The company faced many ups and down through the lane of business. It has suffered from being investor of the largest startups to firing two-third of employees in a single shot. Jason Goldberg having Bradford Shellhammer as his key executive were the founders of the company. Without experiencing a lot of business undertakings as the years went through, the company began to decline.
The two invested $200M, and the business failed to prove its business model despite all the investments done. Fab was the most heavily funded startup the NYC ever had in its business history, but the business did not make progress as years went through. The company faced a high rank a lot of sales and also fell a bad defeat in merely a time of three years. Fab also faced rumors that it would be acquired by PCH innovations for mere $15 million.
The founder Jason Goldberg admitted in a staff meeting that the company did not carried out its process as planned and had lost all its investments due to poor sales operations.
Starting with the Start
The company was formulated in a time of three weeks. The founders named it Fab.com- which was a design-focused, e-commerce site. Fab was dedicated to sell third-party items from small design shops across the globe. Fab used a flash-sales model, which had fortunately proved successful for sites such as Gilt Groupe and Ruelala.
The Sales Ideas
Shellhammer brought up an idea to collect items including into the store that were not found on any other e-commerce site. For this many funky items were included to the store that people literally bought. Additionally, he taught Fab could increase sales if its users invites their friends through social channels such as Facebook.
With the company performing well in the market, many big investors invested huge amount of money to the company hoping it will pay off well. Among them were, actor Ashton Kutcher and another Silicon Valley investor who invested an amount of 1 Million. And soon, Fab had as many as 1.3 million users with an annual run rate of $80 million.
By June 2012, Fab had an employee power of 150 and had raised $105 million at a $500 million valuation. Shortly after this, Fab took over to three other company’s and expanded boundaries to Europe. This expansion costed the company $60 to $100 million. Fab now had too many employees and the sales were not significant after this step. Ultimately this extension had to shut down with a big loss.
Expansions that lead to Decline
The site already had 32 categories of items. The most significant and power factor of Fab products was that they were not found across any other sites. With the expansion of categories in Food and Pet items, Fab lost its competitive edge. The reasons were- these items were available across other sites as well such as Amazon, at lower cost and it was also delivering the item in less time as compared to Fab. Due to this, Fab ditched the idea of Flash sales, and according to one employee, it was a kiss of death.
The Messed up Cost and Sales Structure
Despite of all the mistakes the company made, Goldberg began fund-raising in the Spring but soon realized that money became harder to round up than he had predicted. Soon they realized that Fab had some serious gaps that were caused due to growth tactics and the Europe expansion plan. Also they realized, that the Facebook marketing campaigns did not resulted in repeated buying patterns as expected.
Jason also ignored recommendations and warning about the cost structure. The senior staff and the advisors pointed to cut costs sooner in order to save the revenue, but negligence and reluctance led to painful death.