He didn't mind how he looked to other people, because the nursery magic had made him Real, and when you are Real shabbiness doesn't matter.

Real isn't how you are made. It's a thing that happens to you. Sometimes it hurts, but when you are Real you don't mind being hurt. It doesn't happen all at once. You become. Once you are Real you can't be ugly, except to people who don't understand. Once you are Real you can't become unreal again. It lasts for always.

[O]nce you are Real you can't be ugly, except to people who don't understand." - The Skin Horse from The Velveteen Rabbit

He didn't mind how he looked to other people, because the nursery magic had made him Real, and when you are Real shabbiness doesn't matter.

Weeks passed, and the little Rabbit grew very old and shabby, but the Boy loved him just as much. He loved him so hard that he loved all his whiskers off, and the pink lining to his ears turned grey, and his brown spots faded. He even began to lose his shape, and he scarcely looked like a rabbit any more, except to the Boy. To him he was always beautiful, and that was all that the little Rabbit cared about. He didn't mind how he looked to other people, because the nursery magic had made him Real, and when you are Real shabbiness doesn't matter.

Of what use was it to be loved and lose one's beauty and become Real if it all ended like this? And a tear, a real tear, trickled down his little shabby velvet nose and fell to the ground.

Real isn't how you are made," said the Skin Horse. "It's a thing that happens to you. When a child loves you for a long, long time, not just to play with, but REALLY loves you, then you become Real." "Does it hurt?" asked the Rabbit. "Sometimes," said the Skin Horse, for he was always truthful. "When you are Real you don't mind being hurt.