Sophia Amoruso Expands Nasty Gal

/// Sophia Amoruso Expands Nasty Gal

August 27, 2013  |  Blog

“I’M A CAPITALIST, I’m a CEO, I run a big business, I’m an employer,” says Sophia Amoruso, the 29-year-old head of Nasty Gal, the online fashion retail empire that she transformed from an eBay vintage store into a $240 million company in just seven years. “But it’s all secondary to the way it happened, because I could be anything.”

Sitting in the back garden of New York’s Crosby Street Hotel dressed in a crocheted lace dress and a trench draped over her shoulders, Amoruso is reflecting on the period of her life between age 17—when she left home in Sacramento to dumpster dive, work in record stores and side with anarchism while she floated up and down the West Coast—and 22, when she started Nasty Gal. She named the company after the song by funk musician Betty Davis, the second wife of Miles Davis. “I’ve accepted what I have, and I feel like I’ve completely done it on my own terms,” says Amoruso, who is now based in Los Angeles.

What Amoruso has created is a sizeable niche business in the high-margin fast-fashion space. Her company sells edgy, retro-inspired looks at reasonable prices—$50 tops, $70 dresses—and some actual vintage items to a rabidly loyal customer base of young women, frothed up by almost constant social media interaction. (Detractors might say the hemlines are too high and necklines too low.) Nasty Gal has been experiencing a growth spurt, with no advertising and little discounting. That its successes—and Amoruso—are difficult to characterize has made its ascent all the more enthralling. So what is Nasty Gal, exactly?

It began humbly. In 2006, Amoruso had just dropped out of photography school. She turned her passion for vintage clothes into a small business, run from her Mac laptop in her bedroom of her ex-boyfriend’s San Francisco apartment, reselling key finds on eBay and promoting them via Nasty Gal’s Myspace page. The entire looks Amoruso constructed, using models and her own styling, were far from the bad photos of an old rock T-shirt on a mannequin that comprises the majority of visual presentation on eBay. She’d sell a Chanel leather jacket she bought for $8 at the Salvation Army for over $1,000. These margins, matched with her careful eye, made for a booming cottage business.

“In the beginning, I was basically paying the models with hamburgers,” she says. “They were normal high school girls that you find on Myspace. I would buy them lunch and maybe give them $20 a day.” Using approachable-looking models has persisted with Nasty Gal’s growth. “We’re cool, but we’re inclusive, which I think in fashion is not that common.”

Eventually, the demand from her 60,000 Myspace friends outgrew what she could supply with vintage finds and her eBay store. She bought the site nastygalvintage.com (nastygal.com was, at the time, a pornography site; she’s since purchased the domain name) and began approaching labels with a provocative edge, like MinkPink and Jeffrey Campbell, to participate.

By 2010, equity firms and venture capitalists were banging down her door, but Amoruso barely entertained them. “I built a huge profitable business with no debt,” she says. “I put every drop of profit from this business back into it. That’s why it’s successful.”

When she finally did need help expanding, in 2012, Amoruso took $50 million from Danny Rimer of Index Ventures—an early investor in success stories like Asos, Net-A-Porter and Farfetch—and leased a 500,000-square-foot fulfillment center in Kentucky. Like most of Nasty Gal’s new endeavors, the decision to go with Rimer came from Amoruso’s gut. “I don’t really have any mercenary relationships in the business, and Danny is someone I really like as a person, who I’m friends with, who is like family,” she says. “No one was investing in Net-A-Porter, no one was investing in Asos [when Rimer approached them]. Index is contrarian in their thinking, which I am.”

One way Nasty Gal has kept margins thick is through its approach to promotion. Until recently it didn’t advertise. The company has little to no overstock, thanks to the limited runs it offers to those customers eagerly awaiting Facebook updates—a rarity in a business that relies on discounting (though, more recently, discounting has been featured on the site). Since 2011, its number of Facebook fans has increased tenfold, to nearly 831,055. The company has even more Instagram followers. “Nasty Gal really emerged from a conversation,” says Amoruso. “I’ve probably spent more time than any other brand reading every last comment. To listen to people the way you’re able to online is very powerful. I think other companies are just starting to figure that out.”

Rimer agrees: “What led us to Nasty Gal was the fact that Sophia had created something extremely special in terms of a connection between what she was doing and her customer base.”

Sharon Langlotz, a 25-year-old producer at the ad firm Anomaly, found Nasty Gal when she was looking for a Cheap Monday dress. “I found it on Pinterest first,” she says. “I tracked it to the Nasty Gal site,” where her eye was caught by the “trendy” apparel that was “not too pricey” and reminded her of the stylish clothing she sees on street-style fashion blogs. She now follows Nasty Gal on Instagram, Pinterest and Facebook, checking in with the site twice a week. “I fill up my shopping cart and dream,” she says, adding that Nasty Gal has changed the way she views online shopping.

But the social media component would be nothing if the clothes themselves weren’t selling. “This is the embodiment of the high-low phenomena—women wearing a Chanel dress with the Banana Republic T-shirt underneath—in a way I’ve never seen before,” says Mortimer Singer, CEO of Marvin Traub Associates, which works in business development for top fashion brands. “They can keep a fashion edge by having something vintage, which is luxury by nature and, on the flip side, have a reaction to what is happening in the marketplace. They can have their cake and eat it—that’s the genius here.”

Amoruso is attempting another move: in-house designs; this season will mark the third collection by Nasty Gal. “Designing was the natural next step for us. It’s going on seven years for me that I’ve been selling clothing to the same awesome girl. And we’ve understood the kind of silhouettes and cuts that she likes over time,” says Amoruso. To spearhead the in-house label, she poached her vice president of design, Sarah Wilkinson, from Asos and hired a print designer, Lauren McCalmont, who had worked for Nicholas Kirkwood and Peter Pilotto. She restricts the majority of her input to final say over concepts. “I approve it or say it needs to be sexier.” Currently, the Nasty Gal label and collection comprise 30 percent of its sales.

In 2012, Nasty Gal claimed those sales hit almost $130 million, more than quadrupling revenue from two years before, though the company now calls those numbers speculative. Much of that success is owed to their customers’ intense engagement: 550,000 shoppers check out the site for an average length of six minutes once a day. Nasty Gal claims that their top 10 percent of users look at the site more than 100 times a month. And yet half of its sales come from 20 percent of its customers. Nasty Gal girls might not be loyal to any one label, but they sure are loyal to Nasty Gal. Next up, the company is building 65,000 square feet of office space in Los Angeles.

In her personal life, Amoruso is making moves as well. She is dating a man she knew from when “I was a scruffy, grimy, little anarchist dumpster diver in Seattle,” and pitching a book about “the business world from an outsider’s view.” (She plans to title one chapter “Living the Rap Dream.”) While she retains her independence and attitude from those days, her personal aesthetic has taken a upmarket turn. She is remodeling her new home and recently bought a Porsche, though when doing so, she found her former life creating a small stumbling block: The dealership would not offer her financing (until recently, she had trouble even getting credit cards). “I was willing to put half down on a loan, and they wouldn’t let me finance the other half,” she says. “I had to pay cash.”

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