Ladies and gentlemen, thank you for standing by, and welcome to The RealReal Third Quarter 2020 Earnings Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. I would now like to turn the call over to Paul Bieber. Sir, you may begin.
Thank you, Corey. Good afternoon, and welcome to The RealReal's earnings call for the quarter ended September 30, 2020. I'm Paul Lever, Head of Investor Relations at The RealReal. Joining me today to discuss our results are Founder and CEO, Julie Wainwright and Chief Financial Officer, Matt Gutzke. Hopefully, you have a chance to read our press release and stockholder letter that we distributed earlier today, both of which are available on our Investor Relations website.
Before we begin, I'd like to remind you that we will be making forward looking statements during the course of this call. These forward looking statements involve known and unknown risks and uncertainties, and our actual results could differ materially. You can find more information about these risks, uncertainties and other factors that could affect our operating results in our most recent periodic report, our Form 10 ks, subsequent quarterly reports on Form 10 Q and in our earnings release from earlier today. In addition, our presentation will include certain non GAAP financial measures, for which we have provided reconciliations to the most comparable GAAP measures in our earnings press release. With that, I'll hand the call over to Julie for introductory remarks, and then we'll go straight to Q and A.
Julie?
Thanks, Paul, and welcome to our QC earnings call, everyone. When we provided our last update in August, we were seeing encouraging signs of recovery. In July, our supply returned to growth and GMV was on the cusp of growth. Improving trends in our LA and New York City markets led by the influx of supply into our reopened luxury consignment offices known as LCOs and retail stores and an increase in requests for white glove service overall contributed to our improving GMV and our GMV quarter growth. Consequently, we started reinvesting in marketing sales, hiring and expanding our retail footprint with the launch of TLR in Chicago.
We are learning how to work safely in a COVID environment and feel comfortable making these investments for current and future growth. In fact, we're beginning to show results. The 17% quarter over quarter improvement in Q3 GMV underscores our improving fundamentals. And so far in Q4, retail and LTO supply increased 48% year on year in October compared with down 20% year on year in Q3 and down 81% year over year in Q2. This retail recovery amplifies our overall supply recovery and gives us optimism that a return to positive year on year GMV growth could happen over the balance of Q4.
While uncertainty remains, we are laser focused on making operational changes and strategic investments that will position us to emerge from COVID a stronger, more agile company and set us up for long term sustainable growth going forward. Once again, we'd like to thank all of our employees for their dedication to continuing to move company forward during these unprecedented times. And with that, I'll turn it over to questions.
Great. I guess, a couple
of questions here. Obviously, vaccine news. When you look out 9 months to 12 months, what could be different for your supply acquisition? And you think that could really get a lot easier for you next year? And do you think as people go virtual and curbside, you could really see some savings now that you have more experience with that?
And then second, the marketing spend picked up and the new buyers were I think $5,000,000 in the quarter. How do you feel about the efficiency of that marketing spend? And do you think it will get more efficient as we move forward? Thank you.
I'll start and then I'll turn it over to Matt. So post COVID, here's what we you don't really know what it looks like, but we have a pretty good indication that virtual is here to stay. And we're pretty early in the phases of using that as a tactic. So it's hard to project great efficiencies, but it's a really good way for our LMs to work and for our gemologists, some of our gemologists to work and our watch experts also. So that will definitely be in the mix going forward.
Stores are going to be in the mix. Since we've reopened the stores, we're seeing, as we noted and our LCOs, influx the product. People are really comfortable dropping off product and that's starting again to in October a record number. We're also going to test sort of a mini store LCO concept, similar to the one in our Madison store in New York City, very small footprint, 2000 to 3000 Square Feet with about 400 to 500 SKUs max in the front and then luxury consignment offices in the back. Going to be running that test in the next 120 to 150 days, we should have 3 of them with our one opening next week in Palo Alto.
So that we believe will be part of the mix because Madison as a neighborhood store, a small footprint neighborhood store with a luxury consignment office has really come back quickly. We also believe vendors going to be a more important part of our mix and maybe a greater percentage. We've always used vendors strategically to offset or to go after certain product lines. We believe for the next year to at least 18 months, we're going to have even better quality vendor products and we're already seeing some of that mix change now. So vendor won't be a huge percent, but it will be a more prominent part of our business, maybe 15% of the GMV, it may be as high as 20%.
So we will see continue to see products mix shifts too as noted in other businesses, apparel and footwear have been down for us, while fine jewelry, handbags and men's have done really well along with home and art. So all of those things we expect to more normalize as people get out and about and go into offices again. So we expect all of our categories to start growing again in healthy numbers. I'm going to make one comment about the marketing efficiency and then turn it over to Matt. Look, we are really great at driving down our cost of acquisition, But now wasn't the time to really pull back on putting money into the marketplace because what we're doing is not just generating demand, but future consignors.
So while our marketing efficiency isn't what it was prior to COVID, we do expect it to return to a nice number and then a declining number over time. It just makes sense because we still have an amazing flywheel effect where our buyers become consignors and our consignors become buyers. But with that, I'll turn it over to Matt for more color.
Yes. Thanks, Julie. Thanks for the question, Justin. So a couple of ways to think about marketing efficiency. And I think it's a little bit of danger in getting too focused on the very short term.
So if you would go back like the Q2, for example, where our marketing investment was as close to 0 as we've ever been. And the marketing efficiency in that period was off the charts, right? And so naturally, there's some sort of correlation between spend and efficiency. We saw signs of recovery in as early as early May, at which point we began to progressively reinvest. So we have continued to progressively reinvest as we continue to see signs of recovery in both supply and GMV.
And most recently with retail starting to come back, we're feeling that it's the right decision for us to make. It's going to take time. The typical path for people to turning into buyers as they first become members and then they either become a buyer or they become a consignor. So the investments that we're making for today are helping us today, but they're going to help us next month, next quarter and beyond. So we are laser focused on setting ourselves up to come out of the year in a strong trajectory and set ourselves up for a strong post COVID world.
Thanks, Julie. Thanks, Matt. I'll get back in the queue. Appreciate it.
Okay. Thank you.
Your next question comes from the line of Oliver Chen from Cowen. Sir, your line is open.
Thanks. Hi, Julie and Matt. Regarding the regions, you've seen improvement in supply at New York and LA, but New York looks like it's improved faster than LA, which is less negative. Could you help us understand how those markets are manifesting and any differences or similarities between them? Also, the inbound operation unit costs ahead look like an opportunity for automation.
So what would you generally highlight for efficiencies that you're seeing ahead as we look forward to that as well?
Hey, Oliver, I'll start again. It's nice to hear your voice and turn it over to Matt. New York, the schools are back. So just to be blunt, the schools are open and people came back faster into the urban areas. So and when our we reopened SoHo and then reopened Madison, the stores became vibrant, the LCOs got busy quickly.
So New York, while still not performing as phenomenally as well as it did last year, beginning of this year, it seems like last year. It is coming back faster. So that's what we think is the prime reason. It's just people are back and engaged in New York and New York area. So that I mean, there isn't I don't know, Matt, if you have another theory, because every other number shows that it's just we can tell you when people start coming back.
When Hampton started shutting down, our business started ticking up in August.
Yes. I've seen the same basic thing. The only other thing to add to that is we do have an extra store and an extra consignment office in New York. So we have a little bit more of a retail presence there. So that can certainly contribute at the very tail end of the quarter and certainly into October.
But we're obviously encouraged by the trends in both the markets, but recognize there's still a very long way to go to where we were.
And then You said the second Yes, second question.
Yes, on inbound automation efficiencies. So we're progressing very nicely even during COVID. We basically got into our stated goal of 75% automation in the big three projects that we've talked about repeatedly by the end of Q3. We think there's some more incremental room for us to go to automate a little bit more, but the gains that are going to come from that are not so much by further automation as driving increasing volume through the system because there's a tremendous amount of leverage. This comes from a steady amount of a lot of supply that helps us leverage the people that we have and there are certain aspects of the cost that are fixed.
So getting back to growth is when we're really going to start to see even more benefit than we had recently.
Okay. And finally, on the order count, Q3 orders being down 5% and your average order value being up. Would you expect a similar dynamic? Like how does that interplay with the supply units and or the changes you're witnessing in mix?
Yes. So I'll start that one. So underneath AOV is our selling prices and items per transaction. Selling prices have remained elevated throughout COVID really and that's really on the back of a mix shift toward more handbags, jewelry and to some extent men's products. So that we'd expect to see continuing into the Q4.
But that other part of Unisprin transaction that's more tightly correlated with the abundance of supply. The total available supply in the marketplace was still down a fair amount throughout the Q3. So as our supply builds back up, that's where we'd expect to see that start to come back up and get our AOV overall back to where it was pre COVID.
Thanks. Congrats on Gucci. Best regards.
Thanks. Thanks, Oliver.
Operator, we'll take the next question.
Your next question comes from the line of Michael Binetti. Sir, your line is open.
Hey, guys. Thanks for taking our questions here.
So I
want to I just want to ask a quick one on the short term here. I want to understand how you're getting back to flat GMV with positive November, December. We're starting off at, I think, negative 5 in October. And obviously, we're seeing the headlines of COVID spiking again. But I'm sure you're more prepared than you were last time you saw these spikes.
But I would assume that, that would that could hurt supply again until there's a vaccine available, which obviously we've got nice news on today. But maybe walk us through how you're building to the quarter getting back
to positive, please? I'll answer
a little bit and then I'll turn it over to Matt. We don't really look, COVID is out there. It's not going away. But I would say our consignors and our sales team is learning how to live with it and pick up products safely. Store drop offs really are changing the dynamics in key markets for us right now, even though we only have a few stores open, but not just stores, LCO drop offs also.
So we're not as worried about a big shutdown like we had before where we couldn't operate at all. I think going certainly COVID is rampant, but it's more under control in the urban areas than it was before. So we feel like we will be able to we've already seen some improvement in supply and we're going to be able to continue to grow supply. And we are as we said, we're also testing another the mini store LCL in Madison like the one on Madison that's going to open in Palo Alto. So we feel pretty good about where we are what we've seen.
I mean, the number we gave out on the LCO plus retail store drop off up 48% year on year in October, I think bodes well as we move into the winter. So that's why we feel good. And we do think expect to see seasonality in gift giving during the holiday time. It's still uncertain times. We don't want to sound overly optimistic, but we have enough early indicators that we feel good.
Yes. Not to slice this too finely, but I think just to add another level. So what we saw throughout Q3 was relatively steady improvements in supply. And then GMV sort of followed, we had a little bit of a lapping thing in the middle of the quarter. But coming into October, things were a little that recovery kind of stalled out for a couple of weeks, but then really started to pick up momentum in the back end of October.
Retail was a big driver of that and by retail that's inclusive of the LCOs. General recovery amplified by retail in the tail end of October. And that supply, as you know, Michael, that that supply is not going to hit the site for 2 to 3 or maybe even 4 weeks from the end of October and it's going to benefit us as we kind of get deeper into the holiday season.
Okay. It's a fine tooth question, Matt, but on the if we take out the supply coming in through retail and LCO, it looks like the other area if that's only 18%, I think you said of the supply in the shareholder letter, it means the rest of the channel will be over 80 percent. And it looks like that would be that was supply coming in through other channels is probably up high single digits in Q3. It seems like it leaves quite a bit of room for that to decelerate in the Q4 to still get to your double digit growth target. Is that are you seeing slower trends in other areas?
Or is that just conservatism would be a fair answer? I'm just curious what you're seeing in the other areas?
No, that's not certainly not how we're thinking about it. So I won't answer all those parts because a little bit apples and oranges is the supply value versus supply units. But here's how I'd characterize it. But we are like we are calling it like we see it. I think there's enough uncertainty in the world.
So we don't want to add to that uncertainty by unnecessarily providing conservatism on top of our guidance. I don't think that serves anyone well. So we are being as transparent as we can possibly be given all of the uncertainty around us and telling you exactly what we think is going to happen. So that's we're confident that we can see a return to growth over the balance of the quarter. And the entire organization is laser focused on getting us there, not just to deliver this quarter.
We're certainly not thinking exclusively about the short term. We are very focused on setting ourselves up to exit the year with strong momentum, so that when COVID is behind us, then we can really be a significant part of the bounce back story.
Okay. Thanks for all the help guys.
Your next question comes from the line of Eric Sheridan from UBS. Sir, your line is open.
Thanks so much for taking the question. Maybe I'd come back to newer sales reps that are joining the organization now. How does that compare to some of the efficiency ramps?
Oh, We lost Eric.
Did I ask Eric? Did I ask Eric? Did I ask Eric? Operator, are you still there?
Yes, sir. You're still in the call. He his line and I'm showing his line is still connected and open, at least on our end.
Thank you. Can you
guys hear me okay?
Yes, you're back now.
Okay. Sorry about that. I was curious about sales reps joining the organization now, what you're seeing from an efficiency standpoint and a productivity ramp versus before pre COVID period, how that might compare? And then I apologize if I missed it earlier in the call, but anything on COVID related expenses of a permanent nature versus transient nature, whenever that happens, then we're on the other side of this thing, how to think about the impacts on the cost structure from those 2 variables? Thanks guys.
So, I would say we're still learning how to ramp our team and train our team and we've had some wins and we've had some opportunities for improvement. So, it is more challenging in COVID times. We used to people used to shadow each other. So I would say that it's been uneven, some really big wins, but it's been uneven. So we have work to do in our training of bringing on new people.
Efficiencies, virtual is still a new tool. We're learning how to work with that. That's more, I think, a long term situation. We've only been doing virtual now for a few months. So that we do expect efficiencies over time.
But right now, we're more worried about getting in as much product as possible and taking advantage of some interesting trends that we've seen most notably again, a lot of people are dropping off at the LCOs and the store. So, we're capitalizing on that and moving forward.
Yes. There are a couple
of other things amplifying that. So it always takes our new sales people a few months to ramp. That's been kind of the natural trajectory since the beginning of the company. But we've amplified that because of how intensely the change from 1 quarter to the next in terms of the number of salespeople. In the second quarter, we weren't hiring anybody.
In fact, we had to let a number of salespeople go. So from that low point to where we're heading in Q4, the sheer number of new people is higher than really any period that I can remember as a percentage of the base. So there's a short term productivity hit. But I think as we kind of get into next year that should normalize. And the second question with respect to COVID expenses.
From memory, I think we're looking at about $6,000,000 of COVID specific expenses for 2020. And that's going to continue on realistically at least until next summer at about $2,000,000 to $2,500,000 a quarter, after which we think it should sort of trail off. Hopefully by this time next year COVID is in the past and COVID expenses are as well.
Yes, sir. Your next question comes from the line of Ike Boruchow from Wells Fargo. Sir, your line is open.
Hey, everyone. Thanks so much for the question. Matt, I kind of wanted to dig into the direct business just to make sure I understand what's going on today, the last couple of quarters, the thoughts for Q4 and just high level into next year, how to think about it? I mean, the penetration has obviously gone up. I think you've explained what's going on.
The gross margins have been down, by decent amount year over year. Trying to understand how to think about that into the Q4? And then how do you see this kind of normalizing into next year? Is this going to take some time until things start to improve? Just anything as we look out on the profitability and the drivers of what's going on there would be helpful.
Sure. So for those of you who aren't as familiar, so we have a component of our revenue that is booked on a gross basis, that's direct sales. And that's really anything that originates from product that is on our balance sheet is inventory. Most of that product historically has come from have late customer returns that we have accepted back and has yielded about 6% to 7% of our total GMV coming from that channel. It's been a touch higher over the course of this year And that's largely due to having a relative lack of supplies.
We've had to sell harder into the inventory that we had on hand. So that's a temporary phenomenon. And as we build back supply, that component of direct should normalize out. Now we are starting to ramp, though it's very small still a buy upfront program that we use selectively with both individual consignors and some of our business or vendor sellers, where we offer to buy products upfront. That yields a slightly better margin for us at the end of the day, but we are highly selective in the products that we offer that to.
So that has a small impact now and expected to be a relatively small impact going forward. That said, given the nature of that business, where the costs are essentially fixed upfront and the GMV that comes from that is subject to a little bit of ASP pressure. That's where you kind of get that margin variability. But it's a small part of our overall mix of GMV and doesn't really have any material impact by the time you get down to what really matters, which is our gross profit per order. So going forward, I think you're going to see percentage margin variability anywhere from the low teens to call it 20%, but it doesn't really have a weighted average material impact on gross margin.
And is there anything on the inventory on the balance sheet today, Matt, that makes you uncomfortable? Are you pretty clean? Are you clean with your inventory right now?
Yes, yes, yes. I mean, our inventory at the end of the quarter is I think it's still sub $20,000,000 So yes, it's still a very small inventory balance in the grand scheme of things and we're not looking at that and thinking about any significant inventory risk.
Okay. Thanks. Good luck.
Your next question comes from the line of Edward Yruma from KeyBanc Capital Markets. Sir, your line is open.
Hey, good evening, guys. Thanks for taking the questions.
I guess first, Matt, just
a quick modeling question. You said somewhere in the shareholder letter that you expect unit shift to approach double digit and yet GMV is expected to be flat. So just wanted to square those two comments. Then I guess second, and you pointed out some mix issues, favorable mix issues, but ultimately resulting in lower take rate, I think 190 bps decrease year over year.
Do you expect this mix to kind of
hold in the short to medium term? And there have been some publicized large competitors that are seemingly incentivizing some of these categories. Are you seeing downward pressure on some of these hot items like sneakers and watches? Thank you.
Okay. I will start with the supply demand and maybe you want to talk about some of the category trends we're seeing, Julie. So what we laid out in the shareholder letter with supply outpacing demand, that's entirely consistent with supply imbalance, a deficit in available supply versus where we were a year ago. So in order to get the marketplace back in true balance so that we can supply and demand can grow in lockstep going forward, it first need to get back to kind of even water level. So that is the simple math.
So for growing supply in the high single digits over the balance of the year, that will enable us to kind of get back to seeing positive growth in the GMV side. And then I'll start on the category piece. You're right, higher selling price products have an inverse correlation with take rate, handbags, jewelry, watches, etcetera. In the very short term, I think that mix stays because that's COVID or not, that is the typical holiday mix. So particularly as we get into the peak of the holiday season, I would expect to see elevated levels of those product categories, more or less consistent with what we saw in Q3, frankly, maybe a little bit higher.
But then as we get into next year, we are seeing interesting signs of recovery across categories. So it's not like no one's buying women's ready to wear. That is coming back nicely as well. And particularly as we get closer to the end of COVID, I think we'll start to see our product mix drift back to what its historical level was.
And when you're talking about increased competition, we have such a large TAM. We really don't feel, especially when peer to peer marketplaces start going down to maybe no commission or aggressive commissions, that's a way for them to compete. It's not really the self posting world really isn't our consignor base. And so we don't see that as any competition for product at all. So yes, I mean, I think that's probably the fairest way to say, but we do participate in a very large TAM.
And for us, it's just getting just getting the product back in again, but it's coming in nicely for us. So
Great. Thank you.
Operator, we'll go to the next question.
Okay. Your next question comes from the line of Aaron Kessler from Raymond James. Sir, your line is open. Great.
Thank you. A couple of questions. Maybe first just on the supply acquisition. Can you give us a rough sense for where that sits today by mix and maybe potentially how you see that changing longer term? Should we expect some of these mini stores to replace some of the historical kind of white glove service as well?
And how are you thinking about maybe the cutoff for white glove, this could be by price or how are you looking at deciding kind of when you send out a salesperson to a person's home going forward? Thank you.
Mix, look, the mix hasn't changed that much. I mean, we've been pushing certain categories because we go into high seasonality. So we've always sell a lot of handbags, fine jewelry and watches. So if you go to our site and you see any kind of promotion, it's just our normal prep for high seasonality. On the mini stores, I think first it's probably a good a moment to take a step back.
When we saw before COVID, we saw a shift where people were dropping off things at the LCOs and the stores when we got up to about 18% of supply value coming into those channels. So we changed the shift of the type of people that work in those stores and our LMs did not facilitate that transaction with our consignor. So we've already we changed that. I would assume that if these mini stores work, then we will have a different mix. We have more of associates, more sales associates and consignor associates working to assist the consignors in those stores.
And they are they can be set up a more efficient model for us. I don't know if that answered the entire question.
So then the other question is what how we're thinking about the traditional white glove in home service?
Well, we've always had we have we sort of worked the way the consignor works. But we our average and this really has been fascinating to watch even with our virtual appointments and curbside pickup. We've always gotten about 2.5 times more value by going to someone's home than if they send it into us. And that's just the nature of having a close relationship with the consignor and qualifying them before we go into the home. So we've always had that and I don't expect that to change at all.
What may change is the mix in a market, especially if these many stores start working instead of maybe hiring more people in a regional market, it would shift to a different type of sales associate in the store.
So what's clear is that the virtual style of appointment is not just a COVID phenomenon. It's here to stay. It works very well for certain people. But the exact mix of in home versus virtual going forward, we don't know. We're certainly going to let our consignors largely lead us there, because at the end of the day, we're providing a service and we want to make sure that our consignors are as satisfied as they can be.
Interestingly, very recently, we've been starting to see an uptick in the interest for in home appointments again. So I think that's kind of another sign to us that people are kind of settling into and trying to think about their post COVID life.
Got it. Thank you.
Your next question comes from the line of Rick Patel from Needham and Company. Sir, your line is open.
Good afternoon and hope everyone is well.
I had a question
on the vendor programs. I believe you mentioned this could reach 15% to 20% of the business. Does this happen over the next year or do you see this as a long term target? And second, can you provide some additional color on the areas of coming quarter?
It's really more of a long term. It's probably more of an 18 month plan to get the vendor at that level. We've already started staffing and changing our staff to have category expertise and bringing in more senior people in that category. We're not quite changed the entire team. We're more strengthening the team, but it's getting there.
But it's more within the next 12 months to 18 months we'd expect that shift to happen.
Yes. And so part of getting there is staffing up and creating category expertise and focus. Technology is another key portion of the strategy. We need to build out certain technology that can support selling multiple quantities of a similar item. And that itself is it's a multi quarter journey to get that launched and really streamlined.
And in terms of the impact on margins, what's true but it's hard to say because we don't know exactly what the vendor product is going to be. But if it's similar to how it has been historically, it tends to be significantly higher than average value in terms of selling price per product. Now of course, that means the take rate is lower, but when you translate that down to the actual number of dollars of GMV and gross profit dollars per unit, it tends to be significantly higher than average. So it should be additive to our contribution margin over time.
And can you talk about the competitive backdrop as well with holiday promotions starting earlier this year? Are you seeing any impact on your business in terms of average selling price or perhaps gross margin as you need to price competitively?
Yes, I'll start that. No, it's a simple answer. I mean, our average selling price was up 9% in the quarter, continues to be up year over year. So we're not seeing any particular impact that's connected to the retail environment. Now part of that is given the mix of products that we have right now, which is skewed more toward handbags, jewelry, watches, which just inherently have much less promotional pressure potential.
That's the good news, bad news, right? So as the supply starts to come back, it's going to be coming back and demand is going to be coming back even more so in women's ready to wear, but that will be a nice problem for us to have going forward.
Thank you. All the best this holiday.
Thank you. Thank you.
Operator, we'll go to the next question.
Your next question comes from the line of Susan Anderson from B. Riley. Ma'am, your line is open.
Hi, it's Alec Legg on for Susan. Thanks for taking our question. Just to go back on those many store formats, are you able to provide any details on the type of locations you've targeted? Are there more city centers or suburbs? And then have you looked into mall locations by chance?
Yes. So again, we the best test example we have is our Madison store in New York City, which is a very neighborhooding store. Certainly, it's still very urban, but it's very neighborhoody. So we're looking at neighborhoods around key markets. So our first store that we're going to to test this outside of New York City is in Palo Alto, but we're looking in San Jose, we're looking outside the main center, but still important centers in both California and New York, still very popular states, Texas.
We'll see how it goes. Again, we're going to open 3 and see how that works. We have looked at malls. We continue to look at malls. They are they still don't look like they're the answer for us in many for many different reasons, including they're still fairly aggressive in their cost structure where they want a percent of sales when there's a lot of really nice retail space everywhere now in the 2000 to 3000 square foot space and neighborhoods that we think are going to be better for us financially and perhaps better for us and we'll find out in terms of customer adoption.
Okay. Thank you. Very helpful. And then on the new Chicago store, congratulations on that. Are you able to provide how that's performed relative to the other four locations?
And I guess just the general reception of that store?
All right. So yes, I am. I am so glad you asked that I happened to be there on the opening weekend. It was the best opening weekend we've ever had per store and it was boarded up as most stores still were as a precaution going into the election. I'm happy to say it continues to do very well.
The boards are coming off this week. We're just thrilled. It's a great location on Michigan Avenue. Our single biggest store under one roof, I think LA has similar square feet, but it's 2 different stores. You have to go outside to get into the other one.
So it looks like it's off to a very, very good start.
That's great to hear. Thank you.
Great. And operator, I think we'll take our last question.
Okay. Sir, your last question comes from the line of Simeon Siegel from BMO Capital Markets. Sir, your line is open.
Thanks everyone. Good afternoon. Matt, just touching back on your supply demand comments, the high single digit delta between supply and demand, is that the normal lag you'd expect to run or is that a catch up? And then any way to quantify how much of the ASP increase was mix versus like for like? Thank you.
Sure. Yes, it is entirely a catch up. Our available supply in the marketplace was down approximately 10% year over year throughout the duration of the Q3. So this just really allows us to kind of get back to a normalized state. Now it's not always the case that supply and demand go in lockstep in a given month or even quarter.
There are periods of supply build and supply sell through. But in a normalized state, we have to just kind of play catch up so that we can on an annual basis at least kind of get back into balance going forward. And then the remind me of the second question.
You can quantify it.
Yes. It's mix. It's all mix.
It's all mix toward handbags, watches, jewelry and in a smaller degree men's, which is slightly higher than average. Like for like
is Great. Thanks.
And do you have a view on which of these product category mix are pandemic focused versus might be longer lasting trend?
I think it's all to be honest, I think it's all pandemic focused because apparel is slowly coming back, but apparel and fine jewelry and watches are growing, men's is growing. Apparel is still down, although it's significantly better than it was during Q2.
Yes. The one exception to that is Oh, and queues, wait,
queues are also down. So, queues are more down than apparel. So, I think that's somewhat entertaining on a pure level. We expect the categories to return to a more normal rate when people go back to work and go more and go out more often go to occasions.
Right. With the exception that our men's business is still significantly under penetrated relative to the rest of the business. So we would expect to see that continue to grow at higher rates over the next few years than the overall business.
And it's growing now. Yes.
Best of luck for Holiday. Thank you.
Thank you. Thank you. Thanks. Well, that concludes our Q3. Next time we'll be talking to you, it'll be on the other side of the holiday.
So I want to wish you all a happy and safe holidays and I appreciate your time today. Thank you very much. Everyone else has left the call.
Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation. You may now disconnect.