Modnique.com, a sister retailer to struggling Top 500 jewelry merchant Bidz.com Inc., says Salus Capital will be shutting the company down over the next few days due to unpaid debts.
Stefany Zaroban , Associate Director of Research
Web-only fashion retailer Modnique.com is poised to shut down over the next few days due to unpaid debts, company management tells Internet Retailer.
Modnique is a sister company of the struggling jewelry auction site Bidz.com Inc. On June 25, a group of Bidz.com creditors filed an involuntary petition for Chapter 7 bankruptcy in a Delaware court, according to public documents. This is essentially an effort to force the company into bankruptcy, and Bidz.com is opposing the filing, according to its attorney, Laurie Selber Silverstein.
Bidz.com, ranked in the Internet Retailer Top 500 Guide since 2006, was previously a public company. But in early 2013 its parent company, Glendon Group Inc. took the company private amid declining sales. The merchant brought in an estimated $50 million in online sales in 2013, down from its peak of $187.0 million in 2007.
In the last couple of years, the Glendon Group shifted much of its resources from the struggling Bidz side of the business, toward Modnique. It was successful in reaching international customers, and it was growing at 90% per year, says says Ivka Adam, vice president of marketing and mobile for Modnique. Last summer, the company purchased the assets of struggling flash-sale retailer Totsy.com, and it has been expanding to new international markets. As of the first quarter of 2014, Modnique had localized versions of its site in Canada, Russia, Australia and Eastern European markets.
But Totsy.com sales and its own growth wasn’t enough to offset Bidz.com’s declines, and both companies were unable to repay a $24.5 million loan from Salus Capital parent company Glendon Group took out in July of last year, Modnique says. Last week, Salus Capital told Modnique it was going to foreclose on both companies.
“The loan was granted to both companies,” Adam says. “Because Modnique and Bidz were officially legally tied and bound at the hip, both companies were liable for the debt.”
Bidz.com does not list a public or customer service phone number. Calls and e-mails to an attorney that represented Bidz.com when it went private were not returned.
“The past couple of months have been a struggle,” Adam adds. “We have been throwing out investor pitches for the last year, and we were even close to signing a deal recently, but the Bidz foreclosure and the Modnique foreclosure occurred before any agreement was reached.”
The bank is currently deciding the best way to foreclose on the debt, Modnique says, but it will likely seek a buyer for Modnique’s assets.
Both Modnique.com and Bidz.com web sites tell site visitors they are under construction, and an automated phone message at Modnique headquarters tells customers that the company is currently closed for maintenance, and to call back in 24 hours.
The Facebook page for Modnique.com is humming this week with the angry customers wondering about the status of their orders.
“I have orders totaling over $500,” one customer named Rozza Colegrove wrote on Saturday on Modnique’s timeline. “The web site says it is under construction and has been for six days. And no one is answering e-mails and there is no live chats. Does anyone know what's going on? It's quite worrying.”
Another customer, Mehrnoush Ghorbani wrote, “It is so inappropriate as if they had a planned outage they should have sent notifications to their customers. They have our credit card details and can't just disappear.”
Adam says one of Modnique management’s biggest concern is its customers, and it hopes that however the bank decides to foreclose on the debt will take care of customers who’ve already placed orders.
The retailer’s last Facebook post was on July 11.