The RealReal, Inc. Common Stock

Core operations · Quality control and product defects

Our success depends on the accuracy and reliability of our authentication processes and methods. Our success depends on our ability to accurately and cost-effectively determine whether an item offered for consignment is an authentic product or genuine gemstone, piece of jewelry or work of art. From time to time, we receive counterfeit goods for consignment.

Core operations · Capacity utilization and efficiency

We may not be able to identify and lease authentication centers in suitable geographic regions. We lease facilities to store and accommodate the logistics infrastructure required to merchandise and ship the pre-owned luxury goods we sell through our online marketplace. Our ability to successfully grow our business depends on the availability and cost of leasing additional authentication centers.

Human capital and workforce · Labor relations and union negotiations

Labor-related matters, including labor disputes, may adversely affect our operations. None of our employees are currently represented by a union. If our employees decide to form or affiliate with a union, we cannot predict the negative effects such future organizational activities will have on our business and operations.

Supply chain and procurement · Transportation and logistics disruption

Shipping is a critical part of our business and any changes in our shipping arrangements, costs, interruptions in shipping or damage to products in transit could adversely affect our operating results. Our business depends on shipping vendors to meet our shipping needs. If we are not able to maintain acceptable pricing and other terms or if our vendors experience performance problems or other difficulties, including as a result of inflation, a labor strike by employees of our shipping vendors or rising shipping costs, it could negatively impact our operating results.

Digital transformation and innovation · Artificial intelligence and automation

We may be unable to successfully leverage technology, including artificial intelligence and machine learning, to automate and drive efficiencies in our operations. We are building automation, artificial intelligence, machine learning and other capabilities to drive efficiencies in our merchandising and fulfillment operations. Any flaws or failures, or unforeseen or impermissible third-party use, of such technologies could cause interruptions in and delays to our operations which may harm our business.

Technology infrastructure · Technology systems and infrastructure failure

We rely on third parties to host our website and mobile app and to process payments. The continuing and uninterrupted performance of our online marketplace is critical to our success. We have experienced, and expect that in the future we will experience, interruptions, delays and outages in service and availability from time to time due to a variety of factors, including infrastructure changes, human or software errors, website hosting disruptions and capacity constraints.

Information management · Data quality and integrity

We use data science to predict consignor and buyer preferences, and there can be no assurance that our data science will accurately anticipate consignor or buyer needs. Our business model limits our responsiveness to changing preferences, as the majority of our inventory consists of unique, single-SKU items.

Cybersecurity and data protection · Insider threats and access controls

We or our vendors could be subject to attacks from computer viruses, break-ins phishing attacks, social engineering, ransomware attacks, unauthorized use, misconduct or usage errors by our employees, attempts to overload services with denial-of-service or other attacks, which may allow hackers or other unauthorized parties, including our employees, to gain access to personal information or other data.

Innovation and product development · Intellectual property protection and infringement

If we cannot successfully protect our intellectual property, our business could suffer. We rely on a combination of intellectual property rights, contractual protections and other practices to protect our brand, proprietary information, technologies and processes. If we are unable to protect our trademarks or domain names, our brand recognition and reputation would suffer.

Customer and revenue · Customer retention and subscription renewal

Our continued growth depends on attracting new and retaining repeat buyers. To expand our buyer base, we must appeal to and attract buyers who do not typically purchase luxury goods, who have historically purchased only new luxury goods or who used other means to purchase pre-owned luxury goods.

Market position and competition · Competitive pressure and market share loss

Our industry is highly competitive and we may not be able to compete effectively. We compete with vendors of new and pre-owned luxury goods, including branded luxury goods stores, department stores, traditional brick-and-mortar consignment stores, pawn shops, auction houses, specialty retailers, discount chains, independent retail stores, the online offerings of traditional retail competitors, resale players focused on niche or single categories, as well as technology-enabled marketplaces.

Customer and revenue · Changing customer preferences and behavior

We must successfully gauge and respond to changing preferences among our consignors and buyers. Our success is in large part dependent upon our ability to anticipate and identify trends in the market for pre-owned luxury goods in a timely manner and to obtain consignments of luxury goods that address those trends.

Strategic execution · Geographic expansion and market entry

Expansion of our operations internationally will require significant management attention and resources. While we have members from outside the United States who purchase items from our online marketplace, we have not expanded our physical operations internationally. If we choose to do so, we would need to adapt to and would be subject to new risks relating to various local cultures, languages, standards, laws and regulations and policies as well as tariffs and trade-related restrictions.

Corporate governance · Internal controls and risk management

If our internal control over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results, prevent fraud or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information. Section 404 of the Sarbanes-Oxley Act requires that we maintain effective internal control over financial reporting and disclosure controls and procedures.

Reputation and brand · Brand damage and negative publicity

We may not succeed in promoting and sustaining our brand. We believe that growing The RealReal brand is critical to driving consignor and buyer engagement as well as attracting brand partners. If we fail to provide consignors or buyers with the service and experience they expect, or experience consignor or buyer complaints or negative publicity about our products, services, delivery times or customer support, the value of our brand would be harmed.

Corporate governance · Shareholder rights and activism

Delaware law and provisions in our certificate of incorporation and bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of our common stock. Our certificate of incorporation and bylaws contain provisions that could depress the trading price of our common stock by acting to discourage, delay or prevent a change of control of our company.

Economic and market conditions · Inflation and deflation pressures

Some of the factors that may reduce luxury spending include economic downturns, including an economic recession or depression, high levels of unemployment, higher consumer debt levels, higher levels of inflation, reductions in net worth, declines in asset values, including home values, the fluctuating value of raw materials such as gold and silver.

Tax and financial reporting · Tax compliance and changes in tax law

We pay or collect sales taxes in all jurisdictions which require such taxes. An increasing number of states have considered or adopted laws that impose tax collection obligations on out-of-state sellers of goods. The adoption of new laws by, or a successful assertion by the taxing authorities of one or more state or local governments requiring us to collect more taxes could result in substantial additional tax liabilities, including taxes on past sales, as well as penalties and interest.

Data and privacy · Data protection and privacy laws

Our use and other processing of personal information and other data is subject to laws and obligations relating to privacy and data protection. Numerous state, federal and international laws, rules and regulations govern privacy, data protection and the collection, use and protection of personal information and other types of data we collect, use, disclose and otherwise process. These laws, rules and regulations are constantly evolving.

Legal and litigation · Litigation and legal proceedings

We are currently, and may be in the future, party to lawsuits and other claims. We rely on the fair use doctrine when we routinely refer to third-party intellectual property, such as trademarks, on our platform. For example, in November 2018, Chanel filed a lawsuit against us in the U.S. District Court for the Southern District of New York bringing various trademark and advertising-related claims under the Lanham Act.