Return to Transcripts main page
First Move with Julia Chatterley
U.S. Inflation Pressures Ease in July; One Dead after Explosions at Russian Base in Crimea; China says it has Completed Military Tasks around Taiwan; U.S. Inflation Eases in July amid Lower Petrol Prices; U.S. Stocks Rally after Encouraging CPI Report; The RealReal looks to Address Labor Shortage. Aired 9-10a ET
Aired August 10, 2022 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JULIA CHATTERLEY, CNN HOST, FIRST MOVE: And a warm welcome to "First Move" fantastic to have you with us this Wednesday. And another key day for U.S.
economic data; new numbers raising hopes that inflation has finally begun to plateau or even slow.
Moments ago with U.S. reporting that headline consumer prices rose at a year-over-year rates of 8.5 percent last month yet, that's still near a 40
year high. But it did ease from the more than 9 percent level seen in June. This pricing pullback was expected due in part to recent softness in U.S.
What wasn't expected was a better than expected read in the core rate than the core rate strips out food and energy costs that came in at 5.9 percent
annualized. Expectations for worth for a rise to over 6 percent and this is a number that we talk about because the Fed sees, or at least Jay Powell
has said recently that this is a better predictor of where prices are headed in the future.
So as you can imagine positive news in the eyes of investors. U.S. stock futures, I can give you a look at what we're seeing extending earlier
gains. The S&P 500 on track to rise for the first time now in almost a week up over at what was you can see there more than one and a half percent pre
The hope is that softer inflation numbers will allow the Federal Reserve to raise rates less aggressively. But of course Fed policy setters have also
made it pretty clear that they want more than just one month of improvement.
Now also today Europe is on the rise boosted by that U.S. CPI news after a weaker handover from Asia with the HANG SENG falling 2 percent on continued
tech weakness or will tell if two halves there.
OK. Let's talk U.S. price pressures; Rahel Solomon joins us now. And unlike me, she's been poring over the details of these numbers over the last 30
minutes or so. And I can tell you from the brief read I got, they may have come down but energy is still a huge problem.
RAHEL SOLOMON, CNN CORRESPONDENT: They may have come down month-over-month. But you're right. I mean, when we look at sort of annualized, where we're
seeing price increases, the most energy is still at the top of the list, I think we can show that to you.
Energy prices up almost 33 percent over the last year food prices almost 11 percent over the year. Gas 44 percent and shelter, which is really
problematic is 5.7 percent.
But Julia, the good news here is that when you look at your month-to-month, what's happening, especially in energy, we're actually seeing declines for
energy, gasoline fuel, and that sort of made its way into jet fuel prices. And we saw lower airfare prices.
So overall, it is still clearly problematic, but it is moving in the right direction. We also saw some declines for energy and gas, as I said, but we
saw some increases however, month-over-month for things like food and shelter.
As I just mentioned, food prices increased 1.1 percent over the last month, so still showing a problematic trend there. But overall 8.5 percent
compared to what we saw last month of 9.1 percent certainly not necessarily a reason to celebrate, it's still very high as you pointed out Julia.
But it is starting to feel like maybe just maybe we can see the end of the tunnel. We can see the light at the end of the tunnel. Important to note
one data point a trend does not make, but it is certainly a positive move from what we saw last month.
Let's talk about how the Fed is going to look at this right? We know Fed Chair Powell has said that he is looking at that month-over-month, core
inflation to start to decline. We're not seeing that, but we are seeing the price pressure start to ease start to decline there.
So a 0.3 percent three tenths of a percent for the last month, July that's the lowest Julia we have seen since March. So that's a good sign that
that's moving in the right direction. So the hope is that if we continue to see that maybe the Fed can start to take its foot off the brake.
Well, the September FOMC meeting, we have another CPI report. We have another July - we have another jobs report. So a lot can happen between now
and then. But part of the reason why you're seeing the reaction we're seeing in the markets is because these numbers today, leading investors to
believe that well, maybe we'll see half a percent in September.
And that's certainly leading to the feeling that maybe a soft landing could be possible too early to know for sure, of course, but couldn't be
CHATTERLEY: Yes, one data point does not attract me before we get too enthusiastic. It's so funny. It tells you what kind of environment we're in
when there is a celebration and you can see it in stocks pre market at an inflation rate of 8.5 percent which is--
SOLOMON: It says a lot.
CHATTERLEY: --mind blowing. Yes, and that happens a lot on this show so yes, Rahel, thank you great breakdown Rahel Solomon there. Cash on hand;
Elon Musk, meanwhile, selling nearly 8 million Tesla shares raising almost $7 billion amid his legal battle with Twitter.
CHATTERLEY: He tweeted in the "Hopefully unlikely" event that Twitter forces the deal to close and some equity partners don't come through. It's
important to avoid an emergency sale of Tesla's stock. Paul R. LA. Monica joins me now.
So this is what almost $7 billion worth of Tesla shares sold, in addition to the $8.5 billion that he sold back in April in anticipation of this
deal. He's right. He doesn't want to surprise the market. But you could argue to surprise the market with this latest sale, having said he wouldn't
sell more back in April.
PAUL R. LA MONICA, CNN REPORTER: Yes, I mean, obviously Elon Musk says a lot of things on Twitter that he then either clarifies or backtracks on.
And I think Julia, it's important to note that his hand could be forced, and there are analysts who are starting to speculate that, absent a
significant settlement more than the agreed upon breakup fee, Musk may either have to pay more to make Twitter finally decide to throw up their
hands and say, OK, we get a deal on, you're not going to buy us but just give us more money.
Or they're going to force him to actually buy them for $44.5 billion, which means he is going to need more funding to secure so to speak, a Twitter
acquisition that he no longer wants to do.
CHATTERLEY: Yes. Funding not secured perhaps at this stage. If you look at the tweet that he put out, saying perhaps some equity partners, maybe those
that said initially that they will be willing to join this don't decide to jump on board, if he's forced to sell this-- if he's forced to buy this.
I guess that's the challenge. And that's the fear now fit for Tesla investors that he's not done yet. If he is indeed forced to do this, he's
perhaps going to have to sell more Tesla stock.
MONICA: Exactly. And of course, now there are growing concerns about a digital advertising recession, even if we are not officially in an economic
recession. And those inflation numbers coming down are encouraging, coupled with strong jobs numbers.
But we've seen the results from Twitter, from Snapchat from Facebook parent Meta, there are legitimate worries among corporate advertisers about the
economy right now. And they are pulling back on advertising. That's not great news for Twitter.
And I think Elon Musk probably realizes as well, that, you know, maybe the whole spam and bot issue is a convenient excuse for him to walk away from a
deal where he might have had buyer's remorse because he's realizing that oh, yes, maybe I don't want to spend this much money on an advertising
platform at the time where we might be heading into recession.
CHATTERLEY: Yes, perhaps bought at the highs from Dan Ives. He's a regular on this show, the biggest fear has been that Musk sells more stock and
that's just what's happened. It's a near term gut punch. There's no explanation and that adds to the uncertainty. And to your point, Paul,
that's not going away anytime soon Paul R. LA. Monica, thank you for that.
OK, let's move on President Zelenskyy says Ukraine's war with Russia will only end when Crimea has been liberated. He was speaking after a Russian
airbase on the Crimean peninsula was hit by several explosions.
Authorities in the Russian occupied territory, say one person were killed. Ukraine has not said whether its forces caused the explosions. David
McKenzie joins us now. David, there are sort of two things there. There's fighting talk from President Zelenskyy suggesting that beyond the situation
that's taking place in Ukraine, now they're actually going to go after and try and take back Crimea, but also this attack in Russia. Ukraine is not
taken ownership of this. What more do we know?
DAVID MCKENZIE, CNN CORRESPONDENT: Well, it's not really in Russia. It's in occupied Crimea--
CHATTERLEY: In Crimea, my apologies.
MCKENZIE: --since 2014, and so that is, but that really drives home the point is that the reason that President Zelenskyy says that they will take
back Crimea that is, for most Ukrainians, the original sin. 2014 Russian troops moving into Crimea, taking over that highly sought after, I guess,
Peninsula, a crucial part of Ukrainian history and culture.
And in the last 24 hours, we've seen potentially, the Ukraine is having the capacity to strike far outside of Ukrainian controlled territory onto the
Western Coast of the Crimean Peninsula. You see those dramatic pictures of explosions, several of them, some of them behind Russian tourists at the
beach; this will have a very important psychological impact.
And as you say, Julia, they haven't interacted with these facts they have said to have no information. But the question now, did the Ukrainians do
it? How did they do it exactly, that they have a capacity for that sort of long range strike if it is a strike? Here's President Zelenskyy.
(BEGIN VIDEO CLIP)
VOLODYMYR ZELENSKYY, UKRAINIAN PRESIDENT: This Russian war against Ukraine and against all the free Europe began with Crimea and must end with Crimea
its liberation. Today it is impossible to say when this will happen. But we are constantly adding the necessary components to the formula for the
liberation of Crimea.
(END VIDEO CLIP)
MCKENZIE: So the question that does not poses if Ukraine was responsible, and they had the capacity to strike that far outside of their control
territory, it could be a game changer, say, military experts. And it does, as I said, have a very psychologically important impact, both on the
Russian side and on the Ukrainian Julia.
CHATTERLEY: David thank you so much for that. David McKenzie there. Now Former President Donald Trump is set to testify in a New York case against
him Wednesday amid mounting legal scrutiny of his conduct. He was seen leaving Trump Tower a short while ago. The deposition is part of a probe
into the Trump Organization's finances.
The Former President's extraordinary week began with the FBI searching his Florida home on Monday. Then on Tuesday, he lost a running battle to
prevent the release of his tax returns. Kara Scannell joins us now, Kara good to have you with us what might today bring?
KARA SCANNELL, CNN REPORTER: Well, today the Former President is heading to the New York Attorney General's Office to sit for a deposition. This is
part of the New York Attorney General civil investigation into the Trump Organization's finances and whether some values of his properties were
inflated that could have defrauded banks, lenders and possibly tax authorities.
The stakes here are very high. The big question of the day is - will the Former President answer the questions? Or will he take the fifth and assert
that right not to incriminate himself? Now sources tell me that he's been advised to do both things by different camps.
Some say that he should answer the questions because he has previously addressed how he comes up with these valuations and what his role is in the
preparation of financial statements? Others say the risk may be too great because there is a parallel criminal investigation by the Manhattan
District Attorney's Office.
That investigation is still ongoing. And when I interviewed the Manhattan District Attorney Alvin Bragg in April, he said, any trend - any testimony
that is done in a civil case is something that they would take a look at for their criminal case so something here where the stakes are very high.
And as you see on the screen, the Former President is facing a range of investigations, everything related to the January 6th riot on the Capitol,
to these financial statements. Now his children Donald Trump, Jr., and Ivanka Trump recently were deposed by the New York Attorney General's
Office as part of that investigation.
They answered questions under oath, but his other son Eric Trump was deposed in 2020. And he took the Fifth Amendment more than 500 times Julia.
CHATTERLEY: An extraordinary week indeed Kara, great to have you with us. Thank you for that. OK, let me bring you up to speed now with some of the
other stories that making headlines around the world.
China says its eastern theater command has completed exercises around Taiwan a week after launching military drills. Beijing still plans to
maintain pressure on the island saying there'll be frequent patrols in the direction of the Taiwan Strait. Earlier Taiwan authority said 36 Chinese
war planes were detected in the area, and 17 crossed the strait's median line.
Selina Wang is with us now from Beijing. So China's now saying these drills are over but they also reaffirmed at the same time that the "One China"
principle and the principles upon which reunification may be achieved with Taiwan in future, just talk us through the details of that.
SELINA WANG, CNN CORRESPONDENT: Yes, Julia, that's exactly right. These most recent drills may be over but the pressure on Taiwan is not Chinese
military of saying here that they've successfully completed what they wanted to in these drills following Pelosi's visit.
But the key point in their announcement is that they plan to regularly organize patrols around Taiwan. We also heard China's government also just
published a white paper today reiterating that while Beijing prefers unification by peaceful means they are keeping all options on the table,
including the use of force.
So this recent announcement, this white paper, all of this fits into the concerns for military experts, American and Taiwanese officials who say
look, we're entering a new era where we're expecting more frequent and aggressive military activity from China and that Pelosi's visit was just an
excuse for Beijing to step up these long planned intimidation operations.
We saw during these drills that China went further than what most expected flooding the skies and the seas with warships and planes, shooting missiles
over Taiwan Island even for the first time. All of this is part of what Beijing has called a "Practice Blockade".
And these provocative actions have won a lot of praise at home where Beijing has justified all of these moves as defending China's sovereignty.
Now we've heard Taiwanese officials raise the alarm calling these provocative moves attempts to weaken public morale in Taiwan and wreck the
long term status quo.
WANG: Now Pelosi has returned and she's given several interviews defending her trip. Take a listen to what she said here.
(BEGIN VIDEO CLIP)
REP. NANCY PELOSI (D-CA): I don't think that the President of China should control the schedules of members of Congress or anyone else who wants to
visit Taiwan. He's trying to isolate Taiwan.
(END VIDEO CLIP)
WANG: And the fallout to U.S.-China relations continue, you heard Pelosi's argument there that it is not up to China to dictate who can travel to
Taiwan. Right now you've got both sides pointing fingers at each other, the U.S. blaming China for overreacting and for manufacturing this crisis,
whereas China is blaming the U.S. for provoking them and forcing them to take strong action.
Beijing has been arguing for a while now that they think the U.S. has been hollowing out the One China policy. We're going to see this bilateral
relationship continued down that downward spiral with China also announcing recently that it is going to suspend cooperation with U.S. on a range of
important issues whether it's climate change or defense.
And Julia while we have avoided direct conflict this time around the concern is that with the deepening mistrust between the U.S. and China, the
lack of communication and more aggression from Beijing that moving forward this increases the chance of a miscalculation or an accident that could
lead to real conflict, Julia.
CHATTERLEY: That's the risk, Selina Wang, thank you so much for that. China's Hainan Island a popular tourist destination is battling its worst
COVID 19 outbreak so far, nearly 600 new cases reported on Wednesday. Authorities say some of the tourists who were caught up in a sudden
lockdown while visiting the island have now been allowed to fly home.
And a beluga whale that was stranded in the Sand River for more than a week has been euthanized. More than 80 rescue workers tried for six hours to
return it to the sea. But they sail with the whale was ill underweight and suffered respiratory failure. Many marine mammals have recently been
reported in finance far from their mean habitat.
And 3 golfers from the Saudi back live golf series have lost their battle to plan the first PGA playoff event. Talor Gooch, Hudson Swafford and Matt
Jones had sort of temporary restraining order that would allow them to take part in the FedEx Cup playoffs, which start this week. A judge denied that
request. OK, stay with us. We are back after this plenty more to come.
CHATTERLEY: Welcome back to "First Move" with perhaps an inflation revelation Wall Street futures surging on news that U.S. consumer prices
rose at a weaker than expected rates last month. Headline CPI rising at an annualized rate of 8.5 percent that's lower than the more than 9 percent
rise seen in June the core rate of CPI also coming in a touch softer than expected too. This is the first pullback inflation, in inflation in four
months helped along by falling U.S. petrol prices that have dropped to their lowest levels since early spring.
Now, the Federal Reserve hopes this will lead to the further easing in consumer's inflation expectations. The big question is whether this data
will allow the Federal Reserve to be less aggressive in its rate hikes in the coming months.
Tom Porcelli joins us now he's managing director and chief U.S. economist at RBC Capital Markets. Tom, great to have you with us! I think the way to
handle data at this moment is whatever you expect the opposite, quite frankly, and then we get it. I know we're celebrating or at least investors
are celebrating an inflation of 8.5 percent, which also says something but this is better than expected.
TOM PORCELLI, CHIEF U.S. ECONOMIST, RBC CAPITAL MARKETS: Yes, Yes, so sorry, for starters, good to be with you. You look, I think that this is a
better than feared report. And, you know, like, I'm fond of telling people, it's, you're not just going to get back to normal, like in one month,
It's going to be a process, and I think it's fair to say that, you know, we were sort of at the very beginning of the process. And that's saying
something, because I think, you know, you think back just a month ago, heck, even a couple of weeks ago, I think, you know, people really were
unsure about where this was going.
I mean, look, I think there were a couple of things that really anchor our view, and sort of really inform us with regard to the idea that inflation
will slow in the coming months. And we think it could actually surprise people how much it slows, you know, one, you have bloated inventories. I
know that might sound like a sort of a boring thing to talk about in fairness, maybe it is.
But the reality is, you have retailers that are sitting on a mountain of inventory, and that inventory is going to get discounted in the context of
real volume of spending is now slowing. You know, that will actually really help in this context. So there are definitely some reasons to believe that
the inflation dynamic was slow. It's not just a gasoline story.
I mean, don't get me wrong, I get it. It's, you know, we all spend a disproportionate share of our money on gasoline. But it's going to have to
be other components that do the driving, I think, for the Fed to really feel comfortable.
CHATTERLEY: This is really important and it separates out what we're looking at, in what we call the headline, inflation rate and what we call
the core inflation rates. And the core strips out exactly what you're talking about rising food prices, and rising energy prices, which we all
know and have experienced can be incredibly volatile.
And even the Fed chief Jay Powell got into a debate about this about whether they would chase in terms of rising interest rates, the headline,
inflation rate, which as I've mentioned, is dominated by energy and food or whether they would continue to focus on the core. And he said, look, that's
the better predictor of prices going forward to what you just said, do you think we've seen the worst in terms of inflation?
PORCELLI: So I think we've seen the worst in terms of core inflation, headline inflation, as you rightly highlight it is, it's a tricky thing to
forecast. Because when you're thinking about energy prices, right, which really dominates the sort of the headline at large, a headline CPI at
large, you know, it's swung around by an assortment of different factors. I mean, there's, you know, just basic supply demand, there's geopolitics. I
mean, there's an assortment of things that build into that.
So this is why we've been saying for quite some time now, that the Fed really does need to focus on core, because they have zero ability. I want
to stress this they have zero ability to control food or energy prices. Those are idiosyncratic, there's nothing the Fed can do about that.
Core, on the other hand, right, so x food and energy, they can't they do have the ability to control that to better extend to a greater extent. And
they're I think, you know, they feel like we're in a very different place. I think even as soon as December, I think, in December, I think we'll look
And I think you'll see this sort of mountain of an inflation run rate that we've come down on, but by December, I think that will take that take us
into the coming year for all the factors that I mentioned earlier, particularly around the supply and the discounting idea.
CHATTERLEY: Yes, interesting, so if you've got companies cutting prices of goods, because they simply have too many in inventory, it says something
also about the economic environment.
CHATTERLEY: And I want to talk about that too, because shock astonishing was some of the words that were used to describe the payroll report the
latest payroll report that we got which was a complete blast and that I know for you and for many others was very jarring with numerous other jobs
indicators be the verbal, be the anecdote or that we're hearing from companies or other measures like surveys from businesses.
So what's your sense of what's right and what's not and what we should be listening to you to get a sense of where we're headed on the economic
front, never mind on the pricing pressure front?
PORCELLI: Yes, look, I think you're asking 100 percent the right question, right? Because it's, it's all of this stuff is it? They're all
interrelated, it's not. You can't look at them in isolation in any way. Inflation is going to be slowing because economic activity slowing. Again,
that's not a guess, its happening; we can have a discussion about the degree to which it's slowing. And that's sort of what we're all doing. Now
it's like, you know, do we have a recession or not? Do we have a soft landing or not? And that's all right and fair.
But I think what we need to bear in mind is that it no one should be distracted from the fact that things are slowing down. So when I think
about something like that payroll report from last Friday that was just a blowout in every way. It showed, let's just be clear, it showed an
acceleration and it showed an acceleration in growth.
The same time that jobless claims are rising, and now well off the lows, that happens to coincide with company layoff announcements that are rising,
seemingly on a daily basis, that we now have the household employment measure that's now moving sideways, and has been moving sideways for four
months. That you look at the small business survey, the small business survey on the employment side is also starting to show signs of softening.
So there's the list goes on.
Yet we had this payroll report that showed acceleration in job growth. I mean, that number defies sort of, you know, all the other data around it.
So we'd be more of a fader of that dynamic. I mean, I think a lot of people sort of latched on to it to suggest that, you know, things were really sort
of, you know, still moving along at or will continue to move along at a reasonable clip of a caution against that the payroll report is a lagging
One of the best leading indexes or measures of economic activity in the United States is jobless claims, and they've been on the rise.
CHATTERLEY: Yes, Tom, very quickly, because I have about 30 seconds.
CHATTERLEY: What's your sense of where the Fed stands in light of latest data?
PORCELLI: Yes, so this number is not another today's number, I do not believe pushes them to do 75. I you know, the odds in the market, they've
now drifted below 50 percent. We agree with that. I think it's actually closer to a 30 percent chance of a 75 hike at the next meeting. We would
agree with that.
I think, you know, but because of next month's CPI, where the hurdle to see an acceleration core is actually still high because of base effects. Just
you know, sort of easy year ago comps or unfavorable your ago comps. I think that'll put a floor underneath the odds of 75 falling too far. But
for now, I think that the Fed can get away with a 50 for sure.
CHATTERLEY: Yes, Tom, pretty good to chat to you, thank you so much. Tom, Porcelli, chief U.S. economist at RBC Capital Markets. Great to chat to you
and we'll see you soon. We're back after this, stay with us.
CHATTERLEY: Welcome back to "First Move" with your stocks up and running this Wednesday and we've got a strong rally underway in early trader's
investors upload the first softer U.S. inflation print in many months. Inflation is still close to multi decade highs. Let's be clear, but today's
numbers raising the possibility at least that the U.S. consumer pressures may have finally peaked.
Stocks in the news today to include Wendy's share the restaurant chain low after reporting weaker sales it says consumers are not spending as freely
as they were also shares of crypto exchange platform Coinbase tumbling the firm reporting a wider than expected loss of more than $1 billion amid
ongoing weakness in crypto assets and more high profile earnings on tap later today to entertainment giant Disney is reporting results after the
closing bell today.
Also this Wednesday, Tesla investors not tense on news that Elon Musk has been on another cash raising dash Musk selling almost $7 billion in company
stock recently saying he'll need the money if he's forced to buy Twitter. Twitter shares also on the rise as well. Tech Analyst Dan Ives, as I
mentioned earlier believes Musk's new moves make it more likely that a deal for Twitter eventually gets done now from high inflation to high end
The RealReal is the world's largest online marketplace got authenticated resold luxury goods. Customers can browse through 1000s of items from top
names in fashion like Chanel, Gucci, Louis Vuitton and Prada. The full service platform not only allows customers to shop but also sell their
luxury items too.
But of course, the pandemic has taken its toll on business and achieving profitability has been a struggle. Its second quarter earnings share its
total revenue was $154 million. That's a 47 percent increase since last year. But it did also report a net loss of $53 million. The RealReal is
also starting to see a shift in what consumers is buying, causing the company to cut its guidance for the year. Joining us now is Rati Sahi
Levesque, she is the Co-interim CEO and President of the RealReal. Rati, fantastic to have you on the show! It's a moment for big questions.
RATI SAHI LEVESQUE, PRESIDENT AND CO-INTERIM CEO, THE REALREAL: Good morning Julia.
CHATTERLEY: Good morning, not only for the RealReal but also for the industry I think and resale and retail itself. We'll talk about the numbers
but I just want to start by getting you to explain the vision and what makes you better than the other competitors out there?
LEVESQUE: Yes, thanks, so we are the leader in authenticated luxury goods. In comparison to a peer to peer site we take possession of goods and we
employ hundreds of gemologist, watchmaker's high end handbag authenticators, we believe you need to take possession in order to
authenticate. I'd say that's number one.
Number two is about our technology, we by the end of this year, we'll be taking in almost a million units, unique supply units a month. And because
these are all unique, one of kind items we've had to build very specific technology to funnel those through our supply chain. So the technology
around that piece and all the technology that we built around being able to authenticate via machine learning.
40 percent of our handbags will be authenticated via machine learning by the end of the year. And then we've been able to cultivate a high end
luxury shopper and seller so 28 luxury members are now part of our site, both buying and selling in our marketplace every day.
CHATTERLEY: And just to be clear for people that are watching this and think oh, you know, I've got all sorts of luxury goods that I might want to
sell on how much of the sale proceeds? Did they take home versus you?
LEVESQUE: So it depends, but on average about 35 percent depends on if it's high value items, you get more if it's, you know, a Rolex watch, versus a
contemporary item or something under $50. So, it depends on what the item is. But I will say, because we got the 12, the 28 million luxury shoppers
are you earn the most with TRR, because we've been able to kind of cultivate that community.
CHATTERLEY: This two among as many interesting is in what you were just saying there's the impact of an economic slowdown and the changing consumer
behavior and perhaps going for lower price points, if they're looking for something.
There's also the idea that in an economic slowdown, or in an inflationary environment in an economic slowdown, if you can't afford high end luxury
goods firsthand, you go to a retail site to get them cheaper. From the numbers, it seems that what more of what you're seeing are actually people
trading down to lower price points, and that squeezes your margin is that net what you're seeing.
LEVESQUE: Yes, but I wouldn't be careful about saying that it squeezes our margin. So we split the take rate with our sellers, we don't have that
problem, like a regular retailer would, there's no margin being squeezed there. So are really our objective's to earn the seller, the best price and
TRR, the best price of an item.
As far as you know, the uncertainty of the future. I mean, I do think, you know, there's two kind of schools of thought here, as far as we are a value
play, you know, you do see luxury items up to 90 percent off on our site. So that could serve us well and be an advantage for us.
On the seller side, if people need to monetize their closet, you may see more people selling off.
So we don't know, for sure, but that you know, as far as what will happen, but I will say what we saw in Q2 was that our top of the funnel is quite
What I mean by that is our traffic to the site, our conversion; our new and repeat buyers are new and repeat sellers, all really healthy and strong.
Our you know, the challenge for us was we're calling it the great resignation, part two that we saw in early Q2, March and April. That kind
of slowed us down a bit, we saw more attrition than usual and it was a little more difficult for us to higher up on our sales side.
And that kind of set us up for a softer Q3, we do believe that this is more of a speed bump and transitory. This keeps us on track, even with this, you
know, little bit of speed bump happening keeps us on track for profitability in 2025 and 2025 vision.
CHATTERLEY: So this is a really important point, as you said, the fact that you can adjust to protect your margins in terms of what the seller gets
versus what you keep is vitally important, I think for resilience for the company going forward.
But what you said about labor, and it's something that I think everybody's struggling with, but I think you've made it very clear the importance of
having those that can do the authentication those that are involved in sales for the business to struggling to hire is there a sort of limitation
on the revenue growth that you're seeing?
Some part of that I think the environments and part of that is the challenge that the RealReal is going through itself? I mean, your founder,
and CEO left last month, you're in a position where I know where you're rehiring, what can you tell us about that specifically? Because I think for
whether it's investors, or whether it's perhaps those that are looking at the RealReal and saying, should I go and work there? The message now is
important, even in this interim rage.
LEVESQUE: Yes, I mean, you know, we're machine learning company. So every day, we're changing the way people shop. And that's why employees join us
every day. They want to be a part of the circular movement. They care about the environment, they're looking at regeneration, we know that if we
circulate a certain amount of items every year that will help as far as regeneration goes, and the climate crisis is concerned.
So we're a machine based company, and we have a team that's super passionate to be here every day. And then as far as you know, the labor
challenges goes. We saw this happen, you know, in our authentication centers in 2022.
And we were able to course correct there's some certain actions that we took a compensation being one of them, leadership being another and then
technology so well, something we're doing on the sales side is all about you know, self-service, being a being able to get you know, less friction
for the seller.
So that they can design with without labor to be honest, and that's working really well for us see, we're seeing productivity going up, and we're
seeing the units come in. So this quarter, like I said, it was a transitory issue we feel good about the future. And I would say this quarter is really
about training all these new hires and getting them ready for Q4.
CHATTERLEY: Yes I was just getting sidetracked slightly there by some really great looking handbags and the authentication processes, as you were
mentioning, and the message to investors here, as I mentioned, you are on the search for a new CEO, the message to investors because you did go
public, what back in 2019.
And as I mentioned, we've been through some very challenging years, as individuals and as businesses, whatever sector that you are in? But for
those investors that are looking at the company now in saying, look, what is the direction? What are the growth prospects? And should I either buy at
what could be very valuable levels here? Or stay away till we have a better sense of the direction of the company? But what's the message to investors?
LEVESQUE: Yes, you know, we're, we weren't a COVID friendly business. So COVID was quite challenging for us. Now coming, you know, slightly out of
COVID, the business has gotten much more predictable. So there's a lot of great things happening in our business, we're seeing leverage, great
So first of all, I want to say we're taking a look at everything, all of our costs, with franchise, and there's a lot of there's some low hanging
fruit, you know, across the board, we are finding a lot of leverage in both our fixed and variable costs as you'll see in Q2, our margins have
improved. Our flywheel effect is really working we're finding great efficiencies in our back.
So I, you know, you're really going to start to see these losses narrowing by the end of the year. It's a really exciting time for us. And, you know,
we believe we're very much undervalued right now. And you have the whole equity executive team. I mean, you know, buying stock to be honest with
you, because we know where this can think can go.
CHATTERLEY: And just very quickly, you're in for the long haul.
LEVESQUE: Yes, definitely for sure, we're looking to build a company that's going to last you know, the next 50 to 100 years. Again, our team feels the
same way and they're super passionate about what we're doing every day.
CHATTERLEY: Well, I hope we're not talking about it in 100 years, quite frankly, but I'll continue the conversation. Thank you so much for joining.
LEVESQUE: Thank you Julia, nice to meet you.
CHATTERLEY: --likewise, at the beginning. And that was Rati Sahi Levesque, the Co-interim CEO and President of the RealReal and that's it for the
show. If you've missed any of our interviews today, they will be on my Twitter and Instagram pages you can search by @jchatterleycnn; in the
meantime "Marketplace Europe" is up next.
NINA DOS SANTOS, CNN EUROPE EDITOR: Hello, welcome to "Marketplace Europe". I'm here at the European Space Agency's 5G Hub in Oxfordshire, where
researchers are firing up the latest advances and connected tech. Almost two thirds of EU households actually have 5G coverage according to the
European Commission however, a report by Ericsson says that Europe is still lagging behind the United States and parts of Asia when it comes to
subscriptions. So the 5G fight back begins here.
SANTOS (voice over): If Europe wants to get 5G ready; it might have to aim even higher than these masts. In fact, it may be satellites sitting
thousands of miles above the Earth that hold the key to getting us connected. Here at the European Space Agency Antonio Franchi, says it's the
opportunity of a lifetime.
ANTONIO FRANCHI, HEAD OF SPACE FOR 5G STRATEGIV PROGRAMME, ESA: So we see the digitalization of industry and society really requires connectivity
anywhere on Earth, and 5G promise to provide the connectivity to provide the connectivity fabric to enable this digital society.
We believe satellite plays an instrumental and fundamental role in complementing the 5G terrestrial connectivity with space assets. The
ultimate goal being ubiquitous connectivity on Earth, so everybody and everything connected anytime anywhere.
SANTOS (on camera): In terms of the future connectivity of a 5G and then thereafter a 6G world what type of timeframe, do you think we're looking
FRANCHI: Typical days, the time spent about 10 years from 1G to the next. So we expect in the next 10 years, this connectivity will be revolutionized
will improve life on earth will provide better services globally, and hopefully will take care of our young generation and also our older
generation in providing a much better global digital health care for everyone.
SANTOS (voice over): These headsets offer a tangible example of how 5G networks can be used. They're all linked to one 5G network via satellite,
many thousands of kilometers above where I'm standing.
They can help people via augmented reality train for all sorts of complicated professionals like say oilfield service engineers or pilots,
even doctors. In this case, these devices have come preloaded with an example of what a 5G Smart City would look like. Let's take a look.
SANTOS (on camera): I can actually see a whole 5G connected city spring up in 3D like a hologram, which has driverless cars, planes above us hospitals
that are connected to the internet. It's quite impressive.
SANTOS (voice over): 5G's impact isn't just hypothetical word. This is Darwin, the self-driving shuttle. It's a test project that ESA has been
working on with the mobile operator O2. It's already fairy workers around the area. And O2 hopes it can show off the potential of 5G connections. I
took a ride with David Owens, the company's Head of Technical Trials.
DAVID OWENS, HEAD OF TECHNICAL TRIALS, VIRGIN MEDIA O2: It's really exciting that this is actually real. It's not a trial, in terms of the
technology. It's a trial in how people get used to the technology and using it in their daily lives to commute around the campus.
SANTOS (on camera): None of this would be possible without 5G networks, right?
OWENS: Yes, 5G plays a vital role in ensuring that we can operate shuffles autonomously. It's a number of key partnerships, a number of key
technologies that we need to enable this shuttle to work properly and 5G as part of that technology roadmap that we need.
We've been working on a lot of different projects to give really good examples of how 5G can help industry can help transport. We've also been
working on a number of projects that have been focused on the creative industry. You know, one of the things that we love, Virgin Media O2 is big
entertainment venues that O2. And we focused a lot of our projects around those giving fans better experiences at those venues.
SANTOS (voice over): Owens says it's a marathon not a sprint when it comes to 5G. But the future being mapped out makes it clear. This new tech is
already very much in motion.
SANTOS: After the break, powering a new reality we'll take you inside the Metaverse and the battle for bandwidth.
SANTOS: As more of our continent gets connected more and more Europeans are getting a chance to dabble in new technology. And few innovations received
as much hype recently as the Metaverse. The consultants EY say that Telcos can be key players and getting it off the ground. Anna Stewart helps us get
up to speed.
ANNA STEWART, CNN REPORTER (voice over): What used to be science fiction is now the word on everyone's lips. So what is the Metaverse and will it
become the next frontier for big tech? Think of it like a more immersive version of the internet?
A digital world where your very own avatar can go shopping, attend concerts, or just hang out with friends. And companies are already
competing for your attention. Facebook changed his name to Meta. NIKE bought a virtual shoe company. Even Kraft Heinz is making a play for the
And more investments are coming. In 2021 Meta said it would create up to 10,000 jobs in Europe over the next five years in a push to make the region
a Metaverse Hub. But just like the real world, digital societies don't function without infrastructure.
Europe's internet providers are already trying to keep up with historic demand for data. Powering the Metaverse is a whole different prospect.
Artur Sychov is a Tech Entrepreneur from the Czech Republic. His virtual reality world Somnium Space has been operating since 2017. Now as interest
in the Metaverse grows, he says it's time for users to think big.
ARTUR SYCHOV, FOUNDER AND CEO, SOMNIUM SPACE: Metaverse is you know, the spatial environment a spatial place, it's a platform where you can come in
and literally be whoever or whatever you want to be. And also, you could create anything you like.
But let me give you a quick example. I'm going to on the building. This is the Somnium Mall in the City Center. I'm on the roof. You can climb that
mountain you can visit all the parcels you can go to those kayaks, so these are kayaks and you can actually fly there. These are just few small
possibilities I just showed it within 15 seconds. But as I said, you can literally do anything you like.
STEWART (on camera): I mean the technology is extraordinary. Just watching you in the Metaverse right now, it relies on a lot of bandwidth. Are
telecoms companies ready for what could be an explosion in demand for bandwidth?
SYCHOV: I think they are. We are entering the territory of mobile phones having, you know, close to gigabit up and down internet speeds on the 5G
network with latency, maybe 30 milliseconds, which is plenty enough to hold a lot of data and even do wireless VR.
Generally, telecom companies will play a big role in the development and also accessibility of this technology to many more people. But I think
we're moving in the right direction actually.
STEWART (on camera): Do you think that has put people off entering the Metaverse because they think that they need a very expensive headset? They
need a big computer. They need hand thing - on them.
SYCHOV: The biggest hurdle so far, which I've seen is people not understanding what is actually possible. Because majority of people 99
percent of people actually don't realize that what I'm doing right now and how we're talking right now and then I'm in the Metaverse inside that is
actually technically possible.
Because once they realize once many people realize that this is possible they actually jump and do those things because it's exciting, right? They
want to do the same. They want to explore. They want to meet with people. They want to visit live content. They want to drive NFT cars like I will do
STEWART (on camera): Why? Well, I think I'd like to come in there and have a look at that car. That'd be possible?
SYCHOV: Yes, of course. Let's do that. I'll meet you in the City Center in a bit.
STEWART (on camera): Now before I get into the Metaverse myself I need to sort out my outfit and as Artur was telling me the possibilities are
endless. My producer says I should go for a more traditional look rather than a dinosaur costume, which I think is a shame, but is then just a case
of grabbing my headset and away we go.
STEWART (on camera): Hi I'm here. I'm wearing a slightly odd outfit. I much prefer yours.
SYCHOV: Let's go outside.
STEWART (on camera): Well, why don't you show me around?
SYCHOV: So we could of course play the bowling and the shooting game. But we probably can go and have a look at the car, which I promise you to show.
STEWART (on camera): I love to go see the car.
STEWART (voice over): It's all very dramatic with a high speed car chase at sunset. And as we head up to the mountaintop, Artur is adamant this is more
than just a fad.
SYCHOV: There's certain community forming around this understanding of the power of this platform, right? When people pay tens of thousands of dollars
for a virtual land parcel they probably are not doing it out of fun. They have intent. They have a wish or a dream they want to build on top of that.
STEWART (on camera): What's your advice to brands that want to somehow have a presence in the Metaverse or they want to have purpose in the Metaverse?
What is your advice to them? I'm guessing most of them are consumer facing brands.
SYCHOV: I would say what I see right now its many brands are using this as the marketing vehicle by just claiming that they were in the Metaverse. We
do this and that but there are no utility behind what they're doing yet.
I would recommend brands to really, really, really think about the utility to let people engage with those items to let people form a real life
experience in VR with those items because that's where the connection happens.
STEWART (voice over): From bowling alleys to space stations to a daytime firework display. There was certainly no shortage of distractions in this
corner of the Metaverse. There's still one thing though that I've always wanted to try learning to fly.
SYCHOV: Just spread your arms move forward and you would fly.
STEWART (on camera): That was great. You know after I've had such a good time I really enjoyed it.
SYCHOV: Let's do a selfie together - hopes 3, 2, 1 fantastic, high five, bye! Bye!
STEWART (on camera): That was extraordinary. I have to go sit down in a dark room now for a little bit.
SANTOS: That's it for this month's edition of "Marketplace Europe" for now. We'll see you next time.