Name: Inside The RealReal’s AI-Powered Authentication Center
Uploaded: 2026-08-20
Duration: 8 min

The secondhand clothing market is booming worldwide. Yet it took over a decade for The RealReal to reach profitability, and ThredUp is still chasing that goal, due in part to the hugely complex intake process that goes into receiving, authenticating, pricing, listing and delivering millions of unique items.

Today, AI is revolutionizing that process. Fortune senior writer Phil Wahba goes behind the scenes at The RealReal’s authentication center in New Jersey to see how the new AI-powered intake tools are transforming the secondhand clothing industry.

Inside The RealReal’s AI-Powered Authentication Center

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In the US alone, there's $200 billion trapped in people's closets of luxury goods, and then every year $80 billion gets added. Resale is booming, but just a few years ago, used apparel resellers like the Real Reel and Thread Up were hanged by a thread. Despite the US secondhand clothing market reaching $43 billion in 2023, shares in both companies plunged towards record lows. Single skew items, 50 million items sold, 200 attributes per item. When you get in there and you really start to understand the business, you realize it's much more complex than you think it is. That same year, ultra fast fashion giant Sheehan. Expanded its third party marketplace to the US, further threatening resale on speed, price, and variety. So how did digital secondhand sellers survive? Enter AI. Really what we're doing here is capturing more and more data. The decisions are happening at the speed of machines as opposed to humans. Can AI help resellers compete against the world's biggest, fastest retailers? This facility is about 500,000 square feet network wide across the east and west coast. We have about 1.3 million square feet of warehousing space. The real real is one of the largest luxury goods resellers on the planet. Yet the company operated at a loss for more than a decade, and the complexity and costs of processing secondhand goods remained a major challenge. If you think about real real, you're not sourcing from like other brands, right? You're sourcing from individuals. All of these items will be very, very unique. You could have a particular color or a particular style or a fabric. You have a significant supply side uncertainty, which makes this whole problem much, much more challenging. Unlike broader resale sites like eBay, the Real Real and ThreadUp are responsible for intaking, authenticating, pricing, and shipping millions of items flowing through their inventory. This puts them at a major disadvantage against other online retailers, including ultra fast fashion giants like Xi'an which can drop up to 10,000 new designs daily and ship products within weeks at deep discounts. Today, The Real Real believes AI can change that. So this is our receiving department and we have one of our merchandise operations specialists and he is taking some scanned images of tags, the designer tag, the fabric tag, and this is the start of feeding data into Athena, and that is our AI powered intake platform that helps us to automate the authentication and lifting process of these items. And it's essentially going to assign it a counterfeiting score, and that's going to help route it to the next phase in the warehouse. The Real Real has been incorporating AI tools across its operations since 2018, significantly cutting processing time through AI enhanced intake, authentication, and pricing. The strategy is starting to pay off. In 2025, for the first time, the real real logged four consecutive quarters with positive adjusted EBITDA. GMV rose 22% in the second quarter of 2026, and operating expense leverage improved by roughly 4.7% points. We really focused how we think about AI on our value props and our moat. Authentication is a big one for us. It's our pricing algorithms. We let the market set the price. We don't set the price, so it's all of that data, but it's also taking dollars out of the unit economics that it would take to process the item so we can take that money and invest it in. or invested in other parts of our business. Authentication has long been a challenge for the Real Reel. In 2018, Chanel sued the company for selling counterfeit Chanel products, and a few years later, the Real Reel settled a class action lawsuit accusing the company of using undertrained staff to help meet high authentication quotas. Today, the Real Real's AI powered intake system, Athena helps workers price and authenticate SKUs in seconds. The company plans for Athena to process half of all new items by the end of 2026, up from about 20% a year earlier. On the supply side, the decisions are happening at the speed of machines as opposed to humans. So typically if you think of like a supply chain, right, it has many, many subsystems, so AI can form that layer or a decision support system which can integrate all of this together and actually do scenario analysis of the speed of machines. So now you can have fewer experts or they can be used in a better way. And secondly, your kind of speed of decision making has significantly improved. We've actually built proprietary. for our gemologists, our watchmakers, our handbag experts to count the melee on every stone, the weight of our diamonds. It utilizes a highly magnified camera to help us take a high resolution picture, and it's able to come up with the carat weight in a moment, just 1 or 2 seconds. And so now actually our humans don't need to so much look at that. They're going to be focusing more on grading the actual diamond, which is where their expertise lies. Does this speed up the process? Does it make it more accurate, or both? It's both. It adds consistency, of course, and speeds up the process where we can process items much faster for the consigner so it gets on the site faster, but also the technology behind the scenes, making sure that each individual item is authentic. But also that the consigner is valid too. The global resale market is still booming. It's expected to reach $393 billion by 2030. And now secondhand resellers are integrating AI across buying and selling, ranging from one tap pricing to personalized agentic shopping experiences. Yet as supply, demand, and AI integration increases, critics still point to lasting industry issues around authentication, shipment delays, and low payouts. What are some of the pitfalls of AI where maybe companies lay too much on the back of AI? One of the big challenges that everybody is facing with AI right now is that fundamentally these are nondeterministic systems, what is known as the verification problem. They do tend to hallucinate. It's important for decision makers to understand, especially in the supply chain side. This is sort of mission critical. Decisions that you're making and if you make a wrong decision, it can potentially result in millions of dollars of losses. So when you integrate these things, it's super critical to figure out who is doing the verification, where is the human sitting in the loop. Somebody needs to be accountable for all of these decisions. We've invested millions of dollars over the years and continue to do so as fakes have gotten better. Over the years as things have changed, it requires us to continuously learn, continuously evolve our technology, but it is the art and science. Like at the end of the day you do need that gemologist to come in and look at the item or you need that watchmaker to come in and open the watch to make sure there's no aftermarket parts, and that's where the art and science is really important, but also makes. Us defensible to AI. Why does Gen Z like resale so much? You know, I think it's a few things. I think it's authenticity that's number one, you're right? Like in a world where everything's starting to look the same and it's algorithms after algorithm, it's the anti-fast fashion at the end of the day, but you know you're going to go somewhere and you're going to look authentic to who you are and you're going to look unique, be your own stylists, right?