ASSIGNMENT 7 (ELECTIVE): ENTREPRENEURSHIP/MANCOSA: POSTGRADUATE DIPLOMA IN BUSINESS MANAGEMENT 61
Read the extract below and answer the questions that follow.
In a well-reported piece in The Boston Globe this week, Taryn Luna pieces together, as best she can, some of
the ill-fated business moves that led to the recent bankruptcy filing of Karmaloop, a streetwear fashion e-
commerce company.
It’s a must read for anyone running or investing in an e-commerce company, and it serves as a case study of
how quickly things can go awry in online retail.
As a brand, Karmaloop gained a ton of popularity among urban teens, skateboarders, surfers, and others at the
fringes of the mainstream, a group the company’s founder Greg Selkoe described as the ”verge culture.” Still
one of the better known companies in the space, Karmaloop’s undoing isn’t the result of a mass exodus of
customers, but a series of poor business decisions, awful financial management, and the company’s fall into
cult of the founder” territory.
If you don’t know the Karmaloop story, the company was built by Selkoe in 1999 from his parents’ basement in
the gritty and eclectic Jamaica Plain neighbourhood of Boston. The company thrived selling T-shirts and other
clothes that appealed to the young, urban, and fashion-minded. It eventually served as a conduit to bring
designs informed by hip-hop and skateboard culture to the masses, and at one point earned $127 million in
revenue.
Selkoe did a masterful job creating a national fashion brand in Boston, of all places, that was ahead of its time
in leveraging new technologies for Web payments, the evolution of social media, the growth of online video,
and the use of virality as a sales tool. The company also helped a bunch of fashion entrepreneurs launch their
small streetwear brands, making Selkoe a mentor to a second wave of e-commerce fashion start-ups.
However, at some point the wheels came off. As Luna explained in the Globe piece, the company made one
bad move after another. The first misstep was Selkoe’s attempt to launch an MTV-like cable channel with
Pharell Williams in 2008. Not a single show aired, and the futile project ended up costing Karmaloop $14
million.
The company also failed in an attempt to expand to other branded fashion sites. As Luna explains:
Karmaloop’s e-commerce expansion was also sputtering. The company launched and shuttered the Boylston
Trading Co. site, an attempt to enter the high-end fashion world and sell more expensive clothing. Monark Box,
a subscription service that mailed boxes of ”exclusive” gear to members each month, also failed. MissKL.com,
an attempt to grow Karmaloop’s female customer base, closed as well, according to the company.
Then, at some point, Karmaloop started messing with its vendors, many of them small fashion startups who
flocked to be aligned with the brand, trying to catch some of Selkoe’s magic for themselves.
While some of the brands that Karmaloop sold through its site are well-known nationally, such as Vans, a large
share were one- or two-person operations that hoped to be the next Karmaloop. All they need to do was to be
loyal to Selkoe and they were brought into the Karmaloop family, a huge break for many of the clothing
entrepreneurs.
The price for that loyalty may have been costly. Soon, there were murmurs from some vendors that
Karmaloop, which served as the middleman collecting money between customers and clothing designers,
didn’t pay the money rightfully owed to the companies.
61
PROGRAMME HANDBOOK: JULY 2016 INTAKE
