ModCloth is a DIY Fashion Empire

Founded in Pittsburgh, Susan and Eric Koger’s fashion empire ModCloth has turned a flair for vintage clothing into a $100 million company with designs on the future.

Photos by Laura Petrilla
 

 

Susan Gregg Koger always loved fashion, and she always had an opinion on it. “When we’d go school shopping when I was little, I would say, ‘I want that pair of shoes, not that one,’” she says.

Later, she would photograph outfits she put together from thrift or vintage shops to document her ideas.

That passion led Koger and her husband, Eric, to found ModCloth, a vintage-inspired online retailer and design house that has evolved from their Carnegie Mellon University dorm rooms to a multistate business that grew by 40 percent over the last year. In July, ModCloth disclosed its revenue for the first time since 2009, announcing it grossed more than $100 million in 2012. In addition to women’s clothing and accessories, the company also sells retro home décor.

ModCloth now employs more than 400 people. Susan Koger, 29, continues to exercise a hand in directing the company, from buying to marketing, as its chief creative officer. A decade after selling her first piece of clothing online, she says it’s too soon to foretell where the journey will end.

Susan and Eric, also 29, met in the 1990s while attending high school in suburban Fort Lauderdale, Fla. They didn’t intend to go away to school together, but Koger’s parents didn’t share her enthusiasm when New York University accepted her application the year after the 9/11 terrorist attacks. Instead, she accepted the financial-aid package offered by CMU, where Eric was headed to major in entrepreneurship. She took on a double major of German and business.

By the end of her senior year of high school, Koger was shopping to prepare for her journey north and her introduction to Pittsburgh winters.

“There’s amazing stuff at thrift stores because people come from the north for the winter,” she says. “I started hoarding lots of incredible winter wear. I would say, ‘I’ll use the buttons for something’ or ‘I’ll find a friend who can wear it.’”

Eric saw her swelling collection of merchandise, and he told her others would appreciate her tastes. He suggested they start a website to sell some of the clothing, and the initial stage of ModCloth began.

“We built it in the summer, and in our first semester at CMU, we finished the website,” she says. “I basically taught myself Photoshop. And programming. And web design.”
 

Susan, wearing an Always Adorable sweater dress [$89.99] from ModCloth’s Bea & Dot line, poses with two pups, June (left) and George. These “ModDogs” belong to employees in the Pittsburgh office.

 

In choosing a name for their website, the couple wanted to incorporate Susan’s tastes into a domain name they didn’t have to buy. They tried combinations of vintage and retro with terms related to clothing and eventually came up with ModCloth. The couple registered ModCloth.com in 2002 while they were freshmen; it went live in January 2003. Koger sold one of her vintage men’s button-down shirts the first day.

“[It] was super, super exciting,” she says. “It was something I loved so much, realizing these items were going out to people who would wear them and love them. It made me really happy. I loved the process, but what I really loved was the product.”

As the site continued to grow, Koger reached a crossroads by the end of her junior year. Most of her classmates were completing internships in their chosen fields, and she considered taking that route as well. Her other option was to devote herself full-time to her fledgling company.

“On breaks, when I had time to work on the business, we’d see big upticks in sales,” she says. “ModCloth was work that didn’t feel like work.”

First, she had to decide what to do next — she says she realized she couldn’t grow the business by selling only items she’d found. She reached out to other vintage enthusiasts and fashion bloggers for feedback on other products ModCloth could offer.

“We did a poll of the customers and asked: ‘If the product is vintage-inspired, rather than vintage, would you still be inspired?’” Nearly all said yes, she remembers.

Koger spent the summer between her junior and senior years researching sources to buy clothing wholesale and increasing the website’s traffic. She built an audience with search-engine optimization and joined Facebook at a time when fewer than 50 schools had access to the then-invitation-only site.

“You could see the importance of social networking,” Koger says. “It seemed like we had the opportunity not just to build our retail business … but also to create a brand that was inherently social, that from the beginning was friends with its customers.”

In 2005, she moved with Eric to a house in Squirrel Hill with two roommates. They shipped orders out of the basement with the help of their first part-time employee. By the end of that summer, ModCloth.com had grown to attract 70,000 unique visitors per month.

“If you set up in Pittsburgh in a booth, depending on the area, you wouldn’t get 70,000 people to walk by in a month,” she says. “The online business is a really incredible thing because you can reach so many people.”

Susan graduated in 2006 from CMU, where Eric would continue to complete his M.B.A. degree. Within a four-week span that included Susan’s graduation, the couple married at Phipps Conservatory and Botanical Gardens with a reception at The Andy Warhol Museum, and they bought a fixer-upper in Friendship. There, they took on operation of ModCloth full-time.

“The business kind of grew over the house,” she says. “We lived on the third floor, we had the studio on the first and we rented out the second … There are three or four people still working with us today who were working with us out of that house.”

They found a few independent designers to supply them with clothing and in 2008 relocated to a Strip District office. Later that year, they moved the distribution center to Ambridge, about 20 miles northwest of Pittsburgh in Beaver County.

By 2010, Koger says she was traveling so often to the West Coast to meet with designers and vendors that she and Eric decided to move to San Francisco. ModCloth itself was ready to move closer to booming technology companies after taking its first round of investors from California and Philadelphia in 2008.

“We had an executive network there (on the West Coast) and wanted to be able to hire people,” Koger says.

They opened a second ModCloth office in Los Angeles that spring and a third in San Francisco — now the headquarters — later that year. The Pittsburgh office, now in Crafton, is the largest; it employed 268 people as of November and continues to grow.

Brand stylist Amy Hirt, wearing an On the Scene dress [$109.99] from ModCloth’s Myrtlewood line, helps Susan, also wearing a dress from the Myrtlewood line, style a Long and Skirt of It necklace [$64.99].

 

Among the company’s initial investors was Ann Miura-Ko, whose investment company FLOODGATE came on board in 2008. She was looking at companies that sparked her interest in science as a Ph.D. candidate at Stanford University or satisfied her “weekend half” that loved fashion and shopping.

“I remember just talking to team after team [before ModCloth] asking, ‘Why are you involved in fashion? Do you have a passion for it? Do you read Vogue magazine on a regular basis? . . . Where do you love to shop?’” says Miura-Ko. “And these male engineers from Stanford would kind of stare back at me blankly, and in walks Susan Koger. She started a business because she had too many clothes in her closet.”

Miura-Ko, who now sits on ModCloth’s board, says she’s excited to see where the company will go.

“I think it’s very rare for a business to get the kind of traction they have, not only from revenue but also love from the audience,” she says. “Susan has an innate sense for community, which is extremely rare.”

That ability to build and engage a community is evident throughout features on ModCloth’s website.

There are ModStylists®, employees customers can email, call or chat with about anything fashion-related, including advice on what outfit to wear to a formal event or how to keep spring and summer pieces in circulation through colder months.

Make the Cut® is a feature that allows customers to submit and vote on designs to be produced and sold on the website. More than 4,000 designs have been submitted since ModCloth introduced Make the Cut® in 2011.

Then there’s the Be the Buyer® program, which enables customers to vote on designer samples they’d like to see put into production and offer their own opinions.

“It’s really cool not just to help designers out and help them grow their business but to let customers feel like they have a voice. Fashion has been this top-down industry, and we feel like with the Internet and with the use of social networks and blogs . . . customers can bring a great point of view,” Koger says.

Miura-Ko said she remembers being impressed early on by a “Name That Dress” competition on the website.

“I remember thinking to myself, ‘Oh, that’s cute. I wonder if they got a few hundred submissions.’ They had over 21,000 submissions, and that’s what I think of as real, true community engagement.”

ModCloth also prides itself on creating a community within its corporate culture, reflecting the Kogers’ desire for an atmosphere where they would enjoy working. Video-conferencing is huge, and employees can work from just about anywhere. The company has an open paid-time-off policy with no set number of vacation days for its employees.

“We’ve kind of taken the approach . . . as long as you’re getting your responsibilities done and the people you’re working with and for are happy, you can work from anywhere,” Koger says.

In the Pittsburgh office, employees — some perched on balance balls rather than traditional chairs — typically are busy working at computers, but around them are opportunities for rewards. The Pittsburgh Pierogi Truck and other food vendors set up regularly in the parking lot, and yoga classes are held onsite every Monday and Wednesday. Employees are welcome to bring their dogs to work. “I haven’t met him yet,” says Koger as one pup crossed the room with his owner on a recent fall day.

“When we moved into the office, we had to have a space we [could] bring the dogs to,” says Koger, noting that the couple’s dogs — Winston, a pug, and Blue, a dachshund — are the company’s mascots. “And if we’re going to bring our dogs, we have to let other people bring their dogs.”

Koger says she returns to Pittsburgh at least once every three months to collaborate with the team in that office. She stays in the couple’s house in Friendship, now nicknamed the “ModMansion.” The company still holds photo shoots in the house, and new employees can stay there until they make more permanent living arrangements. She marvels when she compares the size of the house’s basement with ModCloth’s current-day warehouse in Crafton.

“Every time I come [to Pittsburgh], it’s bigger, and it blows my mind,” she says. “When we look backwards, we feel like we’ve come so far, but when we look forward, there’s still so far to go . . . Today we’re thinking about mobile [traffic and design].”

In October, ModCloth announced that more than half of its site visitors were coming from mobile devices. The company launched an app for Android users and added a “Fit for Me” component, which allows users to find clothing based on reviews from other shoppers with similar measurements.

But the biggest step for the company in recent months has been the launch of two private-label clothing lines.

“Now we’re not only able to find for our customer but create for her as well,” Koger says.

Myrtlewood consists of classic, vintage-inspired pieces that are available in sizes 0 to 4X. The Bea & Dot line, named for Koger’s grandmothers Beulah and Dottie, is Myrtlewood’s “quirkier sister,” Koger says.

Her personal collection of clothing inspired the private lines, and she says she has overseen every aspect from production to marketing.

“It’s been very creatively rewarding, getting to see ideas I’ve had in my head come to life,” she says.

When ModCloth launched the lines, the company website’s home page featured a photo of Koger wearing one of the new dresses. She balks at saying she models for the company, but she always wears the clothes — and having regular women model is “part of what really sets us apart as a fashion retailer,” Koger says.

“I wanted models I would stop on the street,” she says. “I’d tell her I liked her outfit, and we’d have a conversation and she’d be really nice. Most fashion models seem unapproachable . . . We take real ModCloth customers and put them in ads and campaigns. We don’t go through modeling agencies.”

Despite the company’s expansion and growing recognition, Koger acknowledges that being an entrepreneur has been overwhelming at times.

“I’ve had those days where I’ve thought, ‘Ugh, who put me in charge?’ You have those times you want to clock out, but you can’t do that as an entrepreneur,” she says. “But I just remind myself I’m so fortunate. I feel incredibly, incredibly, fortunate to be able to do something I love — and to come to work every day and have fun [laughs], and it’s really special. I feel really lucky to be able to do it.”