How consignment became a billion dollar industry.

According to The Guardian, consignment is the act of giving over to another person or agent’s charge, custody or care any material or goods but retaining legal ownership until the material or goods are sold. The RealReal started in 2011 and is on the way to becoming a billion dollar company. The RealReal is an online consignment store where you can buy designer items for a fraction of the price. The RealReal, which grew revenue 55% last year, thinks there is inventory worth up to $200 billion languishing in U.S. consumers’ wardrobes and homes that could be sold off. It has already paid out $988 million to consignors, who typically keep two-thirds of the final sale price.

There have been consignment stores for a long time but if you didn’t live in New York or LA, you didn’t have access. That is what is so amazing about e-commerce, it allows everyone to have access to fashion. Then when you add consignment to the mix, it becomes a booming business. In its first two years, The RealReal sold over 250,000 items, with between 60 to 70 percent of the profit going back to the original owner. Today, The RealReal has over 7 million subscribers and reports revenues of over $500 million, having opened two stores in Los Angeles and New York.

One of the key aspects of a resale company is authentication. There are a lot of fakes in the market, especially if the brands are high-end. Having an intermediary with expertise who vouches for authenticity is an enormous value-add for consumers because it often takes an expert to detect forgeries. They’ve also had problems with getting the descriptions wrong on items. The RealReal and Netflix are very similar because they offer unique services that will ultimately put stores out of business.

Consignment is also good for the environment, there are other companies that are popular including Grailed and Byronesque. Grailed is great for the young male consumer while Byroneque is more specific. In a world heavily influenced by social media, more young people are living and expressing their lives online. There is a growing trend of buying clothes just to showcase them on Instagram. Many are not worn more than once and end up being wasted.