 50-60 robots currently deployed.
Conversational search launched in partnership with Google improves item-to-customer matching speed. Agent-based shopping allows consumers to describe needs conversationally, such as requesting wedding attire for the Hamptons in October. The system serves recommendations based on past purchases, preferences, and trending items. Early testing shows strong conversion results. Consumers spend 42 hours annually on the app scrolling.
Consumer data indicates resilience, with value recognized in both buying and consigning. Spending increased on jewelry, watches, and handbags. Consumers are more educated than previously. Younger customers buy and sell faster, being thoughtful about spending and understanding global conditions. First consignment payouts of $4,000-$7,000 demonstrate real earning potential, shifting mindsets about the ROI of resale participation.
Significant AI investments are generating returns through improved unit economics and reduced processing times. The company targets Rule of 40 achievement with continued double-digit growth and margin expansion. The executive team views the strategic path as clear.
Rati became CEO nearly two years ago during a challenging period. Her parents owned a restaurant where she worked since age seven, providing early exposure to systems, processes, low-margin operations, and stressful environments. Her father's work ethic as an immigrant entrepreneur and her mother's advocacy for customers shaped her approach to empathy, community building, and operational discipline.
The RealReal CEO Rati Sahi Levesque highlighted courage as a key leadership trait drawn from watching restaurant operators. She noted that restaurant founders took significant risks by investing all their capital into a single venture. As a CEO, she emphasizes the importance of taking calculated risks as a leader.
David Levine was recently named Global Co-Head of Real Estate at Blackstone after 17 years with the firm. He is a key leader behind one of Blackstone's most successful investment themes: warehouses, referred to as logistics assets. Levine is a RealReal customer, with The RealReal being one of the most frequent delivery items at his home after Amazon boxes and diapers.
David Levine observed the e-commerce shift starting around 2010 when penetration was only 4-5% and total global e-commerce sales were approximately $500 billion. Today, e-commerce penetration has reached 24% with global sales at approximately $7 trillion. Blackstone identified this trend early and positioned itself by purchasing distribution centers and logistics assets to capitalize on the transition from retail on shelves to retail in warehouses.
As the largest owner of real estate globally, Blackstone can identify trends early through its extensive leasing data. The firm first spotted the e-commerce trend in the US, then tracked its movement to Canada, Europe, and Asia. Prior to the Global Financial Crisis, Blackstone was a significant owner of traditional retail properties and recognized the threat posed by emerging e-commerce companies like Amazon.
Consumer expectations have shifted dramatically regarding delivery speed. Previously, customers were satisfied waiting several days for packages, allowing warehouses to be located on the outskirts of cities. Now, consumers expect two-hour delivery, requiring warehouses to be positioned much closer to population centers. This creates a supply-demand imbalance for warehouse space near urban areas, which Blackstone seeks to own.
Current economic indicators show consumer strength with unemployment at 4.2%. Blackstone's high-street retail properties in SoHo demonstrate foot traffic over 20% higher than pre-COVID levels. High-end luxury hotel revenues are up 9% year-over-year across Blackstone's portfolio.
Agentic shopping, where AI agents conduct shopping on behalf of consumers, is already operational though still nascent. Amazon's Alexa shopping feature demonstrates this trend, with users spending 20% more on average and being 50% more likely to purchase when using the technology. This represents a significant shift coming for other e-retailers implementing agentic e-commerce capabilities.
Warehouse design priorities have shifted from maximizing ceiling height to ensuring adequate power supply for robotics and automation systems. This power requirement is becoming increasingly scarce and represents a new constraint in warehouse development, similar to the challenges The RealReal faces with warehouse space near cities.
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