Not so pretty: Layoffs at e-commerce darling ModCloth

ModCloth, the hot e-commerce startup backed by Accel Partners, First Round Capital, and the Floodgate Fund, laid off just over a dozen of its 248 employees today, the company told VentureBeat.

The company, which sells vintage clothing and apparel from independent designers, raised $19.8 million last year in a round led by Accel. Founded in Pittsburgh in 2002 by Susan and Eric Koger, the company is now headquartered in San Francisco and has offices in Los Angeles as well as its original hometown.

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In January, CEO Eric Koger told employees in an internal meeting that the company had no plans for layoffs.

But today, chief marketing officer Kerry Cooper told VentureBeat that ModCloth is centralizing its designer-relations team, which was previously split between Pittsburgh and Los Angeles, in L.A. The company also found it had “misallocated” some employees in other departments, as Cooper put it, and took the opportunity to make those cuts at the same time. Besides the layoffs, it offered relocation packages to nine employees.

Cooper acknowledged Eric Koger’s earlier comments, but characterized ModCloth’s moves as a “strategic realignment” instead of layoffs.

ModCloth laid off some designers and photographers as well as a designer-relations team who helped bring new wares to the site. Cooper said the company also made cuts in its “experience” team which handles interaction design, engineering, and product management because it didn’t have the right resources in that team. LinkedIn lists 181 current employees at ModCloth. At the same time, ModCloth has 11 job openings listed on its site, chiefly in technology and product.

“We will not hire as fast as we did last year, but we will end the year with more employees,” said Cooper.

Could ModCloth ultimately move to deemphasize human curation by merchandisers and rely more on its community? Cooper said the relocation plan wasn’t aimed at cutting back the size of the department. But already, in its “Be the Buyer” program, ModCloth asks its customers to select dresses which it then commissions from sellers. And it could easily ask sellers to provide more of their own photography and design resources. By increasing such community-driven purchasing, ModCloth could well get by with fewer employees in its merchandising and design teams. And it’s easy to see its Silicon Valley investors pushing for more efficiencies.

“We’re a fashion company and a technology company at the same time,” said Cooper. “It’s a good balance we’re always finding.”

But ModCloth has made its name, so far, on the human touch. Will an increased emphasis on technology and engineering jeopardize its homespun appeal?

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And will the Kogers remain in charge? Employees are now questioning Eric Koger’s management, noting the dissonance between the company’s cultural values of “empathy” and the move to cut some employees who had relocated to San Francisco from Pittsburgh, as well as his earlier statement about not planning layoffs. He may well be under pressure by investors to show results — or get his own pink slip.

And not the kind ModCloth sells, either.