Cookie banner

This site uses cookies. Select "Block all non-essential cookies" to only allow cookies necessary to display content and enable core site features. Select "Accept all cookies" to also personalize your experience on the site with ads and partner content tailored to your interests, and to allow us to measure the effectiveness of our service.

To learn more, review our Cookie Policy, Privacy Notice and Terms of Use.

or
clock menu more-arrow no yes mobile
Nasty Gal’s founding, as depicted in Netflix’s Girlboss.
Photo: Netflix

Filed under:

Nasty Gal Sold to Boohoo, But Its Problems Aren't Over Yet

Shoppers are complaining about losing store credit and customer service woes, but who’s responsible?

Racked is no longer publishing. Thank you to everyone who read our work over the years. The archives will remain available here; for new stories, head over to Vox.com, where our staff is covering consumer culture for The Goods by Vox. You can also see what we’re up to by signing up here.

“Come on, Sophia, you can do this,” Britt Robertson’s character pants to herself in the fourth episode of Netflix’s new series Girlboss. “You do not want a bad review. A bad review is death.” That single, crucial threat looms large throughout the show, loosely based on the rise of Nasty Gal and its founder and former CEO, Sophia Amoruso, propelling the character over the Golden Gate Bridge in a mad dash to get a wedding dress to a customer in time for the ceremony.

Now, a decade after the first season is set, the scene almost seems quaint — after all, what’s one bad review in the ocean of online feedback that’s been directed at Nasty Gal since? And how scathing could a complaint about a discolored hem and a missed delivery be compared to the torrent of accusations of fraud, theft, and mismanagement that customers have directed at the company in recent months?

As recent headlines have made clear, the Nasty Gal of today is not the same Nasty Gal that Amoruso built up from a scrappy eBay store into an e-commerce business once valued at more than $200 million. In November, the company filed for Chapter 11 bankruptcy protection, and shortly thereafter, Manchester-based fast fashion e-tailer Boohoo.com bought the rights to its intellectual property — Nasty Gal’s brand name, URLs, social media accounts, imagery, and other so-called “soft assets” — as well as its customer database, for $20 million.

Boohoo did not, however, buy Nasty Gal’s operations, including the 500,000-square-foot distribution center in Kentucky where the company processed returns and handled customer service (all 70 employees there were laid off earlier this month), nor did it agree to assume any of the company’s liabilities, including whatever store credit customers may have accumulated before the change in ownership and any returns from purchases made prior to the sale.

This is where the problems have arisen: Shoppers have taken to social media and business review sites like SiteJabber and TrustPilot to complain about months of frustration and dozens of emails and DMs with customer service. “SCAM!!!” reads one review from a customer who says she made a $200 return and had $200 in store credit before the company changed ownership and she could no longer access her account. “Currently going through a dispute with Wells Fargo to get my money back. Such a hassle and really inconvenient!” Nasty Gal has suggested other customers take similar recourse and ask their respective banks for a chargeback, a course of action generally reserved for fraudulent transactions (and, as at least one customer has learned, not one that banks easily honor).

Fries before guys. @thelimitdoesnotexistt #NastyGalsDoItBetter

A post shared by Nasty Gal (@nastygal) on

“BEWARE!” reads another review from a shopper who says she was promised a voucher for a return. “Even though the receipt of the merchandise was acknowledged and confirmed, no voucher nor credit was issued. After 3 months of communicating with them, I was emailed today ‘we do not have access to these order details as these were sent from a warehouse out of our holdings.’ I was told to email someone else. I am tired of this runaround. I am done with this company so as [sic] my daughters and their friends. Never again!”

This is a frequent refrain of Nasty Gal’s new customer service representatives — that they don’t have access to orders placed before the sale — but if you delve into the Asset Purchase Agreement between the two companies (a feat I recommend only with the aid of Ctrl+F), customers’ order history was clearly part of the deal:

“All contact history with existing and lapsed customers whose details are contained on the Customer Databases, including order history, correspondence with such customers, and any marketing preferences of such customers including details of any customers who have opted out of receiving marketing communications.”

That said, according to the same agreement, Boohoo doesn’t have a legal obligation to honor returns or store credit, explains Kenneth A. Rosen, partner and chair of the bankruptcy practice at Lowenstein Sandler — though as the new owners of Nasty Gal’s intellectual property, they do have motive to keep customers happy.

“The last thing you want is to purchase the rights to the name Nasty Gal and have people saying, ‘Oh, don't ever do business with them — they don't give refunds, they don't honor deposits.’ You don't need that kind of bad will,” he says. “It's very common in bankruptcy cases — in fact, it's almost the norm — to treat customer claims in a superior manner... If I were representing the purchaser of intellectual property, I would want to make sure that that stuff gets paid. I don't want it to damage my brand.”

Even if Boohoo isn’t assuming the company’s liabilities, he continues, “If I was purchasing the intellectual property, I would say, ‘I need records of who you owe money to for deposits, gift cards, and refunds. I need that information, because I need to be able to deal with those people when they come to me and they cannot distinguish the old company from the new company.’”

A representative for Boohoo, meanwhile, tells Racked that the company will honor store credit — but the onus is on the customer to provide evidence of it. “Although Boohoo has no legal obligations, we understand that Nasty Gal Inc.'s loyal customer base is an integral part to the brand's success and therefore out of goodwill have honored the previous customer's store credit when properly documented. When documentation is incomplete and customers have not been able to provide evidence of store credit, Boohoo has voluntarily agreed to honor 50 percent of the claimed credit,” reads the statement.

Frustrating though it can be for shoppers, it’s not always easy to know how a company’s bankruptcy will affect its customers — though it’s worth staying aware of, especially at a time when retailers are filing for Chapter 11 protection in droves. (In the past year alone, the carnage has included American Apparel, Payless ShoeSource, Wet Seal, Aeropostale, PacSun, and The Limited.)

Giftcards.com hosts a “Chapter 11 Bankruptcy Watchlist” that keeps tabs on retailers that are in financial trouble and outlines how consumers can redeem outstanding gift cards — if indeed they still can. (American Apparel gift card owners, for instance, had until April 11th, 2017 to file a claim with the bankruptcy court handling the case; if you’re still holding onto one, you’re out of luck.) If a company survives bankruptcy and continues to honor gift cards issued before the filing, they are moved to the “Full Recovery” section of the site. If, instead, the cash runs out and the bankruptcy case is closed, they are moved to the “Gift Card Graveyard” (RIP, any Delia’s credits you may have racked up in middle school).

In one of the most widely-publicized cases — which eventually went all the way to the Supreme Court, though it declined to hear it — $210 million worth of Borders gift cards were rendered useless following the company’s bankruptcy in 2011.

Sup, bra? Our Jewel for the Summer Bra, that's what

A post shared by Nasty Gal (@nastygal) on

One of the main contentions of the suit was that the company did not do enough to notify customers of their right to file claims for the gift cards — thanks to an outdated bit of case law, Borders only had to take out a one-time ad in the national edition of The New York Times to satisfy the notice requirements. Since then, retailers’ bankruptcy announcements have often been followed by warnings in the media about using gift cards and redeeming store credit before it's too late, but little about the risks of shopping online with a company in the midst of liquidation.

In the weeks following the approval of the sale to Boohoo, Nasty Gal hosted a massive sale, slashing prices from 50 percent to 70 percent off everything on the site, no doubt with the aim of generating much-needed cash while clearing out unneeded inventory — but when orders went unfulfilled and customer service became unreachable, the social media vitriol started pouring in. The chaos was particularly striking in comparison to the steady liquidation of American Apparel, which shut down e-commerce sales in March amid some fanfare and closed the remaining 110 US stores over a four-month period, following its partial acquisition by Gildan Activewear; it was a slow death, to be sure, but most of the controversy concerned layoffs and a planned shift away from US-made apparel rather than any customer complaints.

With the premiere of Girlboss generating increased interest in the Nasty Gal brand and the new owners stocking the site with an ever-increasing selection of merchandise, it remains to be seen whether the brand will ever generate the same level of excitement it did during its late-aughts, platform-Lita-wielding peak.

“In order to best mitigate any damage [to the brand during the transition], it would be wise of Boohoo to announce opportunities and changes that they plan to make through the IP acquisition,” says Emily Kahn of strategic consulting firm Vivaldi. “By identifying opportunities for growth and change, they can reposition the brand as one to watch.”

It certainly has the resources to do so: Boohoo recently posted revenues of £295 million (about $378 million at current exchange) and nearly doubled its net profits in the past year. But judging by the current selection of merchandise, it hasn’t kicked one of Nasty Gal’s nastiest habits: taking heavy-handed “inspiration” from independent designers. The Bud Out Vegan Leather Moto Jacket, for instance, features an appliqué reading “L.A. Lady” that looks virtually identical to the hand-painted script on the back of New York designer JayDee’s street-style-baiting jackets, while the Lucky Stripe Ruffle Top is the most literal interpretation of Self Portrait’s deconstructed Frill Shirt we’ve seen yet — and that’s saying something. If Boohoo is really committed to building "goodwill," addressing these issues may be the right place to start.

Business

Brands Are Dipping Into Life Coaching and Sex Advice

Business

Casper, Mattress Firm, and the Retail Lifecycle

Business

Of Course There’s a Vest Vending Machine at the San Francisco Airport

View all stories in Business