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