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The other day, I wrote on my blog a sorta advertisement for Modcloth titled 7 Great Reasons Every Curvy Girl Must Shop At ModCloth. Or something like that. Well, lesson learned. That will be one of my last outright advertisements. What happened next took me by surprise.
We have some big news that we can FINALLY share with you. As some of you have already heard, our beloved brand is joining the Jet.com family, which is owned by Walmart. Even though we had to keep things on the DL until everything was official (yes, it’s been killing us), we’ve been listening very closely to each and every one of your comments and messages. Now that it’s official, we wanted to let you know that the ModCloth magic you know and love isn’t changing or going anywhere! We will stay true to our mission of empowering, celebrating, and inspiring women. It’s who we are at the core and that will never change. The only difference is that we’ll now have more resources! Thank you for an amazing 15 years. We are so excited about the next 15 to come! Want to learn more? See link in our profile for all the details directly from our founder Susan Gregg Koger. Got questions? Please leave them in the comments below. We’ll do our best to answer them.
I want to make this very clear, this is a valuable lesson for all creatives to understand business.
To my loyal readers, I was wrong. No sooner had I pushed that darn to publish button, did I see on Jezebel that the company was being acquired by Walmart.
Then, 17 hours ago, according to the NY Mag, Walmart officially announced that it had acquired Modcloth.
Now, you may ask me, “Amie, what’s the big deal? It’s a business deal. It’s not personal!”
Well, true. I will tell you right now, coming out the gate, that I am NOT happy about this. ModCloth dropped the ball in handling this. As a customer of Modcloth, it is.
Now, let me step back and give you a play by play as to why this is such a big deal in a more analytical fashion. With everything, for all you Modcloth lovers out there, we have to look at this logically.
And it’s hard.
BUT, we’re going to try, because, I suspect there’s more to this.
Let’s Look At The Facts of Modcloth’s Business Last Year
According to Bloomberg writer Kim Bhasin, the following things occurred;
- ModCloth planned on opening more brick and mortar stores
- Their designs had become a little more mainstream.
- In 2014, ModCloth had laid off about 20% of its employees, and also had little to no growth.
- ModCloth removed it’s co-founder Eric Koger, and replaced him with the former Chief Retail Strategist of Urban Outfitters, Matthew Kaness. He became the Chief Executive Officer.
Who is Matthew Kaness?
Kaness, the Chief Executive Officer of ModCloth, has been there for a little over 2 years. He was with Urban Outfitters, Inc for almost 8 years. Of course, Urban Outfitters the company runs Urban Outfitters, Anthropologie, Free People, Terrain, BHLDN. Prior to that, he had worked nearly 3 years as the Senior Manager at PRTM, a management consulting company.
While he was at Urban Outfitters, the net growth of e-commerce under all the brands increased from $150 Million to $600 Million.
He had plans for ModCloth to get some brick and mortar stores across the nation to increase sales.
I am not really knowledgeable about this particular topic. However, we know that ModCloth was a Privately held company. The investors included Accel Partners, Norwest Venture Partners, and First Round Capital.
What about ModCloth’s Finances?
Interestingly enough, the last time ModCloth disclosed it’s financing was in 2012, according to Claire Zillman over at Fortune.com on Sept. 18, 2014.
This was when she wrote a piece about the most powerful women entrepreneurs, where ModCloth’s co-founder, Susan Gregg Koger had helped the retailer beat the $100 million mark. Remember, Zillman wrote this article in September 2014.
2 months prior to writing the article, Modcloth laid off 70 employees. Koger responded with:
“For any business that’s grown as fast as we have, it’s not uncommon to restructure.”
ModCloth Had 3 Major Issues Here
I am by no means an expert in business or big corporation’s business. But, utilizing good old fashioned common sense, it seems to me that ModCloth knew they were in fiscal trouble in 2012 when they stopped disclosing finance reports. Now, let’s put the pieces together now and think logically:
Now, let’s put the pieces together now and think logically about facts:
- Modcloth had a niche market
- It stopped disclosing finance reports (2012)
- Modcloth started laying off its workforce (2014)
- The company hired a retail strategist who was known for expanding and making things more mainstream, with the intent of building nationwide stores.
This was no restructure issue. We saw this coming, we knew was going to happen. But…
Let’s Go Ahead And Call It What It Is…
You had two very creative people, with a great whimsical idea, who didn’t know what the eff they were doing when it came down to business, and competition.
Everyone in the online entrepreneur world will sit and scream for you to know your niche, and all that, but they don’t take a moment to think… what happens if you get too far in your niche, that you don’t really diversify yourself?
And that is what happened here.
Unfortunately, retail clothing is not an essential. You can go down to Walmart and get a cute dress for half the price, and boom. All is good, right?
Well, wrong. Because this tells us that ModCloth didn’t really understand it’s consumer base.
ModCloth’s Customer Base
Who are they? Let’s build their profile, shall we? The best part about a business is knowing them, and knowing what they want, and who they stand for.
- The customer base is 18-35.
- Mostly female
- Tech Savvy
- A little Geeky/nerdy (I mean that in the best possible way)
- Likes Vintage things
- Probably leans more liberal (no shade, but just being frank here from some of the t-shirts)
- Looks for good deals
- Supports Indie Brands
- Against consumerism
- Against big corporations
- Celebrates Individuality
OK, I could go on and on about the customer base but… basically, you get the idea. These are young women who strongly dislike big businesses like say… Walmart. Big Corporations that take over the little guy.
ModCloth’s customer base were the women who marched in Washington in January 2017! They did it because they didn’t like Trump (Sorry, gotta bring in politics here folks, but you’ll see why) – and they hate Trump because he stands for – in their mind – big business, the male dominated world, racism, exploiting the lower class, the rich and so forth.
Customers are LIVID
And that’s putting it kindly. Just check out these responses below to the news…
— bok choy (@LauraWoitalla) March 15, 2017
@ModCloth don’t assure your customer base that you’re staying true to your mission when your very actions contradict that mission 👎🏽
— Melissa (@aphotofly) March 17, 2017
— Sarah Duffy (@keepclmdrnkwine) March 17, 2017
Instagram, wasn’t much kinder….
marialandrieTerrible news, Modcloth. Guess I’ll be shopping elsewhere.
victoriahale512@misslagasse girl thousands of dollars isn’t that much…. unless it’s every 3 months
talese_the_beast@suejcasey Torrid. Swimsuits4All (if you need an awesome bathing suit), Eshakti, and Pin-Up Girl Clothing (pricey, but the quality is good).
alyssamartelliBye @modcloth 👋
maneenee@kollerbear82 try Sidecca @sidecca they are awesome
stephisaunicornI just can’t support Walmart. I love ModCloth, but not enough to change my stance. Walmart is an evil company and doesn’t care about people, only money. I’ll miss you Modcloth
k.controlGood for you, sellouts. Never buying from you again.
the_haifischSaw declining quality since I became a customer in 2005–that’s over a decade. I will never purchase from you again. Truly sorry for the employees who I’m certainly wanted nothing to do with this.
But Why Do They Dislike WalMart?
There is no nice way to say this. They dislike Walmart because they perceive it as a business with unethical business practices. There are so many things about Walmart, that I will only list a few semi-recent things.
It Is Anti-Union
Steven Greenhouse of The Atlantic described how Walmart persuaded employees to not unionize by sending “an anti-union SWAT team” in a corporate jet to squash it. Additionally, in 2000, when butchers in Texas became the only group to unionize, Walmart fired them from 179 stores by opting to use prepackaged meat.
A typical Walmart Employee, in 2016, in California Walmart employees worked for 34 hours a week for $10 an hour in California, according to CNBC Christina Owens commentator.
Walmart Has Made Disparaging Remarks About Plus Size Women
In 2014, Walmart had a section up on its website called Fat girl Costumes, according to Anna Merian at Jezebel.com
Walmart allegedly Discriminates Against women
In a 1999 New York Times article, it described where a 1.5 million female Walmart employees were involved in single class action lawsuit against Walmart for discrimination. Here is the legal brief. For those not familiar with the story – the women won.
Walmart Runs Sweatshops
Six months ago, CNN reported that Walmart continues to exploit workers in Bangladesh, Cambodia, India and Indonesia. These countries make clothes for Walmart. Here is the report released by the Asia Floor Wage Alliance, an international group of international trade unions and human rights organizations.
Further, in as late as 2006, there were 200 children, some younger than 11, sewing for Walmart in Bangladesh.
The PR Nightmare….
If 2016 taught us nothing else, it taught the world how to protest. No matter what side you stood on in the political aisle, you did one of three things:
- Protested about it.
- Bitched about it on Facebook, Twitter or some other social media platform.
- Fought against it.
Maybe you did all three. Who knows? But the customer base is already sounding the drums of war.
The loyal fans are circling a list of retailers that is anywhere BUT ModCloth and Walmart.
Alternative places to buy instead of Modcloth. Plus Size companies are marked. pic.twitter.com/8nqIrRlf1R
— Jess Krause (@kessjrause) March 16, 2017
The outrage has many saying to ModCloth co-founder Susan Gregg Koger “Girl, BYE!”
As a side note, I have a lot of sympathy for the Social Media Manager for Modcloth. They are quite busy…
ModCloth claims that nothing will change. The only thing that will change is they will have more brick and mortar stores. But many don’t believe that.
Oh, and from our department of Shameless plugs —-
The Big Issues Customer’s Have
Now, there are a lot of issues coming from this PR nightmare that the customers are expressing their issues and frustrations over this.
Here is the list:
- There is intense hatred over Walmart. We’re talking… intense.
- Where ModCloth promoted inclusivity and togetherness…. it sold to a company that has historically not been inclusive. However, that has changed…
- The declining quality that historically occurs with every acquisition into a larger company.
- The loss of an Indie feel.
- Many feel that ModCloth sold out and threw their customers under the bus.
- There are not that many unique finds anymore, it’s more mainstream.
What This News Really Means In The Grand Scheme of Things
Really, although the news was shocking, all it means is that a struggling company has more access to create more clothes, for a wider audience. My predictions, in all practicality, is that the quality will probably go down. There is no other choice because Walmart’s company still holds the purse strings. here will not be an air of exclusivity as there was with an indie store.
There will not be an air of exclusivity as there was with an indie store. With more brick and mortar stores, the clothes will be easier to access.
Finally, the customer base is going to be angry for a while, it’s normal, it happens, but then ModCloth will shell out a super cute outfit, and they will be back. Plus, the revenue they make will more than makeup for the revenue they lost to the die hard fans. Mark my words.
The NUMBER 1 LESSON we MUST learn from all this…
Businesses are fun. They really are, it’s really exciting to think you are on the brink of something new and exciting, but for the love of God, have a solid business plan and business expansion plan. Know your business, know it inside and out, and even if you aren’t crazy experienced, don’t be afraid to admit it.
However, don’t try to hide it away from your customer base either, as ModCloth did since 2014. We all saw the signs it was in trouble.
Finally, above all things, know your customer base. Know who they are, and also, know what your personal core values are.
I said it once, above, but it needs to be repeated. This is nothing more than a prime example of two just out of college kids, who had no real foundation of the intricacies of a corporate business, and ultimately dropped the ball. They knew it was either the store that they put their blood sweat and tears in, along with jobs for the employees or going bankrupt (which just looking at the facts, that we know for sure, leads me to believe this was what would happen).
It’s a tough situation, for sure. They did really well for how far they came, and to make a deal with Walmart, to keep the store open is pretty savvy if you ask me!
I think I’ll stick to spending my money at places like Ulla Popken, Ellos, Hips and Curves, or Society+ from here on out.
At least until I get a chance to see how all this plays out.
Now it’s your turn!
What are your thoughts? What are your questions? How do you feel about this? Let me know in the comments below!