UPDATE: November 7, 2019: In a statement emailed to Retail Dive a spokesperson from The RealReal said, "CNBC's report does not accurately represent the depth of our team's expertise and the thoroughness of our authentication process. The RealReal has a rigorous authentication process, it is core to what we do and central to our brand. We make every effort to accurately authenticate the items we receive. If there is a question about the authenticity of an item purchased from The RealReal, we will always work with our customers to make things right. We stand behind both our process and authenticity guarantee, and will continue to provide a safe and reliable platform for buying and consigning luxury items."
Dive Brief:
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In an email to customers Wednesday, The RealReal founder and CEO Julie Wainwright appeared to back away from previous statements that there are no fakes sold through its site. "This is a complex problem, and fighting global counterfeiters is hard work. We strive for perfection, but may not be perfect every single time," she wrote.
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Wainwright also implied that's as good as it gets, writing, "There is no other resale company doing more to remove fakes, and put counterfeiters out of business, than The RealReal." She reiterated that the company has always had a policy of taking back items and resolving customer complaints "if there is ever a concern about an item" and defended the company's authentication practices.
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The missive follows an investigative report from CNBC detailing how the luxury resale site has struggled to keep up with authentication at scale. The company has turned to copywriters and otherwise untrained employees to assist with the process, reserving its authentication experts for certain items, according to that report. Questions about The RealReal's authentication process first surfaced in September following an investigative report released by The Capitol Forum.
Dive Insight:
Online apparel and accessories sellers like The RealReal are particularly vulnerable to fraud, which online rose 44% year over year in 2018, according to e-commerce fraud prevention platform Forter. Jewelry fraud rose 5% last year, according to a report released last month and emailed to Retail Dive.
Previously, Wainwright had claimed not just a zero-tolerance policy for fakes, but a zero-occurrence of them, according to CNBC, who spoke with several employees and former employees who said they felt untrained and under pressure to authenticate items and customers who said they'd received easily spotted counterfeits.
It's not the first time the luxury resale site has endured such accusations. Last year Chanel took the company to court, saying the brand had evidence that fake handbags had been sold there.
The RealReal, which went public in June, could be encountering a problem scaling its authentication system as it grows. And there's likely a breakdown in both its tech and manual review, according to Daniel Shkedi, Senior Product Marketing Manager at Forter.
"Under pressure to make more and more deals they’re going to miss more," he told Retail Dive in an interview. "Using machine learning and advanced data science to improve accuracy, using the human expertise from fraud experts, is necessary to protect performance."
The reports of authentication breakdowns couldn't come at a worse time for The RealReal, which is likely facing even more counterfeit attempts as the holidays get closer. Fraud attacks during the season increased by 13%, Forter found last year.
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Daphne Howland, Khareem Sudlow
