Nasty Gal Bankruptcy Ecommerce Takeaways

A shocking story to outsiders but perhaps less shocking to people in the know, Nasty Gal, the poster child of Fashion Ecommerce to many has filed for bankruptcy protection. The full story is here and it’s worth reading to consider what this – and the many other ecommerce failures – teach us today.

1) Firstly, it’s a rocketship. Nasty Gal like most Ecommerce success stories had grown like crazy from a small Ebay store to ‘International’ retailer. This growth is not typically experienced with other businesses. It means they hired aggresively, built structures and systems as well as financed the venture all at extreme speed. Ultimately, this contributed to their downfall.

2) Fast growing revenues don’t equal fast growing profits. In fact, the opposite is usually true and losses are deep for a long-time..even perpetually. The model of ecommerce as pioneered by B2C giants like Amazon, JD.com etc is all based on two things; scale, and secondly, ways to make money other than shipping merchandise i.e marketplaces, payments, digital goods and so-on.

3) You need all the channels. Ecommerce, at least stand-alone, is not viable. We’ve seen time and time again pure play ecommerce companies go out of business. Who is winning in ecommerce? It’s multi-channel. That means you have to integrate stores and other channels to maximise your customer retention (stickyness) and sales. That’s hard.

4) Really consider your goals. Nasty Gal was a founder led business that was quote ‘successful’ ie they had real revenue, real customers and a real brand. But that still wasn’t enough to save it. Perhaps if the company didn’t take venture funding or had grown at a more realistic speed then it would still be on track. When you’re starting, you should consider your goals. Not everyone can be lucky but you can be good.

Have you learned any Ecommerce lessons you’d like to share? Let us know in the comments.

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