After laying off most of its staff, clothing resale startup Fashion Project regroups

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One of Boston’s highest-profile fashion startups laid off the bulk of its staff over the summer, the main phone line has been disconnected, and customers are wondering about the lack of customer service. But Fashion Project co-founder and CEO Anna Palmer says that the company hasn’t ceased operations, adding that she is in discussions with investors about possible financing deals or an acquisition.

Fashion Project originally launched in 2012, creating an online marketplace for “gently used” women’s apparel, primarily sourcing the clothing from charities. The idea was to get a better price tag for high-end items on the Web than the a charity might get in its own consignment shops, and help the charity raise money more efficiently. While Fashion Project was a for-profit company, taking a cut from every sale, all the donations passed through a charitable foundation, so they were tax deductible. (The company’s two founders, Palmer and Christine Rizk, are alumnae of Harvard Law School.)

The company went through the Techstars Boston accelerator program in 2012, and last year announced a funding round of $7.1 million. The investors included Robert Hall of handbag company Vera Bradley; Burch Creative Capital, the venture firm of J. Christopher Burch, who co-founded the designer apparel company Tory Burch LLC with his ex-wife, Tory Burch; Simon Venture Group, the investment arm of mall operator Simon Property Group; and Boston-based Schooner Capital. (I last visited the company in April 2014, when it was on the verge of moving to bigger offices in Boston’s Marine Industrial Park.)

Fashion Project is no longer accepting clothing donations. The company’s social media accounts haven’t been updated since Aug. 28. Several customers have posted on Fashion Project’s Facebook page with questions about why e-mails haven’t been answered, or clothing returns processed.

Palmer says that much of the $7 million the company raised last year “went into the hiring and the systems needed to sort donations and get them up on the site. We were receiving thousands of items daily.” And not all of the incoming apparel was of the best quality; a promotion with Nordstrom last year, in which Fashion Project gave customers $40 Nordstrom gift cards in exchange for donating five items of clothing, didn’t go as well as was hoped.

Palmer also says that it has proven difficult to compete with better-funded consignment startups when it comes to spending on marketing that brings in shoppers. In the Bay Area, the RealReal has raised $83 million, and ThredUp, founded in Cambridge but now based in San Francisco, has raised about $125 million. The capital pouring into those resale sites made it more difficult for “specialized” clothing consignment startups like Fashion Project to attract investment, Palmer says.

ThredUp founder and CEO James Reinhart said he hadn’t been following Fashion Project closely, but he observed in an e-mail that “this is a really hard [operations] business, so if you don’t get that piece right, I think it’s probably tough.”

Palmer said that the company has collected nearly $800,000 for charities since its founding, and charities working with the site say they’ve continued to receive checks as recently as September. (Fashion Project says it passes up to 55 percent of the net proceeds of every sale to participating nonprofits.) The Princeton nonprofit NEADS, which raises money to train guide dogs, held a fund-raiser at Fashion Project’s offices last week, and director of development Cathy Zemaitis says the organization received a $2,000 check recently. “They’ve been a great partner,” Zemaitis says. “I hope they’re able to come back around.”

The company said it had about 60 employees earlier this year; only a handful remain, though Palmer declined to be more specific. Chief operating officer Russell Taddeo left in July, and chief technology officer Joseph Terry departed in September, according to LinkedIn. Several rounds of layoffs happened between June and August as the company tried to raise additional funding, according to one former employee, who asked to remain anonymous.

Palmer says the site is hoping to work through a backlog in donations and also respond to customers as it considers its options. Those include raising additional funding, or being acquired. “We’re trying to figure out what our next move is as a company,” Palmer says. “The second-hand space has been pretty radically changing. We do have a couple interesting options ahead.”

Scott Kirsner writes the Innovation Economy column every Sunday in the Boston Globe, in which he tracks entrepreneurship, investment, and big company activities around New England.
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