Sophia Amoruso was at the top of her world, inspiring a huge following of aspiring girl bosses everywhere. Having founded here company at age 22 and creating massive success, especially compared to here previous life as a dumpster diver and petty thief, she has now been confronted with ruins of her company once valued a $85 Million.
Amoruso started an eBay vintage store, showcasing her distinctive style, in 2006. By 2011 she had already reached $24 Million in sales and by 2012 had quadrupled 2011 sales to reach $100 million. All of this from a retailer that operated solely online.
All things weren’t as rosy as they seemed. The company was producing massive revenue, but the spending was out of control and much of the growth had occurred during startup when there was a big budget for advertising and marketing.
As expenses mounted and advertising budgets fell, sales fell to $85 M in 2014, despite opening the first brick and mortar store and Sophia’s book #GirlBoss reaching best-seller status. Investors were becoming frustrated and Amoruso stepped down as CEO early in 2015, taking on another role as an executive chairperson. She also remained the face of the brand.
These actions didn’t resolve the issues, as revenue fell to $77 M in 2015. Sophia Amoruso published her second book, Nasty Galaxy, in September 2016 and all seemed well. Unfortunately, by November 2016, Nasty Gal had filed for bankruptcy to reorganize. By February 8, 2017, the courts approved a sale of the beloved company for a reported $20 M, far below the previously stated value that the company once held. To add insult to injury, the sale was to UK rival boohoo.com
We are all left to wonder can Sophia Amoruso bounce back? Will her Netflix show do well? Will her new book sell as many copies as the first? And a better question, does she even retain the rights to these things? Intellectual property rights were purchased along with the NastyGal online stores.
I wouldn’t count Amoruso out. She has already proven that she can rise from nothing. I have followed her story for some time and I personally wish her well. I have learned from her rise … and her fall.
The three most important lessons learned from the fall of the NastyGal Empire:
- Massive revenue does not always equate to profitability. You must take in more than you spend.
- Rapid expansion may not be best for your company. Unless large advertising and marketing budgets are sustainable, you may see things quickly unravel. As a digital marketer, it is important to measure both organic growth and growth related to ad spend.
- Finally, what drives the brand initially is likely what will drive the brand as you move forward. What happens to profitability when the face of the brand parts company? Most often there is a loss of loyalty that is associated with the person more than the products. We will ultimately have to wait to see if this purchase was a good one.
What are your thoughts? How do you feel about the breakdown of #girlboss Sophia Amoruso?
I recently read an article about the downfall of Nasty Gal, and in my opinion they has a very toxic and confusing work environment that contributed to their bankruptcy. I understood the appeal of Nasty Gal, but in a world of fast fashion, they began to fade into the background. Sophie seemed to bite off more than she could chew and then disappear. Perhaps this will be a lesson for her to have a more hand-on approach to her next business.
Hannah, I agree, she seemed to bite off more than she could chew. The charm of her vintage reselling seemed to get lost in the big retail game. It also goes to show that popularity in one market may not always translate to profitability in another. Thanks for additional insight.