Curated ecommerce is a hot topic. Call it a new wave of commerce businesses or just a new vertical that has gained a lot of momentum over the last 6 months. The Gilt Groupe started it after Vente-privee mastered flash sales.It is full priced online retail with a focus on apparel and white goods.
Just to be clear flash sales is not the same thing as curated commerce. Flash sales boils down to selling high value merchandise at deeply discounted price. Flash sales is an industry that I keep an eye on as I believe it is a good measure of where apparel online retail is at. Curated commerce is ecommerce with a editorial angle to it (beautiful images, content that is more related to the person buying the item) .
Flash sale businesses have steadily been pivoting to full price commerce as the flash sales businesses is in the decline in mature markets (Ventee-Privee and Markafoni being the exception to the general trend) . Flash sales also faced stern competition for attention and inbox space from daily deals (Groupon, LivingSocial). Ultimately companies who are succeeding in ecommerce are those who have built deep relationships with their customers based on being customer centric, logistics focused and ensuring that joy is created post transaction.
Enter the upstart
I have been following the journey of Fab.com pretty closely as I believe that they are part of a new wave of ecommerce businesses. Jason Goldberg is someone I deeply respect as he is transparent (his blog is a must read for any one in ecommerce) but they are like Amazon as they fret the little stuff. The business is unique and making lots of noise and have gone through a variety of pivots. Pivot has a serious misdirection in this case as Goldberg and co-founder Bradford Shellhammer have refocused their business 5 times. The 5th being the most ambitious I have seen from a startup (more on that later).
What is the mission?
Goldberg’s blog has the company’s mission as:
Fab’s mission is to help people better their lives with design. Millions of people around the world use Fab to discover everyday design products at great prices, to connect with the world’s most exciting designers, and to share their favorite design inspirations. Smile, you’re designed to.
Design is slowly becoming a must have for any digital business. Apple have always executed it unlike any other business and slowly others have done so in terms of UI design. The point is, finding proper designed clothing and merchandise is nothing short of a nightmare. So there is scope for a digital business to make the niche theirs and make millions of dollars for investors. However, I think we all need to be cognizant of a few things.
Compare apples with apples
I have a problem with Goldberg’s constant mention of the fact that they want to become the “Amazon.com of design”. Amazon is a unique case and in most likelihood wont be replicated. The Seattle business has scale, a huge variety of revenue making opportunities (I don’t think anyone in ecommerce has as many chances to make revenue from a customer as Amazon does) and has 25% of all global internet traffic coming to their various businesses. I might be over reacting but I think Fab.com has a long way to go to even be mentioned in the same conversation on ecommerce.
I believe their direct comparison is IKEA. Another small company that has many millions in revenue, that has been in operation for 70 years. IKEA is a juggernaut that operates 338 stores in 40 countries worldwide. The point I am trying to make is that Fab.com is trying to be seen with companies that have history, has made millions of dollars and Euros in revenue and are both juggernauts. Yet, Fab has only been around for 18 months.The
Pivot number 5
Let me be clear when I say that ecommerce businesses going into physical retail is an activity into the unknown. The really big ecommerce players (Amazon, Alibaba.com, Rakuten etc) have all stayed away from this transformation as it ultimately downgrades a huge advantage online shopping has over bricks and mortar.No store rental, no additional logistics to the retail store etc.
The 5th pivot as seen in detail below is very ambitious.
The announcements are:
A major pivot, redesign, relaunch of Fab as the World’s #1 Design Store. The New Fab – redesigned from the ground up — is now live on Fab.com in the U.S. and it will be live in Europe as well in the coming weeks.
The introduction of 3 types of Exclusively Fab products: Products Designed by Fab, Designer Collaborations, and Products Found by Fab.
The launch of Fab in France, now giving us coverage into 99% of the European Union.
The acquisition of MassivKonzept, the leading startup in online customized furniture, which is now being relaunched as Fab Designed By You.
The launch of Fab’s first physical retail concept.
Fab.com acquiring MassivKonzept is in my mind the direct connection to their move towards becoming the digital IKEA. “Online furniture retail is ripe for disruption. We think it’s possible to bring fun, modern, quirky products to people on a large scale,” Goldberg said. Fab.com making IKEA like furniture available to their countries of operation is interesting as now suddenly a whole new skill set will be needed for Fab.com to hire. Retail is a tough business currently being disrupted by mobile and I personally feel the move towards a retail presence is a rushed one. It might make sense for them but the implications might be only seen in the long term.
Massivkonzept by the numbers:
$1000 average shopping cart, with largest customization orders reaching up to $100,000
Over 10% sales are B2B: office owners, architects and carpenters buy from us
900,000 people have used the configuration tools online.
10% of sales in 2 years are from repeat buyers
We’re excited to now relaunch MassivKonzept as Fab, Designed By You, also known as Fab DBY.
Fab.com’s future concerns
It is pretty clear that Fab is backed by an all-star cast of investors but with this last pivot I would not be surprised if they raise some capital in the coming months. They have no other option as I think they need to grow considerably in terms of customers and sales in order to be sustainable.
Fab now serves more than 11 million members across 26 countries. Fab grew sales by more than 500% in 2012, one-third of which comes from users of the Fab mobile apps for iPad, iPhone, and Android devices. In February 2013 Fab was named the #5 most innovative company in the World by Fast Company. Fab won the award for Best E-Commerce Company of The Year at The Crunchies in both 2012 and 2011. It’s all very humbling and inspiring. The truth is we celebrate our challenges more than our successes at Fab and we’re really still just getting started.
Fab has always mentioned percentages when sales are given to the media but I believe they are spending a lot in terms of customer acquisition costs. A third of the sales come from mobile – interesting but if you look clearly then you would see in your inbox that at the end of a quarter then mobile app promotions are done to get transactions on the platforms. Note no mention of return customers nor percentage of international sales.
From the outside my other big concern is the ability to scale this business. Curation is driven by humans and Bradford Shellhammer seems to have a big say in terms of merchandise selection. I might be wrong but that element would make acquisitions and future growth a very difficult proposition.
I have no problem with ambitious goals for commerce companies, however Fab has gone “all-in” in trying to become an IKEA. Does this end badly for Fab or are they onto something?