Meet the Latest Quiet Customer – Nasty Gal, Featured in Forbes

This story appears in the July 16, 2012 issue of Forbes Magazine.

By Victoria Barret

Ten young women dressed in a catwalk-ready mix of denim fringe vests, short shorts, neon sheer tops and 5-inch platform boots are clustered in a downtown Los Angeles conference room on a recent morning. They take turns doing introductions in between bites of Starbucks pastries. “I am superstoked to be here and am definitely a Nasty Gal,” says Kelly, a clinical psychiatrist. A recent USC grad chimes in: “I love what Nasty Gal has done for me.”

Which is nothing compared with what Nasty Gal has done for 28-year-old founder Sophia Amoruso. In four years her spunky retail fashion site has streaked across the Web, pushing new ways to sell trendy but inexpensive clothing. The company is on its way to quadrupling sales this year to $128 million, racking up gross margins of more than 60%, up there with retail’s most profitable ventures. Nasty Gal has done this with very little advertising and nearly no ­discounting in an industry forced to succumb to daily dealmaking. Instead, Amoruso has built a brand on the backs of Instagram, ­Tumblr, Twitter and Facebook—and translated “likes” into sales.

Amoruso is slumped in a chair at the end of the table in a fitted black chiffon dress paired with chunky, white lace-up shoes and bright pink lipstick. The girls in the room are hanging on her every gesture. Her trajectory is a fashion girl’s dream come true, but her story is largely unknown outside her fan base. For all of Nasty Gal’s constant online conversations with customers—the company updates its social network pages five times a day and aims to “get dressed” with them every morning—Amoruso is notably quiet, even shy. “Do you guys work out?” she inquires near the end of the session. Heads bob in agreement before a flurry of passionate pleas imploring her to take on the current athletic apparel giant Lululemon.

This is Nasty Gal’s first real focus group, prompted by the upcoming launch of a line Amoruso designed herself. She’s stunned to hear shoppers parrot what she’s tried to infuse into ripped halter tops and chain mail cutoff shorts: “empowering and fierce,” “sexy just for me.” After the group leaves she muses, “It’s as if they read my mind. I never use those words publicly, but I am always thinking them.”

Amoruso has bucked fashion trends not so much with the styles she sells (which can be found elsewhere, often at lower prices) but in the machine she’s built to sell them. Nasty Gal buys only limited runs so as not to get stuck with stuff that won’t move. It sells 93% of its inventory at full price in an industry that usually marks down a third of all styles. Amoruso refuses to do even the standard gimmicky marketing plays, such as discounts for friend referrals.

She hasn’t had to. Nasty Gal has the sticky online metrics of a fashion magazine. A quarter of its 250,000 customers visit the site once a day for at least seven minutes. The top 10% visit the site more than 100 times a month. One focus group girl admits she refreshes the site “every 20 minutes.” They aren’t always buying, of course, and that means Nasty Gal’s conversion rate (1%) is lower than a typical retailer’s. But because it’s in front of its customers so frequently it has a stunningly loyal group. Just over half of Nasty Gal sales come from 20% of its shoppers. This means there’s room to grab lots more shoppers—hence the Nasty Gal label debuting in September.

Her success springs from a ludicrously simple premise. Says Amoruso: “My philosophy is that you sell things for more than you bought them.” Now she’s being courted by several of Silicon Valley’s top venture capital firms and Mark Zuckerberg’s wealth managers. She raised $9 million earlier this year from Index Ventures, giving away just a sliver of equity, which instantly made Nasty Gal worth $130 million on paper. And the valuations being discussed now for an upcoming round of fundraising push her even higher.

“I’VE NEVER SEEN someone work for a salary,” says Amoruso. Entrepreneurial blood courses through her Greek-American family. Her grandfathers ran a motel and a piano shop. Her father sold mortgage loans; her mother sold houses. Sophia started buying books on startups at age 9 and was “president” of her street’s lemonade-and-abalone craft stand in Sacramento in the mid-1990s. But her charmed suburban life took a hit when Amoruso was 10 and both her parents lost their jobs. She remembers their cutting up credit cards to fill a nearly full jar of others at a credit office. Then they pulled her out of Catholic school to save money.

Soon her dad had her dangling out of his Jeep Cherokee at 6 a.m. delivering newspapers. It wasn’t just the money she made that stuck with her. At age 15, while making sandwiches at a Subway shop, she obsessively counted out olives as her high-school-dropout co-workers snoozed. Her father’s advice: “Show up. Don’t stop moving. Sweep the floor even when they don’t ask you to.”

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