Nasty Gal Doing Nastily Well

Chances are you have not heard of Nasty Gal. Well, you should learn about them. They are doing nastily well!

Nasty Gal’s Offerings
Los Angeles-based Nasty Gal was founded in 2006 when a community college dropout Sophia Amoruso started selling a highly curated selection of vintage clothing on an eBay page. Within five years of inception, the store became one of the leading international marketplaces for new and vintage clothing, shoes, and accessories. Ms. Amoruso named her store Nasty Gal inspired by the song and album by singer and style icon Betty Davis.

The store began when Ms. Amoruso decided to quit her college because of the high debt involved and quit her art school checking student IDs to sell goods she found while searching through Goodwill bins. The store gained low-priced inventory by finding designer products from places such as Salvation Army stores. A Chanel jacket that she bought for $8 at one such store sold for $1000. She styled, photographed, captioned, and shipped the products herself for the goods she sold.

Nasty Gal’s Financials
Nasty Gal’s products have managed to lure a big fan following. Their core following is from women aged between 18 and 20 years. The company has more than half a million Facebook followers and more than 600,000 Instagram followers. They have a user base of nearly 550,000 customers of which nearly a quarter visit their site daily for at least 6 minutes. Additionally, nearly 10% of their customers return more than 100 times a month to their website.

The company recorded nearly $128 million in revenues in 2012 and was valued at $240 million back then. They have been venture funded so far with $49 million in funding from undisclosed investors, although funding came way after the company had already become successful organically.

Nasty Gal does not disclose detailed financials, but they are expected to be profitable. Given their popularity, they are not able to source all their inventory from low-priced stores as before. They now source their products from Los Angeles-based vendors who sell vintage-inspired products. Besides product acquisition costs, the company has kept marketing costs minimal as well. They do not have a marketing team and instead rely on social media marketing initiated by their fans who comment on social networks like Facebook, Instagram, Twitter, Tumblr, and Pinterest and post pictures of themselves in products purchased through the site. Analysts believe that the highly engaged user base would help them deliver a higher conversion rate than the industry’s traditional 3% conversion.

One of the big challenges though that the company faces is being able to market themselves to big brands and investors as some of them still find it a bit disturbing to sell through a company with a name like Nasty Gal.

According to a recent report released by comScore, online retail spending in the country grew 14% in 2013, significantly ahead of the total consumer retail spending in the country which grew in mere single-digits. Mobile sales are also growing in proportion. Goldman Sachs estimates that the global e-commerce sales through mobile devices will grow to $638 billion by 2018.

Online clothing sales have also ballooned in the last decade, and Nasty Gal’s popularity is evidence that many more brands will get built online, going forward. In fact, while Nasty Gal started off selling merchandise from other brands, they have since started producing private label clothes of their own. That strategy offers much better margins, and given their knowledge of a large customer base, they can manage design and inventory effectively, by producing collections and sizes to fit their audience.