Q1 2022 RealReal Inc Earnings Call
Okay.
Okay.
Ladies and gentlemen, and thank you for standing by and welcome to <unk> first quarter 2022 earnings results conference call. At this time, all participants lines are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
A question. During this session you will need to press star one on your telephone if you require any further assistance. Please press star zero I would now like to hand, the conference over to your first speaker today Kaitlyn Huh.
Vice President of Investor Relations. Thank you. Please go ahead ma'am.
Thank you operator.
With me today to discuss our results for the period ended March 31st 2020.
Our founder and CEO Julie Wainwright.
In basketball that.
<unk> Financial Officer, Robert Julian.
Before we begin I would like to remind you that during today's call. We will make forward looking statements, which involve known and unknown risks and uncertainties. Our actual results may differ materially.
Our speakers.
You can find more information about these risks and uncertainties.
And it could affect our operating results.
Company's most recent Form 10-K.
It sounds it sounds it Mike.
Works are important.
Today's presentation will also include certain non-GAAP financial measures, both historical and forward looking which is where all financial measures. We have provided reconciliations to comparable GAAP measures in our earnings press release.
In addition to the earnings press release, we issued a stockholder earlier today, both of which are available at investor.
Relations web site.
I would now like to turn the call over to Julie <unk> Chief Executive Officer.
Our introductory remarks, and then we will go directly to a question and answer session.
Julie thank.
Caitlin and thank you everyone joining our earnings call today before.
Before we get into the quarters results I want to take a moment to acknowledge the ongoing humanitarian crisis in Ukraine.
Our thoughts are with those impacted by this devastating anymore.
And we wish for and resolution to this contract and a return to peace in the region.
Today, we are pleased to announce better than anticipated financial results for the first quarter of 2022.
During the quarter, we delivered solid top line growth despite COVID-19 related staff, Colorado Center and occasion centers early in the first quarter.
Since supply drives demand I returned to normal staffing levels resulted in strong demand on our platform due to increased inventory.
G. M D was driven by fine jewelry and watches high value handbags, and strong growth rates in womens apparel and shoes.
No the real real sounds in apparel are contrary to ecommerce reported retail trends.
Importantly, during the first quarter. We also continued to generate significant operating expense leverage on both fixed and variable costs.
After a better than anticipated financial results in the first quarter. We are pleased to confirm our full year guidance and provide guidance for the second quarter of 2022.
Notably we continue to project the real well will be profitable on an adjusted EBITDA basis in 'twenty 'twenty four.
And we are on track to achieve our vision 2025 targets.
These targets and projections rely on a number of assumptions.
Number one continued top line growth of at least 30%.
Number two operational excellence with improved burial variable cost productivity.
Number three laser focused disciplined and fixed cost we know that the real world delivering on all three of these points in our first quarter 2022 results.
Then you came back to the business continue to be inflationary pressures on our transportation cost.
And attracting and retaining sales and operational talent.
For transportation costs, we are taking immediate steps to offset these increases.
MS Hylton up hiring we exited the quarter in good shape. However, we are actively recruiting to fill positions as weak route.
Looking forward, we continue to see strong demand in our business as inflation has ramped up and prices have increased and the primary luxury mindset.
We believe the real rail is he demonstrated value option offering unique and highly coveted items within the luxury goods space.
Therefore, we believe we are positioned for a strong 28 22.
And with that we will now go into our Q&A session.
Yeah.
Thank you at this time, if you would like to ask a question. Please press star followed by the number one on your telephone keypad again that is star then the number one did withdraw your question. Please press the pound or hash key please standby, while we compile the Q&A roster.
Your first question comes from the line of Anna and driver with Needham Your line is open.
Great. Thank you so much and congrats operating great in a tough environment.
We had a couple of questions on the number of new buyers accelerated this quarter can you talk about the behavior of these buyers compared to the previous cohorts and I'm curious if you're seeing a bigger trade down from a the primary market and just a follow up on guidance for two Q U.
You're guiding for roughly similar run rate in G. M D. Despite lapping a much tougher compare just curious what are you seeing in the business quarter to date are just given we've been hearing a lot of a negative sentiment in the consumer space. Thank you so much.
And while that Robert answer the second part I. You know you should also recognize that when we are giving guidance for Q2. We are now you know five weeks into Q2. So we wouldn't give guidance. If we didn't have strong faith in our in our quarterly estimate.
But to your first question about new buyers in cohort, we measure our cohorts over time, the new buyers are acting you know in the first quarter and buying just the same as the other buyers and biggest shift in our business has been marsh more apparel, which is actually growing incredibly fast right.
And up to where it was pre Covid times, some apparel as a shaft, but the new buyers are acting like our previous cohorts. So there's no change there then.
Trade down from the primary market hard to measure.
Our premise has always been that when inflation hits or a recession that we were gonna be a beneficiary of both because we do we are a value player now our demand is strong and it's really tied to us having inventory on the site, but again, we have no way of tracking our pea.
People switching their purchasing power purchase from primary to secondary I can tell you in the past people moved away from fast fashion and you know, we'll monitor will ask people in these questions and monitor that everybody would do it every year. So that survey won't go out sometime in May now, let's go to guidance.
For Q2 Robert.
Thanks for the question Anna.
We're comfortable with our guidance for Q2 on the topline.
The projection is about 33.5% of growth in G&A for Q2 versus last year, we feel that's.
Very achievable, it's in the range of what we talked about 30 plus percent.
Rose.
So we feel good about where were projected as Julie mentioned, we're a month into the quarter at this point. So we actually have one of the three months in the books and we feel good about the trends and the projections of proceed.
Great. Thank you so much can I just squeeze another one just to follow up on direct sales I think the highest as a percent of G. M D.
It's it's ever been how should we think about the mix just for the balance of the year and especially I was looking at inventory that's growing in line with sales now this quarter.
Yes, so direct revenue as a percent direct revenue as a percent of total revenue was in fact.
Higher than normal in Q1, it was about 34% of our total revenue.
Last year in Q1. It was it was 25, that's really a function of <unk>.
So.
The inventory that we have on hand sold through at a higher rate than we expected and that did drive that percentage up in terms of the proportion of our total revenue coming from direct we do anticipate as the year progresses for that percentage to come down.
The absolute amount of direct revenue stays relatively constant throughout the year it becomes a little bit of Bud different comparison, because direct revenue started to grow in the second half of last year and so the growth rate will decline as the comparison changes.
And we do anticipate over time that direct revenue as a percent of total revenue will go down we do have initiatives that we have mentioned before that we are deemphasizing the direct business in favor of our confined business model and we do have initiatives to reduce that over time, there will always be some portion of our business.
That will be direct there is direct revenue comes from auto policy returns. There is direct revenue that comes from things like get paid now that will continue and will probably grow in proportion of our topline as time goes on the part of our business direct businesses is driven by purchases from <unk>.
Anders and wholesale or so on we will deemphasize it but in general overall that percentage should come down over time, and we project that for the second half of the year as well.
Okay. That's super helpful. Thank you so much Bert.
And our next question comes from the line of Michael Binetti with Credit Suisse. Your line is open.
Hey, guys. Thanks for taking our questions here so.
You sound confident in where <unk> is headed but you know as we try to look at it on a three year basis to think about what the growth rates have been here quarter to quarter relative to the pre COVID-19 world. It looks like you're baking in a bit of an acceleration in <unk> and then a little more in the second half on that basis, maybe just a little help because theres, obviously been a lot of noise.
In the retail marketplace in the U S at least in a couple of the other analysts have mentioned as well, but maybe just a little help in Q2 and you know what what youre seeing in the topline dynamics unfolding since the end of the quarter.
In March that boost your confidence in <unk>.
Yeah, Hey, before we get going you know what does that thing do you Wanna comment we're in a different sector. Then we get lumped in with ecommerce quite a bit and we're not an e-commerce business for our marketplace business and we were on the high end of the marketplace business and we do sell unique products that have that don't have multiple.
So some of the basic retail got credit card down it really doesn't apply to us and we have been countering that so whenever we certainly are aware of what's going on in the normal E. Commerce business, we're certainly paying attention to everyone's <expletive> earnings report.
But they don't map to our business really as <unk> because of where we sit as a marketplace and a value play in the luxury space with unique product so and to be honest one other bit of from people that are really getting in and understanding our business. We also don't necessarily.
The map to what happens in the peer to peer market places, which have more margin pressure on them than we do and certainly have different price points than we do so with that I'm going to turn it over to Robert So Michael.
[laughter].
We've talked before about really not liking the two year and three year stack view of our revenue given the very unusual result that we had in 2020 due to COVID-19.
You look at our growth rate in Q2 of 2020 versus 19. It was minus 20% and then in 2020. One it was plus 92% and now were saying in Q2 'twenty 'twenty. Two is its plus 33 and a half as I mentioned before and I think that's a return to normal.
I don't think it's a it's an unusual growth rate or a change in what we would expect long term and going forward and also I would say that the calendar of our G. M. B over the year and by quarter is very consistent with what you would see in a typical year even in the strange years.
In 2020, the proportion of our revenue that comes in each of the quarters. What we're projecting now is very consistent with that so for those reasons I feel confident that we have a good and accurate for.
Kasper Q2 topline.
And then I guess the follow that any Julie to latch on to your comments about <unk>.
That's on trade down are you seeing any signs of trade down within your business as you look across the different classifications and categories I guess in a in a perverse way that could be a good thing to see within your ecosystem as it probably means you get into more people's radar outside the ecosystem as if budgets start to tighten.
No what we've seen now is more and I don't think that's as we stated earlier, we're selling more apparel, which has a more natural lower price point, and I'm fine jewelry or a handbag and but it has a higher take rate for us. So our apparel didn't start returning to normal.
Last quarter, our Q4 and started to return to normal but now in Q1 were back to normal and those trends continued in April so it's more of a category shift mix now.
And it is a trade down.
Okay. Thanks, a lot for help.
Your next question comes from the line of Laurent Chang with Morgan Stanley . Your line is open.
Great. Thanks, and could you talk a little bit about supply trends that you saw in <unk> relative to the fourth quarter and then if you could update us on sort of the supply mix that you're seeing and then just lastly on the on the ending inventory balance you mentioned, you're expecting to continue to work through that over the next few quarters could you maybe help us break down.
How much of that inventory as its vendor versus the direct buy or that sorry that the by now and the returns piece. Thank you.
Yeah sure I'm going to have Robert take the second part of that question I missed the first part.
And barring some fine trends are concerned they were similar to last year in Q1.
Was quite healthy we talked about that we did have some issues getting the product up on the site because of labor shortages.
That's behind US now as far as the mix goes being the same trends, we are seeing more ready to wear as Julian mentioned on the seller side as well, 30% of our sellers continue to come from stores, that's quite healthy and in home is back to pre COVID-19 numbers, if not healthier so all the trends.
We target a lot of them are kpis in supply, whether that's average unit picked up our conversion.
Next value in all of those are quite healthy for Q1.
And Lauren your question about the makeup of our inventory by the different buckets that we categorized.
Categorized.
About 60% of our total owned inventory is from vendor purchased or wholesale.
Activity about 25% of our inventory balances from get paid now by upfront or I'll.
Throw in the what I'll call recovered inventory, which was an operational sort of issue and about 15% of the total inventory balances due to out of policy.
And that's just stayed in on the balance sheets of the cell.
$70 million to $73 million, that's the breakdown by category.
Okay, Great and just one follow up where do you see that vendor mix going over the next couple of quarters.
We see it declining.
You know fairly significantly.
Great. Thanks.
Your next question comes from the line of Kunal My two car with UBS. Your line is open.
Yes.
Hi, Thanks for thanks for taking my questions.
Just a follow up on the on the inventory side. So.
Thank you.
So much more inventory than you expected.
This unexpected but the inventory.
So it wasn't unexpected inventory coming more from the get go or was it more like that.
Let's see.
And then as we as.
As we look ahead.
Cool.
To the future in the next few years.
That's a that's in there is an expectation that you will be able to deliver 30% plus growth on G. M B b.
Yes.
As we think about a worsening macro outlook.
People are talking about and Julie kind of referred to it.
So the more value conscious consumers so how does it impact.
The Warner Chair for the more value conscious people.
It'd be more impacted by inflation and a downturn pencil me just exit the market completely.
Oh, gosh hard I'm going to answer the last we always like to what happens in the luxury space. Our luxury business is one of the most resilient businesses. We're not N. A me too low costs, you know bottom dollar business, which is impacted by different things, but the luxury business is tremendously well.
Sell yet.
And we have a phenomenal flywheel, where buyers become salaries and our sellers become buyers, which gives us confidence the other thing we always look at it.
And what's happening in the funnel in terms of our the beginning the beginning of us getting our lead car consignment and that actually is very very healthy. We don't expect that to change you can imagine that some people are going to sell their things because they need the money. Other people are going to sell their things to buy new things, but I don't.
See our end of the market being hit.
And in this market, we would've seen there I know our business is that it's a market drops and clearly the market has been dropping when their business evaporates, we have not seen that on our side of the business at all in the luxury market is phenomenal phenomenally recently and the reason we're confident about our growth is because of our low.
And attrition rate overall, so we have less than 2% of potential consignor in the U S and 40 over 40% of our Consignors that can sign with US. Our first time can signers that's been almost since the beginning of time.
We're still introducing the market introducing people to the whole value of Consigning and said they have trapped value in their house once they start signing with us they tend to continue as as you know our consignor have a high purchase rate on our side through our most valuable customers, but we're all.
Also converting more buyers become consignors. So we are very confident about the future growth, we're very confident about our positioning and and with that I'm going to turn it over to Robert to talk about the other issue. Yes. Okay. Now the question was about where inventory grew in spite of the higher sales.
So using the same categories that I gave before.
In terms of.
Where our direct revenue is.
Direct revenue I would say that about 60% of the growth in inventory from the end of the year. The end of Q1 came from the get paid now by upfront recovered category.
Then the remaining 40% was split equally between auto policy returns and the vendor purchased in wholesale category.
Okay.
Got it thank.
Thank you so much.
Your next question comes from the line of Simeon Siegel with BMO capital markets. Your line is open.
Thanks, Hi, everyone.
Just so I saw that <unk> did you say how like for like a S. P is to normalize for mix and then I don't know if we're we're still talking about G. P per order, but just any thoughts on how to think about that going forward. Thanks a lot.
I guess I'll start on the gross profit per order because you guys know that stuff, but my favorite metric.
I think that gross profit per order in Q1 was about $95 that was.
I believe it was an increase year over year, but was 90.
Yeah 90 was I think it was 85 last year, so about a $5 increase year over year yeah.
And again, it's not it's not my favorite metric because it sort of ignores our entire cost base when you're talking about.
Our path to profitability, but.
It was up year over year, I think it might have been down slightly sequentially.
And then I can take the first question around a O N E. S. P. A L V is up year over year in 2019, and there really is just an inverse relationship between units per transaction and E. S. P.
We did see that a lot driven out of units per transaction and then.
S P.
Or like Idaho, we are getting smarter and we have.
Awesome technology, you've heard about at.
At Investor day around testing higher prices around average selling prices. It's all machine learning driven and we feel really good about that and when we control our mix, we do see average selling price.
Yeah.
And thank you that's great and then I know the take rate tends to be a function of.
I guess the ASB within UV. So how are we thinking about any changes or any opportunities on the take rate side.
Yeah, we do think there's some opportunities there and we're looking at it now.
Because we do have some areas, where we don't have a lot of concrete our competition, but we haven't completely finalized, but we do think there's some opportunities on the take rate side, mostly on the low end of the product spectrum.
We did take an action yeah take right now is up yet driven out of more ready to wear but it's also driven by the change we made last year in.
Taking more commission on low price, such as well as an unbranded jewelry and we think that low price cuts, there's still an opportunity when I say low price I mean very little price.
Perfect. Thanks, a lot everyone. Good luck the rest of year.
Thank you.
Your next question comes from the line of Susan Anderson with B Riley Your line is open.
Hi, good afternoon, Alec leg on for Susan My first question just on the going back to the direct revenue.
Is there any major difference between the vendor the pay now option in the out of policy return margins.
There are certainly different margins by category in the owned inventory.
The the margin, it's a competitive market in terms of what we can.
By items for an expected gross margin. So there are I wouldn't say, it's by the difference between paid and our vendor in wholesale but it's different gross margins by product category certainly.
Yeah.
Okay and then this quarter like you mentioned a lot of operating.
Leverage how much of that was driven by mix leverage versus the improving or variable cost productivity.
Yes, so we saw very nice fixed cost leverage in the quarter versus prior year round.
Round numbers, roughly 600 basis points on that part of our cost base and we saw very nice productivity on our variable cost base. Another 250 basis points, which stated in in terms of variable the variable cost productivity. It was almost 7% productivity on our.
Variable cost base.
Between the two of them we saw.
18, hundreds and seven to almost 1900 basis points of leverage on our operating expenses in the quarter versus prior year.
Perfect very helpful. And then my last question just on the neighborhood store strategy. How many stores do you have now spots for the future and then any metrics around the stores you can share this quarter.
I'm sure we have 16 stores right now their shopper ball. We also have three luxury consignment offices at the place where you can just go in and drop off you're going to meet with an expert there supply driven and yeah. I mean, our strategy on stores are the same as last quarter, we're opportunistic.
As far as locations go.
Buying real estate that looks and type thing will definitely take take us take them on at 30% of our salaries continue to come from the stores and both on the supply and demand side.
But our goal is to where were estimating this year may be done because unless we have an extraordinary at least it follows that way, but its about two two stores per year going forward and new openings.
Perfect. Thank you best of luck for severe.
Right.
Your next question comes from the line of Michael Mcgovern with Bank of America. Your line is open.
Hey, Thanks for taking my question I have two the first one that I think the consignment take rate was up pretty significantly year on year, but the consignment gross margin was still down slightly I'm. Just wondering if there's anything to call out for either of those on the consignment side and then just for your full year EBITDA guidance.
Obviously implies some margin improvement. So can you just remind us of the fixed cost leverage versus variable cost productivity gains that are underpinning that kind of margin improvement through the end of the year I guess, what kind of change should we put into our model. Thank you.
So on consignment take rate that is largely a function of mix when you see our take rate going up or down. It's almost always just the mix of category between high take rate items versus what would take right items and if anything on an item by item basis, we stay either flat or increase slightly so that's always a question.
Mixed same thing on the margin I will say in the way we report margins in our Q. We include the shipping expense the net shipping expense on the consigned sideways at that category is actually consigned and services and the direct is a category that's cleaned by itself.
A little bit of what you might see on a consigned gross margin change again could be mixed but it's largely a function of there also being services and shipping and shipping is has been a headwind.
What was the I'm sorry, the second question on the leverage they're able to leverage going forward.
Just yeah just helpful. In the context of the full year guidance just looking at.
You know based on my math about 65 million in losses in the first half of the year and then to get to the lower end of the range of full year guidance would suggest about improvements of 35 million in losses. So I guess could you describe that kind of margin improvement just.
Yeah.
Any context, you can give us for that.
I do think that you're going to continue to see the fixed cost cost leverage that we have seen in the past and you are going to continue to see.
The support Opex as a percent of revenue decline.
Largely that that part of our cost base I've described is primarily fixed and with the seasonality of our business and with increased <unk>.
Top line growth on both <unk> and revenue for Q3 and Q4 in the second half of the year, just mathematically you're going to continue to see really nice leverage on that part of our cost base and I think you should expect to continue to see the type of productivity, we talked about at Investor day that our variable cost productivity you need it to be three to five.
5% sort of low to mid single digits, we did better than that in Q1, but I think that our current projections include that type of productivity on the variable cost basin and again with the seasonality and the increased revenue in the second half of the year, that's what's flowing through and the improved profitability.
The second half.
Got it thank you.
Your next question comes from the line of Ek Bar show, we had a wells Fargo. Your line is open.
Alright.
Robert two questions for you first on the gross margin line I know this to record a revenue question has been asked.
But I'll ask it more from a margin perspective can you can you kind of be more explicit about your gross margin expectation for the upcoming quarter and for the year, because there's just such a meaningful mix.
That makes sense that are taking place I think it might be helpful for us to understand exactly how to think about the gross margin one.
Yeah. So a couple of comments in answer to that question.
You should see gross margin improve as the proportion of our revenue coming from the direct business declines that as projected in our Q2 results and the guidance we projected for Q2 and you can't extrapolate you'll you have Q1 actuals. We've given Q2, you can extrapolate second half and so you will see that.
There's a pretty significant increase in gross margin in second half versus first half and again, it's primarily due to the declining proportion of our revenue coming from direct in the second half of the year versus the first half of the year all very much consistent with how we projected the year and what we communicated.
In terms of our initiatives going forward and deemphasizing direct.
But there is a pretty significant improvement in margin in the second half versus first half due to that mix change.
But we should expect in <unk> to see another quarter of pressure, maybe not as much in Q1, but year over year pressure in gross margin below the 64 from last year correct.
That's correct I would say that you should see sequential improvement from Q1, but youre going to continue to see pressure on a year over year over year basis in Q2 itself and then youll see a lessening of that pressure in the second half versus prior year.
Got it and when we get to the end of the year does that kind of lead us to flattish.
Gross margin versus the 55 last year.
Lattice to maybe a little down I would say.
Not significant.
No.
I won't get specific numbers, but.
But still because it works out.
Yeah, so maybe a little bit down, but does it flattish is probably within the realm of what we're projecting yeah.
Yeah.
That's super helpful. And then just the last one on marketing so you've got some pretty good leverage on the marketing line. The past couple of quarters I think those compares get a little bit more challenging as we move forward in Q2 and beyond can you just kind of help us. So how are you guys thinking about the marketing spend going forward for the rest of the year.
Marketing spend we I mean it.
And I don't know, what we spent in them and and.
And that's a day not a lot where we have a nice flywheel effect. So we expect to see it get continuously.
Not dramatically more efficient and variable part of marketing into fixed cost, obviously gets very efficient but.
And we're doing a really good job of driving efficiencies aided by the flywheel effect and also I'm really smart variance of our marketing mix. So we're not as dependent on digital as other people, which has actually helped the business and I would say for all the reasons that Julie just gave you.
We're looking at our support Opex and we're looking at our productivity by each functional area and actually marketing is one of the areas, where we are getting the most productivity the most leverage.
And it's for the reasons that Julie mentioned earlier, but it's actually a really success part of our story in terms of the efficiency and productivity and leverage is in the marketing group and.
And we've been aided by the story shield, 30% of new Consignors are coming to the stores. We also had a healthy level of new buyers and and really how hands on supply of songs in that and when we get you know some of the stores have aided that quite a bit.
Got it okay. Thanks, so much.
Yes.
Your next question comes from the line of Tom <unk> with Wedbush Securities. Your line is open.
Hi, Andrew Wiener here on for Tom Thanks for taking our question.
Just a quick one so you had a COVID-19 disruption going into Q1, which at this point seems to be mostly behind us. It implied GMB growth rate for Q2 is about the same at about 31% is there anything that's preventing any sequential improvement here in Q2, and what really gives us confidence.
To do that acceleration in the second half.
Oh, well, there's different things and I'll, let Russ you talked about this but you know one of the things.
In general once we present demand side once we have supply and so once we got back to full staffing we got the product up on our eyes on our shelf so to speak or virtual south it really had an aggressive south Korea. So we ended the month at actually ended the quarter in a really nice way in Q1 and.
And we expect to be on target for April but our.
Growth in G. M. D is directly tie tried to how many leads we have aren't coming in and our ability to hire and retain salespeople as I noted in my opening remarks and <unk>.
So we feel good about that as something we've been doing for a while you want to add more color. Yeah. I think you know on the supply side, the leads and opportunities like Julie mentioned that they are the top of the funnel is very healthy and for us. It's all about hiring and like Julie said retention, which is you know.
It goes ebbs and flows as we all know, especially during COVID-19, but we have many things in place to mitigate that risk and keep attrition.
Hey, Dominic just came on the only other thing I would add is Q2 of last year, we grew 92% well that's off a low base.
Yeah.
Yeah.
He was shut down for.
Just in terms of the actual data so our GMB growth rate in Q1 was 38% projected GMB growth in Q2 was 33 six but I would also encourage you to look at the revenue growth rate. So the revenue growth rate in Q1 of this year was 48, 5% and the revenue growth rate projected.
For Q2 was 52, 3%.
So we're talking about more than 50% growth of revenue in Q2 versus prior years and it doesn't exactly match the same percentages of G. M D. Because the disproportion that comes from direct.
It has a higher impact on revenue than it does on GMB in terms of the growth rates, but it's a pretty healthy amount of growth built into the Q2 projections.
Got it thank you very much.
Okay.
Your next question comes from the line of Ashley Higgins with Jefferies. Your line is open.
Hi, good afternoon, and thanks for taking our question you've.
You've talked about the price increases in the primary market driving up resale values.
Just wondering how are consumers responding to higher prices on your platform and then is there any way you can quantify the pricing benefit to Jim to your G&P growth. Thanks.
So I'll, let raunchy add more color to this but one of the things. We do is we don't try to evolve the way, we set up and price as we try to get the optimal price not the highest price and what that means is we take a lost city of sale into consideration and that's really important product consign.
And there is to know that our cadence of sell through can be anticipated and unexpected and it's consistent and also allows us to pretty accurately forecast when we need new Apis centers due to running out of space. So velocity of sale is one of the measurements for the sell through arms.
City of sale has not dropped in fact, if it didn't drop we weren't the only the price.
It really is finding that balance between the highest price possible without losing velocity of sales do you want to add more.
Great.
Exactly how much like for like items.
Our movie had but that's something we're constantly testing and constantly moving that bar right.
We priced them being at $5 and so really quickly we are going to test $10 next time, so we're constantly optimizing.
And okay, we're all over it right.
Yeah over time, our items have gone up you know and you know 10 to $15 in the last five years, but but this is that it's not static at all so it's dynamic.
Okay, great. Thanks, and if I could just throw in one more would you expect a weaker macro backdrop to actually drive supply higher as consumers, maybe look to monetize their items.
I do.
I mean, that's that's just making a sort of a wild forecast, but I really like our business started in 2011, the tail end of a recession.
And once people found they could monetize product in their home that was sort of a you know just free money sitting around they really jumped on it. So I personally believe we aren't going to see if we go into a recession or if people I'm feeling the impact of inflation there'll be looking around to see what they can monetize clearly there are other points of view out.
There and no one knows but we weren't certain born out of a recession as a company.
Okay, great. Thanks, so much.
Your next question comes from the line of Marvin Fong with <unk> T. I G. Your line is open.
Great. Thanks for taking my questions are pretty much all of them into asked so I'll just ask.
This one on take rate I think think about it going forward I know that.
Apparel in ready to wear.
Take rate accretive so just as we stand in the first quarter you know, what's your thought about about mix.
Mix today versus sort of the normalized rates do you think that theres more room for apparel.
Apparel and ready wear and higher take rate items, two to grow as a portion of the mix or we'd just about where we should be.
So Marvin this is Robert I'll tell you on our current projections as we look at Q2 and second half of the year, we do show.
Increasing take rate trend for the take rate to increase throughout the year and again, it's a matter of mix as you said as we sell more higher take rate items.
That's reflected in the overall average.
Created the company and without getting into specifics I can tell you that our current projection is an increasing trend for the take rate to slightly increase as the year progresses, not not very large changes.
A few hundred basis points, something like that but we do see an increasing trend based on mix.
Okay, Great that's really all I had thanks Robert.
Your next question comes from the line of Oliver Chen with Cowen Your line is open.
Hi, everybody one of our surveys of Cowen speaks to processing times as an opportunity as customers love.
Speed, what's the head there second you've made lots of great progress on automation and pricing would love some highlights on the lower hanging fruit that's left there.
And then finally Julie.
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At Columbia, we have a lot of great topics would just love your views on block chain is it intersects with authentication digital Ids and also meta versus given your experience in the industry.
Okay Route 10 year on the first part so the processing time is we did have some delays in early Q1 like we mentioned because the COVID-19 related impacts I'm happy to report that processing times back and that's L. A for all categories. So.
That's great and then processing is about two weeks.
L. A over time, we see that even decreasing some more as we add more automation there as well and we have the vision to bring that all categories down pretty significantly over the next three years. So excited about that plan and then on the automation front.
Like we mentioned in Investor day, there is a few areas that we targeted handbags being one of them by the end of the year, we continue to be on track them with the idea that we'd be automating about 40% of all that.
Fine jewelry diamonds typically will also be mostly automated over the next 12 to 18 months and pricing 80% of our items will be on auto priced as well. So we're making really great traction there and we continue to be on target I'll, let Julie take.
The meta burst.
Oh yeah.
So we.
We don't need to be a leader in the meta versus I think.
The meta versus at this point is still a lot like second life. You know, it's got some real sex appeal, but it's not a place. The average person is going to hang out. So we can be a follower in the med embarrassed I personally.
And someone who reads a lot of neurological reports I'm worried about people spending time in another words, but that's my own personal consideration, but we would it be a real deep follower in that one on blockchain as it relates to authentication.
We've had a lot of counterfeit and blockchain and numbers come in so I think that it's an interesting.
I think it's too nascent to really understand the impact I mean at the end of the day if people opt in into this and then they buy the product they opt in to whatever they have to do into the cloud it could be useful it could be useful for brands to get closer to their customers. However, it may and the.
Case, I'm brands, who don't believe in resell being used against the customer and it could be a privacy issue. So I wouldn't say that that the jury's out I know everyone's pretty excited about it I think the technology is nascent.
It can be counterfeited fairly easily I think theres customer privacy issues around debt and at the end of the day. When we look at you know what does it mean for US I mean, there are on average we've got our products are about five years old or apparel and shoes and after that it even gets older since it can be.
A long time before it becomes irrelevant discussion in the world that we play in but it's something we watch and something we've considered adding to our products and to be honest the cost benefit isn't there for us and I know brands are experimenting and they love getting closer to the consumer and I would say like everything when you get the consumers also.
You have to be aware.
Very helpful. Thank you best regards.
And there are no further questions over the phone line at this time I would now like to turn the call back to Julie for any additional and closing comments.
Thank you all for joining us today on our earnings call in closing I want to thank the real real team at all levels for their continued dedication.
And express my appreciation for our strong start to 'twenty, two and we are looking forward to sharing other results with you on further progress on our path to profitability during our next earnings call.
And then finally I'd like to thank our more than 27 9 million members, who are joining us on our mission to extend the life of luxury and make fashion more sustainable. It's really important we limit that is one of our key pillars. So thank you very much and with that we're going to end the call.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.
You have been removed from the comp.
Yes.
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Sure.
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Okay.