Modcloth Employees, Facing Layoffs, Are Caught Between a Big-Box Store and an Investment Firm

By Molly Osberg | October 18, 2019 | 4:10pm

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Modcloth Employees, Facing Layoffs, Are Caught Between a Big-Box Store and an Investment Firm

Image: Getty

Modcloth, the upstart online retailer that gained a significant following through the 2000s thanks to its quirky, body-positive vibe, has struggled to maintain the velocity of its early years, changing owners and leadership several times since its founders exited in 2016. In 2017, much to the chagrin of its indie-minded and loyal fanbase, the company sold to a subsidiary of WalMart. Since then, it’s had a rotating cast of CEOS, and on October 4 announced that the brand had been acquired by an investment firm called “Go Global Retail.”

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At the time of the sale, the new owners told The Verge they expected Modcloth would “continue in the same direction as before,” and that customers would be unlikely to see many changes. But early this week, a significant portion of the company’s workers indeed saw some changes as they were pulled into meetings and either offered new positions with Go Global or informed they would be unemployed come a few days before Christmas. A spokesperson for Go Global says the company has retained “the majority” of its workforce in both its San Francisco headquarters and the Pittsburgh office, where the company was founded and its warehouse is located: Two employees in the latter say they’ve heard headcount could be reduced by about 30 percent.

Employees who joined an offbeat and intimate company several years ago now find themselves caught, ironically, between Walmart HR and Go Global, an investment firm backed in large part by Asian manufacturers. The laid-off employees Jezebel spoke to had largely been with the company for several years: they spoke to us on the condition of anonymity, as some were still negotiating their exit packages, and others feared retribution during an uncertain time.

In one case, a worker who had been with Modcloth for a decade was initially offered a position in the new company, which he accepted, forfeiting any chance of severance based on his tenure. He was unceremoniously fired the very next day. “They treated us like fucking children,” he says. “Modcloth has taken advantage of its workers.” (Go Global referred us to Walmart on that issue; a spokesperson for Walmart says, “As part of this transaction, the go-forward strategy and employment plans are all being made by the buyer.”)

Others describe widespread confusion about the future of the company: “I truly don’t understand the rationale for this round,” says one. “The teams are decimated,” says another. “It’s a shame, it’s definitely the end of an era,” she adds, noting that over the last few years the company has felt unfocused, its designs more mainstream. The original Modcloth customer—the “quirky girl”—has been “completely forgotten about,” she says. “We’re catering to the office girls now,” she said.

Founded in 2002 when Susan Gregg Koger began selling clothing she no longer needed from her dorm room at Carnegie Mellon, Modcloth’s vintage designs and politically inflected branding caught a loyal customer base and portended a profitable wave of “ethical” or “feminist” fashion brands, many of them helmed by women. The company, which by 2012 was reporting annual sales of over $100 million, was among the first to adopt a number of self-consciously progressive practices: It was the first retailer to adopt an anti-Photoshop pledge in its advertising, dropped “plus size” from its vocabulary, and since 2013 has featured non-models on its website in an attempt to combat “the industry’s singular definition of beauty.”

The brand also promoted itself as a sort of tight-knit indie girl community, offering free 24/7 chats with in-house stylists and encouraging customers to submit designs. It hosted a Google Hangout with Neyla Pekreck of the indie rock band the Lumineers and hired Esmé Wang, a prize-winning novelist, to write about fashion full-time. As Gregg Koger told the New York Times in 2013, “ModCloth is the fashion company you’re friends with. We want to be a good friend to her.”

It was this reputation, in large part, that gained Modcloth more than $78 million in venture funding over several years, funding that ended with a large installment of cash in 2015. Shortly after, both Gregg Koger and her husband and co-founder, Eric Koger, left the company, leaving control to an investor-installed CEO named Matt Kaness. (At the time, Gregg Koger told Jezebel she and her husband had plans to “travel the world.”)

Kaness, a former Urban Outfitters executive, was unpopular with some employees: In 2017, several current and former employees described the executive’s apparent discomfort with plus size models to Jezebel, along with longer-term strains on the business’s culture as Modcloth expanded.

In 2017, under Kaness’s leadership, Modcloth sold to Jet, a subsidiary of Walmart, surprising longtime customers and inspiring calls for a boycott. According to Recode, Modcloth struggled with the debt it had accrued and, despite experimenting with brick-and-mortar stores and its own fashion labels, had been struggling to make scheduled payments. It reportedly sold for under $50 million, and a string of CEOs have shuffled through the company in the years since. In April, Silvia Mazzucchelli, who most recently led the relaunch of American Apparel, took control. In early October, Go Global announced the acquisition, writing in part:

Under Go Global, ModCloth will continue to operate out of its current operational set up. Go Global Retail will invest in ModCloth’s digital capabilities including artificial intelligence and predictive analytics. As a freestanding, independent fashion brand, ModCloth will continue focusing on its core customers; championing values of female empowerment and inclusivity; and further serving their passionate buying community by celebrating their stories and offering a full range of sizes.

In a recent interview with Sourcing Journal, Go Global’s managing director, Jeff Streader, said he hoped to expand Modcloth’s “manufacturing capabilities,” and suggested that predictive analysis and artificial intelligence would play a central role in the company.

A Go Global spokesperson tells Jezebel that the layoffs are part of a “holistic” strategy, and that the company’s “focus was on retaining the long-term institutional knowledge, to maintain the people who know the most about business,” adding that for now, the Pittsburgh warehouse will remain open. (Multiple employees in that office expressed concern that their new bosses might shut down the location altogether.)

One laid-off employee told Jezebel she had taken a second job several months ago in preparation for an event much like this one. At Modcloth, she said, the pay was pretty good: You could make $2 or $3 an hour more than in your average call center. But over time, it had become clear that the company was struggling. “And I really always prepare for the worst in life,” she said.

Modcloth’s founder, Gregg Koger, describes herself as a “‘retired’ entrepreneur” on Instagram, where she posts photos of her travels.

This story has been updated with comment from Walmart.