Desperate times call for desperate measures. Recode published the newsreferring to an anonymous source that the Nasty Gal – online fashion retailer – «is preparing to file for Chapter 11 bankruptcy protection, allowing it to reorganize its business». We tried to understand how a company which is so popular among many American women, came to such situation and what it was preceded.

 

What Is Nasty Gal And Who Is Sophia Amoruso?

Nasty Gal’s story is a cautionary tale of how to start a business from nothing to reach the pinnacle of success and … do not stay on it. The company began as a small project on eBay. The idea of creating an online vintage clothing store came to Sophia Amoruso’s head in 2006. At that time she was 22 years old and she was unemployed. Sofia resold interesting things from flea markets, second-hand, etc. For example, one of the first items was Chanel jacket from the Salvation Army for $8, which subsequently left for $1000. By 2008 Nasty Gal has got its own website. Sofia started hiring her first employees – Christina Ferrucci, who became the director of procurement.

Nasty Gal Files For Bankruptcy

 

The heyday of the company accounts for the 2009-2011. Then everything went very well. Nasty Gal was growing. Sofia got her own office instead of the old warehouse. The staff was growing. Former employees remember those days: «We really liked work. There was no financial problems. Every Friday we brought cakes and had parties – celebrating the $100 000 per hour of sales, the first million earned on «Black Friday»».

 

A Rough Patch

The first problem the company got along with the first investors. Index Ventures, who invested in the start-up $40 million, according to Sofia’s ex-employee, started asking «more profit, more goods on the site». In 2013, there were a number of staff reductions. 100 people lost their jobs. But the Sofia kept away from her start-up: «I’m a creative. I’m a brand-builder. I’m a rainmaker. I’m a pretty good marketer, but that’s not something I want to do every day». All her thoughts were about the new project – Girlboss, which now includes a 2014 New York Times bestseller, a hit podcast, a just-released coffee table book, and an upcoming Netflix comedy based on Amoruso’s unconventional path.

Nasty Gal Files For Bankruptcy

 

In 2014 Sofia entices into her team 58-year-old Sherry Watterson – former product director of Lululemon brand. It is difficult to name Watson a successful specialist: from previous place she was fired with scandals (clothing sales fell). At the new place the staff disliked her due to incompetence and irrational. But this did not prevent Sofia in 2015 from stepping down from the CEO role and give it to Watson.

Nasty Gal Files For Bankruptcy

 

With a new leader came more cuts. On Glassdoor site appears devastating article accusing management of Nasty Gal in the «incompetence», and the atmosphere at work in the «toxicity». Brand Sophia Webster accuses Nasty Gal in plagiarism. At this time, Sofia continues to work quietly on a book Girlboss and promote the campaign in support of women’s business projects under the hashtag #GIRLBOSS.

So we came to 2016. Forbes magazine names Amoruso one of the richest entrepreneurs of the year. She made her debut this year with an estimated net worth of $280 million, based entirely on the assumed value of her majority stake in Nasty Gal, which according to multiple sources had nearly $300 million in sales. But in November Nasty Gal declares bankruptcy. Watson explains: «Our decision to initiate a court-supervised restructuring will enable us to address our immediate liquidity issues, restructure our balance sheet and correct structural issues including reducing our high occupancy costs and restoring compliance with our debt covenants».

Amoruso itself commented as follows: «It was my first business and I got really far. Filing for bankruptcy is actually the most responsible decision for the business». At the moment, the situation remains so. How it will unfold – only time can tell.

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