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While massive retailers like Best Buy, JCPenney and Wal-Mart grapple with how to build bridges to the online shopping world, all the hottest e-commerce companies, including Warby Parker, Bonobos and Betabrand, are getting into the bricks-and-mortar business. Now you can add modern design site Fab, arguably this year's breakout e-commerce startup, to the growing list.
“We very much want a (physical) Fab store because we think we can create an amazing experience,” Fab CEO Jason Goldberg says. “The question for us is when, not if.”
Creating an offline version of an online store might not be as radical as it sounds. Amazon and eBay, while not opening big-box stores anytime soon, are tiptoeing their way toward a physical presence with lockers (Amazon) and one-hour pickup from local retailers (eBay). But a niche site like Fab might have an easier time reproducing the online experience of their store in an offline format. And thanks to Goldberg's redesign this year of Fab from flash sales site (a la Gilt Groupe) to massively growing online store, Fab’s got the momentum to pull it off.
By nearly every metric, Fab exploded in 2012: It grew from 1.5 million members in December 2011 to 10 million in December 2012; inventory expanded from 2,000 products to 15,000; and sales topped $1 million per day on several occasions, Goldberg says.
Goldberg got Fab there by carefully setting goals to add more products to the site, and very deliberately moving Fab away from the flash sales model, where a limited number of products are sold for a few days or hours. “We found that people weren’t coming to Fab with the perception of getting a deal, so we saw an opportunity to build a long-term brand,” says Goldberg. That meant building a full-fledged digital storefront, with a mix of limited-quantity goods and products that are consistently available.
Fab also had to do what most flash sales sites like Ru La La and Gilt Groupe don’t – take on inventory. That took serious courage, and serious cash. In July 2012, Fab raised $105 million from Atomic, along with previous investors Andreessen Horowitz, Menlo Ventures, First Round Capital and others, to lease a warehouse, build its own supply chain, and purchase inventory. Now, products come into Fab’s New Jersey warehouse and remain there until the sale ends, usually between three and 30 days later. “If someone orders something that’s in our warehouse, which is 75 percent of what we sell, it starts shipping in two hours,” Goldberg says. That’s a huge change from the 16 days it typically took Fab to ship products using a patchwork of a supply chain in 2011.
Even though Fab is on its “second pivot,” as Goldberg calls it (its first pivot was from gay social network to flash sales), he has even more changes planned for next year. “In 2013, we’re heading towards becoming even more of a store, and even more of a discovery business,” he says. Given that one-third of Fab's sales come from tablets and smartphones, you can expect the model to be "mobile-first," says Goldberg. Flash sales will also fade into the background, and you’ll see more exclusive-to-Fab products pop up on the site.
But the biggest change in Fab's business will happen when it starts opening stores sometime next year, according to Goldberg, who says he wants to “reinvent the entire retail experience, not just put some Fab products on a shelf." He's not talking pop-up stores either, but imagines a Fab flagship store initially, likely in New York City, where the startup is based.
Details are still under wraps, but Goldberg uses art – which makes up 12 percent of Fab’s sales – as an example. Since people are often intimidated to buy art from a gallery, says Goldberg, Fab wants to offer an "easier and less-scary way" to pick out a painting to hang on the wall or a sculpture to perch in an entryway. Goldberg won't reveal more than that. And while it might end up being a more soothing experience for Fab shoppers, if you're a bricks-and-mortar retailer in the high-design and art world, Design Within Reach for example, things just got a lot scarier.
