Company News • 25.03.2013

Naughty in Name Only

Sophia Amoruso turned an eBay store into a Web retailer with nearly $100 million in sales

Nasty Gal is the fastest-growing retailer in the country, its founder, Sophia...
Nasty Gal is 'the fastest-growing retailer in the country,' its founder, Sophia Amoruso, says.
Source: Nasty Gal

If ever there were a Cinderella of tech, Sophia Amoruso might be it. In 2006, Ms. Amoruso was a 22-year-old community college dropout, living in her step-aunt’s cottage, working at an art school checking student IDs for $13 an hour. Then she started a side project, Nasty Gal, an eBay page that sold vintage women’s clothing. Last year, Nasty Gal sold nearly $100 million of clothing and accessories - profitably.

For the last seven years, Ms. Amoruso has been courting a cult following of 20-something women. Nasty Gal has more than half a million followers on Facebook and more than 600,000 on Instagram. But it is not yet well known beyond that base. At fashion trade shows, the company’s name still gets strange looks. “People say: ‘Nasty Gal? What’s that?’ ” Ms. Amoruso, now 28, said in an interview at her new headquarters in downtown Los Angeles. “I tell them, ‘It’s the fastest-growing retailer in the country.’ ”

Back in 2006, she toyed with the idea of going to photography school, but couldn’t stomach the debt. Instead, she quit her job and started an eBay page to sell some of the vintage designer items she found rummaging through Goodwill bins. She bought a Chanel jacket at a Salvation Army store for $8 and sold it for $1,000. She found Yves Saint Laurent clothing online on the cheap by Googling misspellings of the designer’s name, reasoning that anyone who didn’t know how to spell Yves Saint Laurent probably didn’t realize his value.

She styled, photographed, captioned and shipped each product herself and sold about 25 items a week. She named the eBay page “Nasty Gal” after the 1975 album by Betty Davis — not the smoky-eyed film star Bette Davis, but the unabashedly sexy funk singer and style icon Betty, whose brief marriage to the jazz legend Miles Davis inspired the song “Back Seat Betty.”

Ms. Amoruso curated her eBay page to match her own style, which on a recent rainy Friday included a floor-length trench coat, vintage rock T-shirt, no-nonsense bob and blood-red lipstick. Her look and attitude resonated with the type of young, body-confident women who would not be caught dead in Tory Burch.She created a Myspace page to market Nasty Gal and garnered 60,000 “friends” by reaching out to fans of brands like Nylon, the music and fashion magazine, who she thought might appreciate Nasty Gal’s fierce aesthetic. Every week, her new finds ignited bidding wars among shoppers from Australia to Britain.

She began enlisting friends to model and photograph her products, which quickly outgrew her step-aunt’s cottage. She moved Nasty Gal’s headquarters to a 1,700-square-foot studio in Berkeley, Calif., in 2007, and eight months later moved again — this time to a 7,500-square-foot warehouse space in Emeryville.Ms. Amoruso also outgrew eBay, which she said was a terrible platform to start a business. Competitors started flagging Nasty Gal for breaking the site’s rules by, for example, linking to Ms. Amoruso’s Myspace page. Fed up, she decided it was time to start ShopNastyGal.com. (At the time, NastyGal.com belonged to a pornography site. Nasty Gal now owns the domain.)

She recruited a friend from junior high school to build a Web site and taught herself to use Photoshop. She eventually abandoned Myspace for Facebook, where she tantalized fans with coming inventory, from cheap shrunken motorcycle jackets to high-end vintage Versace clothing.She challenged her Facebook fans to come up with the best titles for vintage products and gave gift cards to the winners. She used models who were approachable and “looked like nice people, not dead people,” she said, and had to fire some when customers complained that they looked too skinny or annoyed.

That constant conversation with customers created a loyal following. Nasty Gal has no marketing team, but fans comment on its every Facebook, Instagram, Twitter, Tumblr and Pinterest post and regularly post pictures of themselves in their Nasty Gal finds. A quarter of Nasty Gal’s 550,000 customers visit the site daily for six minutes; the top 10 percent return more than 100 times a month.

With Nasty Gal having made just shy of $100 million in revenue last year, analysts say they would expect a bigger audience. “I would expect them to have a few million visitors a month,” said Sucharita Mulpuru, a Forrester analyst. On the flip side, Ms. Mulpuru said Nasty Gal’s conversion rate must be significantly higher than the industry standard of 3 percent. “It speaks to an engaged audience,” she said. “They’ve figured out the marketing tool. That’s the real story.”

Ms. Amoruso knew Nasty Gal couldn’t grow by selling one-off vintage items forever; customers were asking why she didn’t have more sizes. So in 2008, she posted an ad on Craigslist for a buying assistant and hired Christina Ferrucci, the first person who answered.

The two experimented with buying vintage-inspired clothes from vendors in Los Angeles’s fashion district. Soon, the items were selling so quickly that Ms. Amoruso and Ms. Ferrucci were making the six-hour drive to Los Angeles every other week. They ventured to the Project trade show in Las Vegas, where fashion brands and buyers convene every August, but higher-end brands weren’t exactly thrilled at the idea of having their products sold by a brand called Nasty Gal. Many dismissed it as an online sex shop. The fact that the NastyGal.com domain was at that time still owned by a pornography site didn’t help matters.

Sam Edelman, the shoe brand, initially gave Ms. Amoruso the cold shoulder. She charged back an hour later, showed them Nasty Gal’s Web site on her iPhone and promised to deliver the brand some street cred. Sam Edelman acquiesced. That opened the door for a deal with Jeffrey Campbell, another shoemaker, which has become one of the most recognizable brands on the site. Nasty Gal fans will tell you Sophia Amoruso “made” Jeffrey Campbell, not the other way around.

A Jeffrey Campbell spokeswoman, Sharon Blackburn, said that the brand was well established before partnering with Ms. Amoruso, but that Nasty Gal created a new channel for its more provocative styles, like the “Lita,” a towering lace-up platform boot with a five-inch heel. “Not a lot of people got it, but Sophia loved it,” Ms. Blackburn said. “She bought it in every color and fabric, wore it herself and opened the door for other styles in our collection.”

By 2010, Nasty Gal started generating buzz among unlikely fans in Silicon Valley. Venture capital firms were pouring millions into e-commerce sites like ShoeDazzle.com, Kim Kardashian’s shoe subscription site, and BeachMint.

But the company had been making money from Day 1. “They would say, ‘We want to invest in a woman-owned business — it’s part of our investment thesis,’ ” Ms. Amoruso recalled of her discussions with several venture capitalists. Her retort: She didn’t want to be part of their “investment thesis” and didn’t need their money.

“I don’t think they got it,” she said. “It’s this bunch of guys sitting around saying, ‘Oh, yeah, let’s start a Web site and put Kim Kardashian’s face on it.’ ”

Ms. Amoruso moved Nasty Gal to Los Angeles in 2011, to be closer to her merchants and models. She shunned office space in Santa Monica, where ShoeDazzle and BeachMint are based, for less glamorous space downtown, where 20-something Nasty Gal employees in mesh crop tops, leggings and platform shoes stand out from the paralegals. (Shortly after the move, one employee was berated by a lawyer in the building who saw “Nasty Gal Creative Studio” and assumed it was a pornography studio.)

Last year, Ms. Amoruso, who had held on to 100 percent of her business, decided she was ready to hear what Sand Hill Road had to offer. She met with several venture capitalists but ultimately clicked with Danny Rimer, a partner at Index Ventures, who had invested in e-commerce sites like Net-a-Porter, Etsy and Asos.

In March, Ms. Amoruso agreed to give Index a slice of equity for $9 million. But by August, things were moving so quickly — Nasty Gal was on track to quadruple its 2011 sales to $128 million — that she raised an additional $40 million from Index and used some of it to build a 500,000-square-foot fulfillment center in Shepherdsville, Ky. Nasty Gal now attracts more than six million visits a month, while e-commerce start-ups like ShoeDazzle and BeachMint are losing customers and executives.Bigger competitors are taking notes. Urban Outfitters recently contacted Ms. Amoruso about a potential acquisition, according to people briefed on the discussions. Asked about that, Ms. Amoruso said only, “We’re talking.”

Naysayers in Silicon Valley think she should consider the acquisition. Some venture capitalists who would not speak on the record — perhaps because they did not have the chance to invest — say Nasty Gal is playing on a short-term fashion trend that will be difficult to sustain on the public market.

“They’re the hot new thing, but I do think it’s risky,” said Ms. Mulpuru, the Forrester analyst. “With this type of hype, either they are looking for a big fat acquisition or a blockbuster I.P.O.”

Ms. Amoruso is hardly ignorant of the possibility that it could all fall apart. Nasty Gal’s motto is, “Nasty Gals do it better.” But her personal motto is, “Only the paranoid survive.” At 16, Ms. Amoruso tattooed the Virgin Records logo on her arm. Last year, she enjoyed a small Cinderella moment when she got to show it to Richard Branson. She recently bought a Porsche — with cash — and is remodeling her dream home.

But, she said, the Cinderella story ends here. “It’s been very charmed, but I’m not willing to rest on my laurels,” she said. “It’s only going to get harder to keep building from here.”

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