ModCloth's Sabina Weber (left) and Mary Jimenez
New ModCloth owner talks post-Walmart rebound plans
Go Global says the brand will close FitShops and its online outlet, and will instead fashion a turnaround dependent on deep knowledge of apparel retail.
It may have been a surprise when Walmart bought ModCloth (along with a slew of other online pure-plays), but less so when the brand was sold to investment firm Go Global just two years later.
Since its founding some 18 years ago, the brand had attracted a fiercely loyal customer base lured to its affordable, vintage-inspired clothing, inclusive sizing and sense of community. Some drifted away as Walmart took over in 2017, part of a strategy to acquire e-commerce talent and knowledge. But the retail giant didn't tinker much with the brand's overall vibe, according to Go Global founder and Managing Director Jeff Streader.
"Walmart wanted to better understand the e-commerce space as they were seeing their competitors Amazon and Alibaba grow at a faster pace," he said in an interview with Retail Dive. "Jet, Bonobos, ModCloth were really about their efforts to more clearly understand the opportunities at digitally native mono-channel brand. They supported the business financially and did not want to 'Walmart-ize' these companies, but wanted to observe. And when they were done observing, they decided to divest, and their first divestiture was of ModCloth."
Now what? According to Streader, some things will change, and some will stay the same.
Moving from ownership by Walmart to ownership by a financial firm is itself a major change, though many of the brand's existing team is sticking around.
He has assembled a team of 200 dedicated to the brand, Go Global's first acquisition. Streader himself has decades of retail experience, mostly in the back end in corporate operations roles, at companies like VF Corp and Guess.
Sabina Weber is staying on to lead marketing, and Mary Jimenez (who worked with Streader at Guess) to lead merchandising, he said.
The brand will remain headquartered in Los Angeles, with its fulfillment center staying in Pittsburgh.
"There's some great people here — the people that are here are passionate about the brand," he said. "This is a brand that has a pulse, it has a life."
Although Streader also worked at a couple of private equity firms after his years in retail, he sought to distance Go Global from the many such firms that seem intent on streamlining costs during a turnaround and re-selling their acquisitions after three to five years, a phenomenon that has meant the downfall of many a retailer.
"Our intentions are to buy retailers and make them profitable, but not by stripping away the brand. We're not interested in flipping companies quickly," he said. "Rather than money coming from institutional investors, it's coming from the industry, from textile mills and garment makers and footwear makers around the world that I have relationships with from my years in the business. We're using a partnership with companies that are both invested through their capabilities and their capital — this is the premise and concept. We are focused on the health of the brand, really investing into her — the customer — getting to know her, really listening to her and getting her product based on what she wants."
ModCloth was always a curator of fairly affordable apparel, but under Walmart deep discounts became more frequent, and last year the brand even introduced an online outlet store.
That outlet business disappeared from the ModCloth website in recent weeks, and it's not coming back, Streader said. And the discounts will soon be less frequent, too.
"Today she goes to the site and knows that what's there will be marked down in weeks," he said, adding that the site is rich with data that wasn't being optimized for forecasting, planning or buying. "We don't want to go down that path anymore — I don't want that on our site anymore. If she doesn't buy it and comes back in a month, it's not there. We've already moved to a scarcity model — we will sell out."
Streader trusts that loyalty to ModCloth has remained steadfast, which will help with that move, and he knows just who the ModCloth customer is.
"We inherited a brand that has over two million Pinterest followers and nearly two million Facebook followers," he said. "Nearly 700,000 Instagram followers, and that's a younger demographic. We're thrilled with the social presences. She's 25-40 years old, she's an indie girl, she's comfortable wearing combat boots and a denim jacket with a printed dress. We're thrilled that she's loyal to the brand."
No more 'fitshops'
Under Walmart, ModCloth expanded its "Fitshops," inventory-free locations where customers could try on items and get styling advice, then order online. But Streader is doing away with that brick-and-mortar experimentation and returning to pure-play e-commerce.
He dismissed emerging concerns about the high cost of digital apparel sales, which suffer some of the highest returns in e-commerce, saying that savvy implementation of data, AI, personalization and communication (including an "advanced chat platform") can combat that.
"Our number one item is a printed dress that has four-way stretch — we're not Fashion Nova, so there's a greater degree of acceptance," he said. "Our return rates even when they weren't communicating with the customer was something like 23%, that's one in five or one in four, and it's not a problem. Using better directions I think we'll take that down to sub-20."
ModCloth will soon help Go Global live up to its name, too, with plans to expand to Europe, "to Berlin, Amsterdam and London by the middle of this year."
That's this year's project. Next year, Streader says the brand will also return to wholesale, and show up again in retailers like Nordstrom. If ModCloth ever has its own stores, it won't be for a while. "Not short term," he said. "Brick-and-mortar stores are expensive. What we need to do right now is rebuild the relationship and the velocity with her, the ModCloth customer, number one."
Author: Daphne Howland Twitter: