How an American earned $ 280 million and went bankrupt in six months
'19.07.2018'
ForumDaily Woman
In 2012, the online store Nasty Gal was considered an example of a successful project - in just six years, the company’s management managed to grow a business with an annual sales volume of $ 100 million from an eBay store. But already in 2016, project founder Sofia Amoruso became one of the most successful versions of Forbes with a fortune of 280 million dollars, and in the same year declared bankruptcy. What went wrong?
The founder of Nasty Gal, Sofia Amoruso, independently selected clothes for sale, negotiated with manufacturers, and also acted as a model for the store. Vc.ru. In the summer of 2016, Amoruzo entered the Forbes list of the most successful women in the US, and in the fall of the same year, online retailer Nasty Gal filed for bankruptcy. In October, 2016, Amoruso left the company.
The story of Sofia Amoruso - a fairy tale about the modern Cinderella, tells Company's secret. The future founder of Nasty Gal was born in California to a Greek-American family. As a child, she suffered from depression, because of this, left school and finished school at home. Then her parents lost their jobs at the same time and the girl had to get a job at Subway, then she worked as a saleswoman in different places.
Having received a certificate, Amoruzo hitchhiked for some time and experimented with drugs. In 2003 for the first time, she was caught stealing for the first time — she was trying to take out a grill stove and shower curtain rings from a hardware store in Portland. After paying the fine, Amoruzo decided that she had to change her life. She returned to California, enrolled in a community college and began to think about how to do "something legitimate and brilliant".
Two years later, 22-year-old Amoruzo opened a vintage clothing store on eBay. The businesswoman bought cheap clothes and accessories, came up with bright images for them, took off her friends and put the resulting images on eBay. The poses of the models and their outfits were so well thought out that buyers really willingly paid hundreds of dollars for things that Amorozo got into almost nothing. The fact that this model works, it became finally clear when the two Chanel jackets, for which the businesswoman gave less than $ 20, left for $ 1500 each.
Over the years, eBay’s store revenue soared to $ 100 000. Amoruso opened an office in the suburbs of San Francisco and started developing her own website.
It was launched in the 2008 year and immediately took off - the warehouse became so empty that Korean merchants, the main suppliers of Nasty Gal, had to dangle every week for goods. Soon the company moved to Los Angeles, the range began to grow and not second-hand things. At the beginning of 2012, Amoruzoos hired the first designer, and already in 2013, clothing, shoes and accessories under the Nasty Gal brand accounted for 30% of sales.
All this time, the company grew practically without advertising - Amoruzo staked on social networks. Every morning, her employees tell subscribers what to wear today, they publish tips on make-up techniques and other simple, but catchy things to the target audience. The entrepreneur believes that she managed to get into the rating of the most successful American women of Forbes with the help of likes.
Growth difficulties
In 2014, the founder of Nasty Gal invited former employee of the Canadian sports goods chain Lululemon Athletica Sheri Waterson to the position of director of production control, in 2015 she replaced Amoruso as CEO. In 2014, Nasty Gal's revenue reached $ 130 million, in 2015, $ 300 million.
At the end of 2014, the company opened its first offline store on the prestigious Melrose Avenue in Los Angeles; in March, 2015 opened a boutique in an expensive Santa Monica shopping center. In February, 2015, an entrepreneur, hired Apple’s Ron Johnson’s Apple Retail Development Team. For all the time Nasty Gal has received more than $ 65 million.
According to analysts, the rapid growth in sales was triggered by large investments in marketing and advertising. "This strategy is used by many startups, but it pays off only if buyers become loyal users and turn to the services of the service again and again."
“The funds of online stores go to online marketing: banner ads or fees to influencers. If you pay $ 50 to attract a user who makes only one purchase on the site, it will be difficult to make money. ”- Ari Bloom, Investor.
Experts believe that the inability to retain customers played a significant role in the death of Nasty Gal. As soon as the company began to run out of investor funds, it had to cut marketing costs - and sales began to fall. “You can spend $ 200 million and earn $ 100 million, but this is not called sustainable business,” said Richie Siegel, founder of the Loose Threads media company.
Customer retention
“Why didn't the store manage to retain users? Some were not satisfied with the quality of the product. Others liked buying things from retailers like Zara or H&M more - it was faster and more convenient. In addition, the brand had its own ceiling: its specificity helped it grow, but only until the company reached a large part of its target audience, ”writes the Los Angeles Times.
“Nasty Gal was selling items to young California women. I'm not sure if the store's products were popular across the country, let alone around the world. ”- Richie Siegel.
Empty expenses
Total online retailer attracted $ 65 million investment in three rounds. Venture Fund Index Ventures invested its funds in the company.
As the Los Angeles Times notes, Nasty Gal executives spent a lot of money on things that did not help the company grow. For example, in 2013, a startup rented a new headquarters in downtown Los Angeles with a total area of 4700 square meters. Industry experts believe that the company could manage with a smaller area and feel quite comfortable.
In addition, the online retailer opened a logistics center in Kentucky with a total area of 46,5 thousand square meters, as well as two offline sales points - in Los Angeles and Santa Monica.
“Fashion is too highly competitive business to spend money wisely. In addition, young employees of Nasty Gal, obviously, were more interested in creativity than the business side of the business, ”says Siegel.
All these expenses only weakened the company's budget, without bringing tangible benefits to the business itself, analysts say. The retailer Boohoo.com, which is ready to buy the company, will not buy its offline stores. Most likely, these points will eventually be closed, writes the Los Angeles Times.
Among other things, Amoruso was again accused of stealing - this time, plagiarism - several fashion brands and one jewelry brand: Pamela Love was asked to pay $ 300 in compensation, saying that Nasty Gal stole the design of three precious jewelry.
Employees also complained - for example, in 2015, Amoruso fired several women during pregnancy and maternity leave, and before that she had repeatedly laid off several dozen people at the same time.
In a bankruptcy lawsuit, the company's management indicated that the business was experiencing "serious liquidity problems," and in addition, it had "strained" relations with suppliers. Over the past few years, Nasty Gal has issued two loans. "The management claims that it has dealt with its debts, but their payment nevertheless demanded a lot of money."
Nasty Gal was looking for new investors, but it was not possible to find them - experts believe that potential partners were frightened off by the news about the resignation of Sofia Amoruso from the post of head of the company.
“Amoruso and Nasty Gal are two inseparable brands, the girl herself spoke about this. Investors perceived her departure as a signal that the ship was sinking. ”
In March last year, Sofia Amoruso launched a new project - Girlboss, which includes the eponymous charitable foundation, the Girlboss.com media platform and the Girlboss Radio podcast. As writes RamblerAccording to Amoruso, investors have invested $ 1,2 million in Girlboss. The funds will be used to promote the project, as well as to expand the state. Girlboss employs former CRO Goop lison Wyatt, Vice President of Strategy and Investment Refinery29 Neha Gandhi, editor of Mashable Jericho Mandibur.
Sofia Amoruso named Girlboss after the autobiography released in 2014. In 2017, a book of the same name was shot based on the book.
