We visited a ModCloth store to see why Walmart reportedly plans to sell the company just 2 years after acquiring it

Bethany BironJul 8, 2019, 23:14 IST

ModCloth/Sarah Ching

Walmart is expected to sell ModCloth by the end of 2019, just two years after acquiring the e-commerce clothing company in a deal that was estimated to be worth as much as $50 million, Vox reported.
Walmart's e-commerce unit is reportedly projected to lose $1 billion this year as it struggles to compete with Amazon.
We visited one of the four ModCloth store locations in the US to see why Walmart could offload the brand from its portfolio and cut its losses.
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Upon visiting ModCloth's New York City store - or FitShop, as the company refers to its brick-and-mortar stores - it's hard not to be charmed by the bubbly sales associates, a diverse group representing a variety of backgrounds and body types.

Though ModCloth originally started in 2002 as a passion project of founder Susan Gregg Koger while she was a college student at Carnegie Mellon, the company quickly grew popular for its whimsical, vintage-inspired aesthetic. As its fanbase grew over the years, eventually it popped onto Walmart's radar as the retail giant sought opportunities to build out its e-commerce business.

After Walmart acquired Jet.com for $3.3 billion in 2016, it set founder Marc Lore in search of what Walmart executives hoped would be lucrative e-commerce acquisitions. In 2017, Walmart acquired ModCloth for a reported $50 million, the first in a series of acquisitions that also included Bonobos, Moosejaw, Hayneedle, Bare Necessities, and Art.com.

However, just two years later, Walmart is facing significant losses from its e-commerce division, according to a recent report from Vox. Compounding the loss is the reported underperformance of ModCloth, Bonobos, and Eloquii, none of which are profitable, sources told Vox.

Now, as Jet begins to undergo an overhaul that will move all employees under the Walmart umbrella, Lore is expected to face the music and cut his losses - possibly beginning with ModCloth.

"The decision to sell ModCloth appears to stem from a realization that Walmart is going to be unable to turn around the company's economics in the near term," Vox's Jason Del Rey writes. "The company was not performing well before the acquisition, and the business has not improved dramatically since."

A spokesperson for Walmart did not immediately return Business Insider's request for comment.

We shopped at the New York City ModCloth store to see why Walmart might be letting go of the company. Here's what we found:

See We visited a ModCloth store to see why Walmart reportedly plans to sell the company just 2 years after acquiring it >>

The New York City ModCloth store is located in Manhattan's SoHo neighborhood, a prime shopping district and destination for tourists. Though ModCloth is primarily an e-commerce company, it also has three additional stores in Austin, Washington, DC, and San Francisco.

Source: ModCloth

As we approached the store, we saw a sign for an extra 40% off already discounted items.

We also saw a display emblazoned with ModCloth's mission statement to make "original prints and patterns and unique styles accessible to all."

When we first walked in, we noticed the store was bright and airy. However, we didn't see many shoppers on a recent Friday afternoon before a holiday weekend.

We spotted a sign near the front explaining the FitShop, which is intended to function like a personal styling experience.

This personal styling approach explains why some of the shelves were fairly sparse. A sales associate told us that they keep a full range of sizes in the back.

The FitShops are intended to feature samples of styles and sizes for shoppers to try on, before placing their order online.

"Nothing is more frustrating than ordering something online and finding out it doesn't fit," former ModCloth CEO Antonio Nieves told Business Insider in 2018. "This is an avenue to improve that experience."

Source: Business Insider

ModCloth has long been a proponent of size inclusivity, and it recently expanded its sizing to include XXS to 4X and 00 to 28.

Beyond apparel, the store features a range of additional items, including accessories, coffee-table books, and home goods.

The store also featured some local flair, like this display of handmade leather products made by a New York-based artist.

There was also this New York City guidebook for Instagrammers, positioned alongside some very Instagrammable wallpaper.

Throughout the store, you can see touches of the traditional ModCloth whimsy, like these rainbow sandals.

There is no register in the store. Instead, the sales associates — which ModCloth calls ModStylists — process payments on handheld iPads. We found this iPad near the shoe section for customers to shop styles they may not find in the store.

The store was fairly small, but it included unique flourishes, like this funky light fixture.

There were various 40% signs throughout the store, and the sales associates were pushing the sale as well.

Near the fitting rooms, we found another sign promoting discounted apparel.

Each of the fitting rooms had a different quirky wallpaper, like this room with a ballpoint pen pattern.

Ultimately, it was difficult to see from first glance why ModCloth might be struggling. The store was well-organized and bright, and the sales associates were helpful and friendly. However, in the end, the lack of shoppers was perhaps telling.

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