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ModCloth Is Under New Ownership

ModCloth is changing hands—again.

After roughly one year in Go Global Retail’s clutches, the vintage-inspired women’s wear label, once owned by Walmart, has a new future with Nogin, which leverages its intelligent commerce tools to prod promising brands to online profitability in lightning-fast time.

As part of the deal, whose value was not disclosed, Nogin will onboard 55 ModCloth employees from the buying, branding, design and merchandising, logistics, IT, accounting and human resources departments, who will work out of an office in Los Angeles. Chief merchandising officer Mary Jimenez will ascend to the role of CEO of ModCloth, while customer service employees will remain at their Pittsburgh call center. Roughly three dozen workers were eliminated as part of the transaction, said Nogin CEO Jan-Christopher Nugent, though many were independent contractors.

Nogin’s acquisition offers a glimpse into retail’s digital-first—or digital-only—revolution.

The Tustin, Calif.-based technology firm wields its suite of data analytics to help brands grow digital sales, offering a range of services from strategy and creative to logistics and performance marketing.

Nugent said Nogin operated brands’ e-commerce before partnering with brand licensors. Nogin operated e-commerce for Justice, the tween chain formerly owned by Ascena Brands Group that brand management firm Bluestar Alliance acquired for $90 million after a Chapter 11 bankruptcy collapse. As part of that arrangement, Nogin invited 25 Justice staffers handling e-commerce, creative, design and production to work side by side at its California offices.

“We learned a lot from having buyers, merchants and designers on site helping with the licensees. We’ve become a vertical operation,” Nugent said, noting that Nogin already owns the online rights via service deals through licensing arrangements.

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“We’ve been able to change the financial optics of these brands, where they are profitable and can flourish, while keeping the DNA of the brands,” Nugent said. Once Nogin saw the opportunity to forge profitable deals, it decided to begin investing.

“By getting the brands onto our advanced platform, we have the capability to bring down the costs, which then frees up the creative and design teams to do what they do best,” he said. Some brands turn a profit after just 90 days on the Nogin platform.

Nugent said Nogin will keep ModCloth’s existing supply chain intact. Though ModCloth has talented creative and design professionals among it ranks, the CEO said technological and capital limitations hampered them from fulfilling the brand vision. With Nogin’s arsenal of resources at their disposal, they can now focus on what they do best and leave the operational and logistics minutiae to their new owner.

He also said that because Nogin has powered the platforms of other fashion brands—Hurley, Bebe, Lululemon, True Religion, Yeezy and Charming Charlie, in addition to Justice—the company has a wealth of knowledge about the profile of the ModCloth consumer. “We have advanced capabilities that will allow them to get more focused on delivering what she wants in the way she wants it,” he said, citing Nogin’s ability to deliver the right products at the right prices and quantities to maximize sell-through.

ModCloth has already migrated over to the Nogin platform, a process that started before the deal closed.

The ModCloth transaction marks Nogin’s first investment in a native brand, but Nugent said it won’t be the last. The California company has created a wholly owned subsidiary to own the “new” native brands it plans to acquire. And while ModCloth is already digitally native, Nugent aims to resurrect struggling brands, reimagining their best assets for a digital-centric revival. The CEO also said he doesn’t plan to acquire any of the brands that Nogin currently is dealing with. “They will be new brands,” he said.

Nugent believes turmoil in the retail sector could surface tantalizing opportunities. “As more of these omni-channel retailers shed physical stores, there will be opportunities to take these online to become digitally native,” he said.

Nogin has already kicked the tires at some possibilities, like giving Lord & Taylor a hard look as well as other brands that have popped up on the auction black. “We are committed to this thesis,” Nugent said.

The world is Nogin’s oyster, according to Nugent, noting that geographical barriers will not limit the company’s deal-making ability. “We’re open to all brands that fit within the optics that we know we can make successful. There’s no limit to sales volume,” the CEO said. When the company was previously known as Digital River, it had a hand in helping build HP and Microsoft into billion-dollar tech brands.

“From that standpoint, our platform and our team can handle very large brands,” he said.

The foray into fashion was a natural move for Nugent, who was previously engaged with Nordstrom before moving to the tech world and has watched apparel’s e-commerce evolution.

For now, ModCloth seems to be positioned for new success.

“ModCloth is an amazing brand poised for growth,” said Jeff Streader, managing partner at Go Global, the brand investment platform he founded in 2016. “We feel very good about the progress at ModCloth since our January 2020 acquisition of the brand from Walmart and are excited to see its momentum continue with Nogin.”

ModCloth was Go Global’s inaugural investment. The platform gave strategic investors—most of which are Asian manufacturers—the opportunity to participate in an investment brand’s supply chain. The premise supposedly gives investors “skin in the game.” The ModCloth experiment was seen as a trial run for Go Global’s future investments.

Under its brief tenure with Go Global, the retro-minded brand regained GDPR compliance, allowing the e-commerce retailer re-enter European markets in September. GDPR, or General Data Protection Regulation, is considered the toughest data privacy and security law worldwide.

Tiger Finance helped Nogin with financing for the deal and executives expect to see more deals ahead. “There is considerable M&A activity for lower middle-market eCommerce brands and platforms,” said Andy Babcock, a managing director at Tiger. “Though the trend was somewhat hastened by the pandemic, the activity is more about the natural maturation of an industry. The growth brands like ModCloth benefit greatly from the operating leverage and institutional knowledge of larger platforms.”

Babcock added that he expects “these brands to continue to search for and match with strategic financial partners like Nogin and Tiger who not only bring knowledge of capital markets, but also provide best practices on analytics and the tech stack.”