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Nasty Gal grows from eBay storefront to profitable venture

By NICOLE PERLROTH
New York Times

LOS ANGELES - If ever there were a Cinderella of tech, Sophia Amoruso might be it.

In 2006, Amoruso was a 22-year-old community college dropout, living in her step-aunt’s cottage, working at an art school checking student IDs for $13 an hour. Then she started a side project, Nasty Gal, an eBay page that sold vintage women’s clothing.

Last year, Nasty Gal sold nearly $100 million of clothing and accessories – profitably.

For the past seven years, Amoruso has been courting a cult following of 20-something women. Nasty Gal has more than half a million followers on Facebook and more than 600,000 on Instagram. But it is not yet well-known beyond that base. At fashion trade shows, the company’s name still gets strange looks.

“People say, ‘Nasty Gal? What’s that?“’ Amoruso, now 28, said in an interview at her new headquarters in downtown Los Angeles. “I tell them, ‘It’s the fastest-growing retailer in the country.’ ”

In 2006, she toyed with the idea of going to photography school but couldn’t stomach the debt. Instead, she quit her job and started an eBay page to sell some of the vintage designer items she found rummaging through Goodwill bins. She bought a Chanel jacket at a Salvation Army store for $8 and sold it for $1,000. She found Yves Saint Laurent clothing online on the cheap by Googling misspellings of the designer’s name, reasoning that anyone who didn’t know how to spell Yves Saint Laurent probably didn’t realize his value.

She styled, photographed, captioned and shipped each product herself and sold about 25 items a week. She named the eBay page “Nasty Gal” after the 1975 album by Betty Davis – not the smoky-eyed film star Bette Davis but the unabashedly sexy funk singer and style icon Betty, whose brief marriage to the jazz legend Miles Davis inspired the song “Back Seat Betty.”

Amoruso curated her eBay page to match her own style, which on a recent rainy Friday included a floor-length trenchcoat, vintage rock T-shirt, no-nonsense bob and blood-red lipstick. Her look and attitude resonated with the type of young, body-confident women who would not be caught dead in Tory Burch.

New friends and bidding wars

She created a Myspace page to market Nasty Gal and garnered 60,000 “friends” by reaching out to fans of brands like Nylon, the music and fashion magazine, that she thought might appreciate Nasty Gal’s fierce aesthetic. Every week, her new finds ignited bidding wars among shoppers from Australia to Britain.

She began enlisting friends to model and photograph her products, which quickly outgrew her step-aunt’s cottage. She moved Nasty Gal’s headquarters to a 1,700-square-foot studio in Berkeley, Calif., in 2007, and eight months later moved again – this time to a 7,500-square-foot warehouse space in Emeryville.

Amoruso also outgrew eBay, which she said was a terrible platform to start a business. Competitors started flagging Nasty Gal for breaking the site’s rules by, for example, linking to Amoruso’s MySpace page. Fed up, she decided it was time to start ShopNastyGal.com. (At the time, NastyGal.com belonged to a pornography site. Nasty Gal now owns the domain.)

She recruited a friend from junior high school to build a website and taught herself to use Photoshop. She eventually abandoned Myspace for Facebook, where she tantalized fans with coming inventory, from cheap shrunken motorcycle jackets to high-end vintage Versace clothing.

She challenged her Facebook fans to come up with the best titles for vintage products and gave gift cards to the winners. She used models who were approachable and “looked like nice people, not dead people,” she said, and had to fire some when customers complained that they looked too skinny or annoyed.

A constant conversation

That constant conversation with customers created a loyal following. Nasty Gal has no marketing team, but fans comment on its every Facebook, Instagram, Twitter, Tumblr and Pinterest post and regularly post pictures of themselves in their Nasty Gal finds. A quarter of Nasty Gal’s 550,000 customers visit the site daily for six minutes; the top 10 percent return more than 100 times a month.

With Nasty Gal having made just shy of $100 million in revenue last year, analysts say they would expect a bigger audience.

“I would expect them to have a few million visitors a month,” said Sucharita Mulpuru, a Forrester analyst. On the flip side, Mulpuru said Nasty Gal’s conversion rate must be significantly higher than the industry standard of 3 percent. “It speaks to an engaged audience,” she said. “They’ve figured out the marketing tool. That’s the real story.”

Last year, Amoruso, who had held on to 100 percent of her business, decided she was ready to hear what financiers had to offer. She met with several venture capitalists but ultimately clicked with Danny Rimer, a partner at Index Ventures, who had invested in e-commerce sites such as Net-a-Porter, Etsy and Asos.

In March, Amoruso agreed to give Index a slice of equity for $9 million. But by August, things were moving so quickly – Nasty Gal was on track to quadruple its 2011 sales to $128 million – that she raised an additional $40 million from Index and used some of it to build a 500,000-square-foot fulfillment center in Shepherdsville, Ky. Nasty Gal now attracts more than 6 million visits a month, while e-commerce startups such as ShoeDazzle and BeachMint are losing customers and executives.

Read more here: http://www.newsobserver.com/2013/03/31/2792870/naughty-name-nice-little-business.html#storylink=cpy

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