Walmart to acquire Modcloth

By

P J Gach

Published
Mar 17, 2017

Modcloth, a beloved, yet financially struggling fashion e-commerce site is in the process of being acquired by retail mega-giant, Walmart for its subsidiary, Jet.com.

News of the sale broke on Jezebel.com yesterday afternoon, when an unnamed employee recorded Kanness notifying employees of the imminent sale in a meeting. An amount for the sale has not been disclosed, however, it is speculated that Modcloth may be bought for anywhere between $50 to $80 million dollars.

It appears that Walmart intends to fold Modcloth into Jet.com; using the company’s indie-cred and the way it quietly revolutionized plus-size sales (by avoiding the “plus size” appellation) to increase apparel sales.

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The indie fashion brand was created by husband-and-wife duo, Susan Gregg Koger and Eric Koger in 2002. Whilst a favorite with millennials and those who favored the company’s vintage-inspired and quirky goods— selling clothing, accessories and home goods-- the company first encountered financial difficulties in 2014. To cut costs, they had two rounds of layoffs that year.  The following year, co-founder Eric Koger was replaced by Urban Outfitters Chief Strategy Officer, Matthew A. Kanness. 
 
In an attempt to increase sales, Modcloth began opening pop-up shops, beginning in San Francisco in 2015. Other stores followed in Los Angeles and Austin. The company's brick-and-mortar efforts were neverthless unable to bolster the site’s revenues, prompting a subsequent injection of $78 million from investors Norwest Venture Partners; Floodgate; First Round; and Accel Partners. Interestingly enough, Norwest and Accel also invested in Jet.com. Now, the monies will be returned to those investors.

This is the fourth acquisition for Walmart, who have been snapping up small,  niche, independent e-tailers in recent months. They first bought Jet.com, then went on to purchase Hayneedle.com, ShoeBuy.com, and most recently, Moosejaw. Not all acquisitions have gone down smoothly with customers, and the backlash from disgruntled and upset Modcloth fans has been fast and furious. Consumers have left comments on Modcloth's Facebook page and via various social media outlets decrying the news in disappointment at the corporate takeover of formerly independently designed apparel.
 
Will Walmart, whose business and social philosophies are polar opposites from the socially progressive Koger’s, be able to woo back Modcloth’s base whilst expanding broader consumer interests? Or has the corporation, by acquiring the indie retailer, also put the final nail in its coffin?