The epitome of a cool girl clothing online boutique filed bankruptcy in November 2016. This is why Nasty Gal failed, a brand that had recognition of 2.3 million followers on Instagram with a database of over 550,000 customers. In the year 2015 alone Nasty Gal made $300 million in sales. 66 percent of Nasty Gal will be acquired by Boohoo by the end of February, for a mere $20 million. Today Nasty Gal is closing all of it’s retail stores in Los Angeles. Nasty Gal will remain an online retailer and will float on thanks to Boohoo, but for the moment the company is all over the place. The entire site and stock currently is 70 percent off, and customers are complaining the purchases they’ve made were charged full price on their credit cards meanwhile no customer service reps are responding to their emails for refunds. How did it get here, and how did a company with a CEO that all girl bosses look up to fail?
How Over Growth Can Kill a Business
Inc. says overfunding killed Nasty Gal, AKA too many players in a small game means it’s bound to end quickly. Investors and players in Silicon Valley became obsessed with the fast, organically growing online store. Many high-volume investors decided to invest and grow the business as fast as they could, just like a tech start-up.
Inc. states that “Nasty Gal, today, should be a thriving company if they hadn’t been caught up in the venture capital financed hyper growth mode. Steadily, Nast Gal could have grown to over $100 million in profitable revenue with no VC money at all.”
When small niche fashion companies are forced to grow rapidly, they seem to always die faster. American Apparel and Pacific Sunwear are some examples of clothing brands/stores that fell in 2016.
When You Lose Fundamentals You lose Customers
As Nasty Gal grew fast and received more funding, former-CEO Sophia Amoruso decided to start an in-house line. Since the brand was primarily focused on working with wholesalers, this would help Nasty Gals’s margins become 70 percent as opposed to the 45 percent it was making from its wholesalers. In 2015 Nasty Gal had its first 500,000 square foot fulfillment warehouse in Kentucky, which was unusual from a retail company standpoint since most clothing companies use third-party providers for their fulfillment. Not only was the wearhouse a big jump, the manufacturing took a wrong turning point. The company had to use factories that produced garments that were not up to it’s company standards. The pieces of clothing Nasty Gal were producing did not look as good as they were styled online and many orders were returned. A company founded on selling high name vintage brands such as Chanel, needed to keep the quality of the garments they produce high, even if they were priced at an affordable price point.
Founders have intuition
Sophia Amoruso stepped down from her CEO position in January 2015 because she knew. This happened after writing her memoir, “Girlboss,” and she knew her story was the biggest point of the brand itself. “According to one executive, the publication of Amoruso’s memoir was the “nail in the coffin” for Nasty Gal, as it marked the founder’s own pivot away from the company she started. “She was savvy, and she saw the writing on the wall,” the person said. The term “#Girlboss” became more ubiquitous than Nasty Gal itself, and Amoruso’s book promotion did not correlate to sales, according to another former executive.”
Sophia began to step away from the business she created and used her personal brand as the breadwinner in her career. Her celebrity was bigger than the company she founded. But it wasn’t Sophia who made Nasty Gal plummet; it was everyone else. She is one of my idols, because Sophia Amoruso was a 22-year-old who ended up starting a multi-million dollar company and now has one of the biggest influential personal brands in the world. Learning from what Nasty Gal did wong and right will help all girl bosses start their own businesses and companies.
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By Brio Five