Greg Selkoe founded Karmaloop.com out of the basement of his parent’s Boston home in 2000. Since then, he has grown it into one of the Internet’s leading streetwear destinations, with 2011 sales of $130 million, which were up 81 percent over the previous year. The site sells more than 500 brands targeting the young men and women of “verge culture” — the multicultural, tech-savvy and fashion-independent generation of consumers raised with the Internet. “The first two years I would get an order, come home from work, go into the basement. My mom was like, ‘What the hell are you doing in the basement all the time?’” recalled Selkoe. “I said, ‘I’m starting a clothing company.’ That made her even more worried. My girlfriend — who is now my wife — we would pack up the boxes and I would take the boxes to work and mail them.”
Selkoe, who holds a master’s degree in public policy from Harvard’s Kennedy School of Government, was working as an urban planner for the city of Boston at the time. While he wore a suit to work each day, he embraced DJ, skate and hip-hop culture and style on the weekends — and saw an opportunity to leverage the Internet to bring indie street and skate brands to a wider audience.
“I saw the heroes of the culture, like Mos Def and pro skaters, were all wearing these cool brands. If you didn’t live in New York or L.A., there were only a few boutiques and they didn’t have a huge selection. You really couldn’t get the stuff,” explained Selkoe. “But you had college kids in Corpus Christi, Texas, or at the University of Ohio and they knew these brands. The Internet was something that provided universal reach so that anyone in the world could dress like someone in the Village or Brooklyn or SoHo or Fairfax out in L.A.”
Selkoe credited two important factors to Karmaloop’s growth. The first was putting editorial content on the site, which boosted its credibility as an authentic hub for verge culture. The second was creating a rep program that allowed brand evangelists to earn cash and clothes for recruiting new customers to Karmaloop.
“Our audience saw Karmaloop as a destination to learn about that lifestyle they wanted to be part of. They understood that we were part of that culture,” said Selkoe of its editorial content, which includes interviews with designers and celebrities.
That audience now watches more than 4 million videos a month on Selkoe’s lifestyle entertainment site, KarmaloopTV, which launched in 2008.
The rep program has grown to about 100,000 participants, who account for about 25 percent of Karmaloop sales. Reps register for a unique identity number and can then distribute discounts of 10 to 20 percent to friends and contacts. Reps previously would market Karmaloop at bars and clubs — one enterprising rep printed his information inside fortune cookies and distributed them at Chinese restaurants — but today much of the work is done online via social networking sites.
Selkoe was careful to point out that Karmaloop’s verge culture audience is not the same as urban culture. Verge culture overlaps with the urban demographic in some respects but is more diverse. “It’s not that they don’t love hip-hop — they do love it — but that’s an old paradigm,” noted Selkoe. “Verge culture is both incredibly ethnically and racially diverse. They don’t define themselves by race. It’s less important than shared ideas and shared values.”
A high percentage of Karmaloop customers are college students and they tend to be technically advanced, ordering lots of iPhone accessories from Karmaloop. While they often gravitate towards indie brands and niche labels, they aren’t philosophically opposed to big brands like Nike, Apple and Red Bull. That attitude has helped Karmaloop retain its credibility, even as it grows into a $200 million company this year.
“They aren’t Sixties counter-culture. They love brands,” said Selkoe of his target demographic. “Clothing and fashion is important to them and they’d rather eat tuna fish for a month than not have the coolest sneakers and newest T-shirts.”
Karmaloop employs about 200 people at its Boston headquarters in addition to smaller offices in New York and Los Angeles. “I think the way I looked at Karmaloop, it’s the Millennium Falcon from ‘Star Wars,’” said Selkoe. “It was held together with glue and tape and always breaking but somehow always beat the competition anyway. We had to change that to continue to scale, so now we are really doing best practices.”