A lot has changed in 15 years for ModCloth, the indie apparel brand that was launched by founder Susan Koger out of her Carnegie Mellon dorm room in 2002. The most notable being that it’s now owned by Walmart.
ModCloth was bought in March by Jet.com, Walmart’s e-commerce marketplace subsidiary, an acquisition that hasn’t been embraced by its vocal customer community. The move stems from Walmart’s push to acquire more fashion brands, in an effort to compete with Amazon; this summer, it also purchased menswear specialty store Bonobos.
The online brand became known for its vintage flair and retro aesthetic. It also became beloved by its community for its dedication to inclusive sizing and imagery, using ModCloth employees as models for campaigns. As a result, many customers weren’t pleased to hear their beloved brand had sold out.
CEO Matt Kaness, the former chief strategy officer for Urban Outfitters, who joined the brand following co-founder Eric Koger’s exit in January of 2015, spoke to Glossy to discuss the changing retail landscape, what drove the brand to Walmart and how he’s dealt with customer backlash. Answers have been edited for clarity.
How did ModCloth arrive at the Walmart acquisition?
ModCloth was bootstrapped until 2008, when it took its first round of venture capital. There’s a life cycle to venture investments. When I joined the business, the brand was clearly toward the end of its investment cycle. [Ed. note: ModCloth has raised a total of $80 million in seven rounds of funding.] The market has shifted, and you look at what’s happened to apparel retail in general.
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So, I think it’s great that Walmart sees the value in the ModCloth brand, team and culture, to explicitly want us to maintain an independent brand within their portfolio.
What shifts in the retail market has ModCloth witnessed over the years? How do you adjust for those changes?
The market has evolved around the idea of putting the customer at the center of the business. When I joined, the vision that I had was to keep the brand positioning, but shift the business to focus on in-house product, as well as broaden the aesthetic of the assortment beyond the retro fit-and-flare dress.
I’m not one to try to predict what the industry will look like very far down the line. Customer behavior evolves; it’s not an acute shift. These things have been happening for years; social media has been around for years. It’s something you live with every day. If the customer all of a sudden wants to start shopping through pins on Pinterest, we’ll be there. If she wants to engage with us on Snapchat, we’ll be there. Being agile and adapting to where the customer is going is part of the muscle memory of our business.
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How is ModCloth going to change now that it’s owned by Walmart?
We’ll continue to compete on our values and keep our brand purpose at the foreground of the evolving business model. Thanks to the acquisition, we’ve already been able to improve our service to our customers with free returns, which we couldn’t afford to do beforehand. We’re in the process of improving our shipping times. We’ve also been able to move faster with merchandise development while remaining a full-size-range brand. Those changes have already happened this year. We have a really big platform now that lets us get our message out there, drive awareness and engage the women who already love ModCloth.
But customer response to the news of the acquisition hasn’t been great.
I try to lead with empathy. Feedback is a gift, even feedback that’s not 100 percent positive. It’s incumbent on leaders to hit pause and listen, and understand different points of view. I did a lot of that. There was a lot of feedback that I felt was about fear of the unknown, around what might change in the future.
There’s also been a lot of internal dialog going on. As we launch new initiatives, you can expect to see that we’re still community-centric, dedicated to the concept of representing all women. We’ve begun to reach out to our community to survey them to ask them for feedback on what they would want us to do a better job of in the future and what they don’t want to change. We’ve created a special email address (feedback@modcloth.com) that we share with customers to gather up information, and we make sure we have that voice of the customer at the center of our transition. That’s the way we get better and how we’ve been able to stay around for 15 years.
What do you think it says about retail right now, that a company like ModCloth ends up owned by Walmart? Is that Amazon’s doing?
I have a personal belief that the opposite of big isn’t small; it’s special. We don’t think of ourselves as ever trying to be the biggest. That’s not why we started this. What I expect us to do is continue to be a special retailer to our target audience, and that’s how we compete in an Amazon world: By knowing our customer better than anyone else, and delivering an assortment and experience that is unparalleled to what she gets elsewhere. Regardless of shifts in industry paradigms, that formula has stayed true for many, many years.
So what comes next?
I think we have an opportunity right now to understand our customer and why she loves us, and to double down on innovation to give her an unexpected experience. It’s a great time to lead with creativity, try new things and take risks. Our customer is constantly giving us ideas, and so you’ll see us do a bunch of things in the second half of this year. Our first paper catalog is launching this September, and we have our first exclusive collection for Jet.com launching this fall.
The new resources afforded to us by our new parent company is allowing us to maintain that high-level customer experience and evolve it. I don’t think the strategy changes that much, as far as just trying to grow the business based on where she’s telling us to go, through product first. It’s about brand awareness, more engagement and getting more women to go to ModCloth. That’s always the goal.
