Walmart has announced recently that it was buying Modcloth, which is an online fashion retailer that was founded 15 years ago by a young couple still in college. The pair were studying at Carnegie Mellon, when they came up with the idea for a business based on vintage era designs and thrift store clothing.
The combination took off and they raised a lot of capital, via venture capital investments and moved their operation to San Francisco. They even dabbled in brick and mortar locations, but they were struggling. Even after a final round of venture capital investment, they eventually had to consider selling.
Unfortunately, like so many other small startup online businesses in the fashion industry, Modcloth found it difficult to stay profitable, for that reason it was also difficult to secure additional rounds of venture capital investments. They had an extra reason for selling quickly, they had an upcoming debt payment due, this would also make it hard to find an investor willing to give them a big check.
Enter Jet.com, an online fashion retailer, they have been buying up other retailers like Modcloth, in hopes to build their online business. One reason why Jet.com is able to be in a position to buy is they they are a subsidiary of the largest retailer in the world, Walmart.
The terms of the deal between Walmart and Modcloth was not disclosed, it would be highly unlikely that the purchase price would be much over the $80 million dollars that Modcloth was able to secure from a venture capital firm on their final round of financing.
Since being bought by Walmart earlier this year for an amazing $3 billion dollars, Jet.com has busy with acquisitions, Modcloth being its third deal since the sale. The other online businesses include MooseJaw, Shoebuy which go along with Hayneedle that they purchased just before Walmart acquired them.
While Walmart is the largest brick and mortar retailer, they still lag behind many of the other major players in the online retail business, but if they continue to buy up smaller retailers like Modcloth, they made not stay that far behind for very long.