Susan Gregg Koger and Eric Koger took a love of vintage clothing and some tech know-how and built a popular online retail site. The husband-wife team is expected to bring in $15 million this year.
No. 2 Susan Gregg Koger
No. 3 Eric Koger
Ages: 24 (Susan) and 25 (Eric)
Location: Pittsburgh, Pennsylvania
2008 Revenue: $3 million
2009 Projected Revenue: $15 million
Year founded: 2003
When Susan Gregg Koger and her then-boyfriend, Eric Koger, were about to start Carnegie Mellon in 2002, the Florida natives set out on a search for cold-weather gear to help them survive those harsh Pittsburgh winters. Susan, who always loved vintage wears, led them to thrift stores, where she enjoyed browsing so much, she even bought clothes she couldn't wear because they weren't quite her size or style. One day, Eric convinced her to set up a site to sell some of her finds. Today, that site, ModCloth, is on track to sell $15 million of women's clothing and accessories this year.
The Kogers launched ModCloth in January 2003, during their winter break. The site operated out of Susan's dorm room, and she personally fulfilled all orders while maintaining a full course load. "I'd get phone calls in the library," she says. Eric, who had experience hosting and designing websites for retailers back home, provided technical support for the site.
As Susan approached graduation in 2006, she and Eric decided to run the site full-time. They realized, however, that it would be difficult to sustain ModCloth as a business selling only one-of-a-kind frocks. So they decided to offer retro-inspired pieces from independent designers in addition to actual vintage clothing. That year, Susan traveled to the MAGIC trade show in Las Vegas to buy inventory that fit the site's new concept.
She and Eric married later that year and moved into a house in Pittsburgh, which they initially used as ModCloth's headquarters -- until the company outgrew it. "When we moved out, we had 16 people working out of there," Eric says. "The living room was our conference room. We had to get a second fridge for the kitchen." After receiving his MBA from Carnegie Mellon in 2007, he joined ModCloth full-time as CEO. The next year, the company moved into a converted steel mill in Pittsburgh's Strip district.
Since then, ModCloth has only continued to grow. The site now offers fashions from more than 300 designers. The Kogers have ramped up their staff, which totals 92. In the past year, to keep up with demand, they have added nearly 60 positions -- from fashion writers and stylists to Web developers and fulfillment staff.
ModCloth sets itself apart from other online clothing retailers, Susan says, through its authenticity. She and most of the company's employees are women in their 20s -- the company's target demographic. Susan, in consultation with ModCloth's buyers, still handpicks each piece sold through the site. The site also holds regular contests through Twitter, Facebook, and its own blog in which visitors submit names for new items and photos of their fashion ensembles. "We really want the customers to be truly involved," Susan says. "We're not some big retailer telling you, 'This is what you should be wearing." ModCloth has also succeeded in extending its online visibility. In the beginning, Susan swapped links with mom-and-pop vintage retailers in order to spread the word across the Web and increase ModCloth's page rank. The site is now one of the first results on Google for both the terms "vintage clothing" and "clothes."
But the Kogers have a larger vision for the site. Ultimately, Eric says, they aim for ModCloth to emulate the feel of combing through racks in a boutique. ModCloth has taken a small step toward that goal by allowing visitors to browse through ensembles worn by its models, similarly to how a brick-and-mortar shopper might browse mannequins' outfits. "The way that fashion is purchased is dramatically different than how books and electronics are purchased," he says. "Apparel is much more about the browsing experience. But every single e-commerce site is built with a books and electronics mindset."
That concept has helped ModCloth gain some impressive backers. In March, the company closed a $3 million round of funding led by Maples Investments, which has also invested in Digg and Twitter, and First Round Capital, a seed-stage venture firm led by Josh Kopelman, the founder of Half.com.
Developing that technology, the Kogers say, will help them build upon their strong rapport with their customers, which remains their top priority. "I think we're very unique in that there aren't many other retailers with a specific point of view," Susan says. "I'd much rather buy from a company where the founders are similar to me."
-- April Joyner
Watch ModCloth's video clip