‘We keep changing’ to fend off fakes

The RealReal is constantly updating its operations in an effort to prevent and remove counterfeit products from its website, founder and CEO Julie Wainwright told CNBC Tuesday.

“What we did even in August of this year doesn’t look like what we do now,” Wainwright said in a “Mad Money” interview with Jim Cramer. “We have to keep iterating and we get smarter all the time.”

Last month, the authentication team processed more than 490,000 units, averting about 4,000 fake items from being listed on the digital consignment shop. Roughly another 140 products that made it through the certification were prevented from listing to the site by the quality control team, according to the company.

Wainwright’s interview comes on the heels of a CNBC investigation into the online luxury consignment store’s claim that all products listed on the site are real. The RealReal has built its brand on the premise that its authentication procedures keep fake products off the platform, and that every product is authenticated.

Interviews with nearly three dozen former employees and internal documents revealed not all goods are authenticated by experts and that employees must meet strict quotas. A review of nearly 1,400 customer comments by CNBC, found that fake products, damaged merchandise and mistakes are the top gripes from customers.

The industry does not have a standard for authentication of luxury goods and determining the authenticity of a product is increasingly difficult as counterfeiters get better at producing knockoffs.

The RealReal declined an interview in the original report, but Wainwright defended the company’s processes in the Tuesday interview on “Mad Money,” saying their process is constantly being updated.

“We use a combination of data, technology and humans to drive the authentication process and it is hard,” she said. “There’s no doubt about it. It is hard. It is hard.”

The RealReal expects authentication to look vastly different in the first quarter 2020 as the company adds artificial intelligence and machine learning. Management is doing away with copywriters, who were trained to help weed out fake products and write content for goods marketed on the site, she said.

“Now and what we’re moving to is things are authenticated, a photo is taken, [AI] extracts all the attributes” and writes product descriptions for the website, Wainwright said.

“So [copywriters] won’t even be writing things, they’ll be checking it,” she continued, adding: “I think the key is nothing’s static.”

Shares of The RealReal are down nearly 20% since the Nov. 5 report. The stock is more than $5 off its late-October closing high.

After CNBC’s report, The RealReal sent a note to customers, conceding that its claim of not having any fakes on its website may not be correct.

“We strive for perfection, but may not be perfect every single time,” Wainwright wrote in the email.

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