JustFab, the subscription-based fashion commerce site, is putting the $109 million that it has raised so far to use: today it is announcing the acquisition of The Fab Shoes, a European e-commerce shoe club in France and Spain, to build out its global operations. Terms of the deal were not disclosed.
The deal will give JustFab a stronger foothold in the European market: it already has operations in Germany, where it has a European HQ in Berlin, as well as in the UK; now it will be adding France and Spain, with the integrated site coming in July 2013. Growth in Europe has been coming at a fast pace for the company so far. In 2012, JustFab did $2 million in sales, co-founder and co-CEO Adam Goldenberg tells TechCrunch (he shares the CEO role with co-founder Don Resller). ”This year we are on track to exceed $30 million.” The Fab Shoes has slightly more than 500,000 users; combining that with the 1.5 million across Germany and the UK, JustFab will now have over 2 million members, with 15 million worldwide, and is on track to do $250 million in revenue globally ($215 million in the U.S.).
Call it a funny coincidence, but this isn’t the first acquisition JustFab has made of a would-be competitor with the word “Fab” in its name. Earlier this year, the company acquired FabKids to spearhead a move into children’s fashion. “We have a running joke that whoever is called ‘Fab’, we’ll buy them,” says CEO Adam Goldenberg. (And indeed that may not extend to the biggest Fab of all, Fab.com, which apparently is now raising a $250 million round at a $1 billion valuation.)
More seriously, Goldenberg says that his company is not singularly focused on buying up so-called “clones” of its own service. Taking a lesson from some of the challenges companies like Groupon have had digesting large, inorganic acquisitions to scale up their services — from what we understand Groupon has yet to migrate many of its extensive global assets on to a single common platform with the U.S. operation — JustFab has a different approach.
As Goldenberg describes it, the company’s M&A policy is based on acquiring smaller businesses that complement JustFab’s and are also built on the same subscription model. This means that they can be easily integrated into the bigger company’s infrastructure.
There is another reason for this: it’s increasingly a challenge for e-commerce fashion companies these days to raise money, with much of it going instead to those that have proven to have the most scale. “This is part of the reason why we raised such a big round last year,” Goldenberg noted. The Fab Shoes, founded in early 2012, was raising financing — or trying to — when JustFab came knocking.
“Scale and infrastructure are key if you want to grow quickly in the fashion business,” said Pablo Szefner, CEO of The Fab Shoes, in a statement. “While The Fab Shoes has had a lot of early success, we are thrilled to take our core business to the next level. With JustFab, we can provide our existing members and potential new customers with excellent styles, quality and service for an outstanding shopping experience.”
“We met Pablo and Xisco” — Pablo Szefner, CEO of The Fab Shoes and Xisco de la Calle, its COO — “and we decided this would be a great talent acquisition as well.” De la Calle will become the VP of operations for JustFab Europe, while Pablo becomes General Manager for France and Spain, overseeing 12 employees in Barcelona and Paris.
While some have waved a red flag over subscription-commerce sites — the implication being that they are not transparent enough about how they charge users on a regular basis — Goldenberg is insistent that this is a model that works well and is a hit with its customers, and investors. “There is a subscription commerce funding craze right now,” he says. “But because it is so low-cost you have to have the scale to make the economics of it work. We have millions of satisfied customers.”
Looking ahead, he says the company is planning to launch more products beyond the shoes that are the basis of the company’s model. In addition to childrens’ clothes that will go online in June, there is already denim and handbags that altogether make up about 30% of the company’s sales. And he hints that there will be another fashion category being launched later this year. “We’re building the next generation of H&M and Zara,” he says. Through all of that, “we’re staying entirely focused on subscription-based commerce.”