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What Nasty Gal’s Rise and Bankruptcy Taught Sophia Amoruso

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Oct,23,2017

By:Mike Cibik

 

What Nasty Gal’s Bankruptcy Taught Sophia Amoruso

Nasty Gal’s Sophia Amoruso was once described by her own website as “the patron saint of [strong] women … complete with lamé platform thigh-high boots.” But even those who come to success with what looks from the outside like an uncanny ease can fall on hard times. Fewer things in life are as hard as bankruptcy, and Amoruso and Nasty Gal certainly experienced it. To understand the meteoric rise and fall of Amoruso and her company, it’s best to start from the beginning.

 

The Rise of Nasty Gal

Bankruptcy was the last thing on Sophia Amoruso’s mind when she started Nasty Gal, an e-commerce fashion website. It began in 2006 while she was working at a Californian University and she started a side business selling vintage clothes on eBay. After a period of time spinning seemingly discarded garments into gold, Nasty Gal took off with amazing success.

 

By 2008 it had spun into a highly successful online store of her own and separate from eBay, using her own fashion designs and keen business insight. She managed to leverage fledgling social media sites like MySpace to increase her brand awareness and to get the word out about her new enterprise. Before long, the company started to gain massive profits, and, in three years, jumped in revenue by a whopping 11,000 plus percent.

 

Shortly after this time, Amoruso purchased spacious warehouse storage and set up a corporate headquarters based out of Los Angeles, California. They became part of Index Fund A and B portfolios, denoting Nasty Gal as a stable, reliable business to out investment money behind.

 

They brought on over a hundred employees in a few short years. They opened brick and mortar stores in Los Angeles and Santa Monica. In 2015, it seemed as if Amoruso had reached the pinnacle of success – she herself was estimated to be worth $280 million, with her company doing $300 million in revenue at the business’ height. It was the classic rags to riches story that every American has heard of and looks up to and aspires to live up to. Netflix even created a series that was loosely based on the rise of Nasty Gal’s brand and Sophia Amoruso herself.

 

But, past performance is not always indicative of future performance. Many were shocked in 2016 to find that not only had Nasty Gal’s fortunes declined; they were filing for bankruptcy to regain solvency and to right the company’s ship.

 

The good times, it seemed, were over.

 

What Happened?

Amoruso remains tight-lipped about her own opinions on why the company had to file for bankruptcy, though she’s admitted mistakes were made. This has led to much speculation by both professional and armchair economists and business analysts.

 

Some might point to her marketing strategies, which while successful initially, were not sustained. After deciding to reduce their spending on marketing, they slowed their stream of both new and returning customers, leading to a ‘leaky bucket’ economic model. From this viewpoint, it’s easy to assume that Nasty Gal’s marketing strategy decisions were leaving money on the table that they needed to keep things moving.

 

Others noted the controversy that had begun to swirl around the company’s labor practices. There were allegations of the firing of a handful of employees when they told the company that they were pregnant, as well as the fostering of a toxic work environment. Americans have a long history of boycotting businesses when they see a known brand being caught up in activities they don’t approve of.

 

Another hole was probably their spending largesse – the lavish headquarters in one of the most expensive cities in America, a Kentucky based fulfillment center that was purported to have strained relationships with vendors, and what might be characterised as ‘vanity project’ brick and mortar stores all could have played a role in depleting the company’s coffers.

 

Any of these factors on their own might not have made too many waves – but together, they led to a massive depletion of funds resulting in the need for a declaration of bankruptcy.

 

Bankruptcy and Legacy

The Bankruptcy announcement came on the night that Donald Trump was voted as President-Elect. “It was a really really really bad day,” Amoruso said to Forbes Magazine. That night, she also lost her seat from the board of her own company.

 

Shortly after Amoruso’s ouster and the Bankruptcy filing in late-2016, the company was bought out in the following February by boohoo.com, another prominent online fashion retailer. As a result of their filing for bankruptcy, The Nasty Gal label remains, as does its website. Though, alas, it’s Netflix series, GirlBoss, has since been canceled from Netflix’s roster.

 

However, as far as Amoruso is concerned, it won’t be her own last season.

 

Bankruptcy Takeaways From the Real Life Girlboss

Like most entrepreneurial spirits, Amoruso has managed to glean some wisdom from her mistakes. She doesn’t “compare [her] hustle to a highlight reel.” It’s easy to compile a ‘best of’ viewpoint of your own narrative – something social media has been teaching us since it was born – but her bankruptcy helped her see the sides of her journey that she may not have wanted to look at while working her way to the height of success.

 

She also came to see naivete to be empowering. It gave her a feeling that knowing nothing from the outset allowed her to set her goals so high. “Being naive is such a beautiful thing. You can accomplish so much,” she said to Forbes Magazine. She also said there that it is true what they say in business: “You don’t get what you don’t ask for.”

 

Lastly, she noted something that many businesses lose sight of: focusing on core competencies and making sure that you’re not taking on more than the company can chew. “Focus on those [core] things, and be great at those things.”

 

What Can You Learn From Amoruso and Nasty Gal?

While a large business and a personal filer are two separate bankruptcy experiences, you can certainly take a page from Nasty Gal’s experience.

 

The first thing to know is that bankruptcy can be needed by anyone. It’s not just for corporations. Any individual from the head of a big company like Sophia Amoruso, to a regular every person. It doesn’t even have to take some of the issues she experienced. Unforeseen financial complications, illnesses, or even simple bad luck can bring about a need for debt reorganization and a bankruptcy filing.  

 

Bankruptcy also doesn’t mean the end of you, your reputation, or your social standing. While it can bring about hardships and a not inconsiderable amount of credit reduction, there is life after bankruptcy. With the right amount of determination, willpower, and planning, there’s a way back to financial solvency. Amoruso will certainly be taking many steps to move ahead and put the unpleasant experience of bankruptcy behind her.

 

Additionally, just like a corporation like Nasty Gal, you might need the assistance of a competent, reliable bankruptcy attorney. An experienced bankruptcy lawyer can guide you through the process of filing for bankruptcy as well as give you legal advice about your financial situation. If you are in need of representation, contact Cibik & Cataldo P.C. at (215) 735-1060 for a free consultation.

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