Karmaloop has a new owner and it’s neither Damon Dash nor Kanye West.
The streetwear e-commerce site has been acquired by Shiekh Shoes, a California-based sneaker retailer that operates 136 stores in the U.S. The terms of the deal were not disclosed.
Matt Fine, the president of Shiekh Shoes, believes the deal will benefit both businesses, which share a similar shopper.
“We are predominately a brick and mortar retailer and we think that in the future, having a strong balance between brick and mortar and a compelling e-commerce business will be a successful formula,” said Fine. “There are also synergies between our customer. For me, this deal is two plus two equals six.”
According to Fine, Shiekh Shoes started to eye Karmaloop once it filed for bankruptcy last March, but the e-commerce site’s more recent standing — it was sold to Comvest Partners and CapX Partners for $13 million last May — made the acquisition more advantageous.
“When they first filed for bankruptcy, we didn’t think we could realize the business the way we wanted to,” Fine told WWD.
Greg Selkoe, who founded Karmaloop in 1999 and left the business shortly after it was acquired, is optimistic about the new owners.
“The brand is something I built over 15 years and it’s obviously something that I care about,” said Selkoe, who is working on a new e-commerce venture. “Certainly, the new owners are very friendly to me as opposed to Comvest. With Comvest we were not aligned and I didn’t like how they treated the customers. But with Shiekh Shoes, I’ve actually spoken to the team and known about this deal for several weeks.”
Selkoe isn’t sure how the acquisition will affect his current standing with Comvest, which sued him in August for breach of contract, alleging that he owes them money. When Karmloop filed for bankruptcy it owed $29 million and Selkoe agreed to personally pay $5 million of it.
“They are making money, so hopefully they will leave me alone,” Selkoe said.
Seth Haber, who was hired by Karmaloop shortly after Selkoe left, will no longer serve as chief executive officer, but Fine said he would consult him as needed.
“This is a great deal for all involved. It’s a true win-win. I look forward to watching the team at Shiekh Shoes take Karmaloop to the next level,” said Haber, who previously co-owned the Agenda trade show.
Although Fine said the deal is in its infancy stages and no big decisions have been made, his first priority is winning back trust with Karmaloop’s consumer. For the past few years customers have complained about cancelled orders, missing orders and missing refunds.
“The consumer comes first and we want to deliver a great experience as well as a compelling brand mix,” Fine said.
He has no plans to change the DNA of Karmaloop, but he will be relying on consumers’ shopping habits and requests to dictate any shifts. He’s also hoping to break new brands and offer exclusive collaborations on the site.
Shiekh Shoes is privately owned by Shiekh Ellahi, who opened his first store in San Francisco in 1992. Fine wouldn’t reveal the company’s size, but said the business is profitable and in a good position.
Fine, who previously worked at Nike, was hired as president in 2014 to elevate the position of Shiekh Shoes in the marketplace and refine the brand’s purpose. Since his arrival, the brand has been re-merchandised and its stores have been updated. For now, Fine has no plans to open brick and mortar stores for Karmaloop, but he said he won’t rule it out.
While Fine admitted the streetwear category is going through a lull and Karmaloop is nowhere near its sales in its heyday – at one point is was well over a $100 million business – he is excited by the site’s analytics, database and weekly active users.
“I’m encouraged by the numbers,” said Fine. “We see a great opportunity in front of us.”