Rakuten Buys Virtual Fitting Room Startup Fits.Me In A Fashion Commerce Play

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Rakuten — Japan’s answer to Amazon with e-commerce operations and investments that stretch from digital media and e-commerce marketplaces through to social media and transport apps — is making another acquisition to expand its holdings, this time in the area of fashion.

The company has acquired Fits.me, a startup founded in Estonia and now headquartered in London that develops “virtual fitting rooms” — two-way technology that lets online buyers who can’t physically try something on better visualise how those items might fit them; and lets retailers collect more information about the preferences and interests of visitors to their sites (for the latter, think ad tech applied to fashion to improve personalization).

Rakuten plans to run Fits.me as a standalone business, where it will continue to develop its technology, grow its business and work with existing clients. The latter includes Thomas Pink, Hugo Boss and home shopping channel QVC. James Gambrell will stay on as CEO of the 65-person company, which still lists co-founders Heikki Haldre and Paul Pallin as active employees.

We’d actually heard that Rakuten had acquired Fits.me a couple of weeks ago, but neither company would comment on the deal.

There was a reason for this. Rakuten has been on a buying and investment spree in the last couple of quarters — perhaps most notably leading a $530 million round of funding for Lyft in March — and in June it launched a share offering to raise $1.5 billion to help finance some of that activity. That offering put the company in a quiet period, but today it closed — hence the Fits.me acquisition is now being confirmed.

(Two sidenotes: It sounds like this may not be the last we hear of Rakuten’s M&A and investment activity. We understand that the company is interested in another European startup, for starters. But at the same time, there is at least one deal that we’re hearing is no longer. The company’s bid to buy PopSugar, which we reported in June, has now apparently gone cold.)

Fits.me will in the future also be working more closely with Rakuten. No specific details yet on how, but Rakuten is already very active in several areas where you could see Fits.me being a good (wait for it) fit.

They include fashion and beauty products sold through its main Rakuten.com portal; the company’s fashion-focused sites like StyLife in Japan and Vault in the U.S.; and its different holdings in online marketing. Rakuten also has a stake in Pinterest, the image-led social site that has recently moved deeper into commerce.

“Fits.me represents both the fun and functionality of shopping online and is a natural complement to our growing portfolio of e-commerce and marketing services,” said Rakuten’s CEO and founder Hiroshi Mikitani in a statement. “Not only does the virtual fitting room provide customers with a more realistic shopping experience, it also empowers merchants with the valuable data they need to continually improve their service.”

Among the consumer-focused services that Fits.me has created to date are robot mannequins that adjust to your size to show you online how an item you want to buy will look; and tech that maps out a profile of how you might look wearing a particular size of an item, after you provide details like weight, age, height and so on.

Prior to Rakuten buying Fits.me, the company, founded in 2010, was in the process of raising a round of funding — specifically looking for strategic investors to complement the $14.3 million it had already received from Gambrell himself, Conor Venture Partners, Entrepreneurs Fund, SmartCap and a number of others. From what we understand, companies that were looking at Fits.me also included the likes of eBay.

While Rakuten was initially approached to make an investment in Fits.me, it decided to make an offer for the company outright. Fits.me agreed because, in Gambrell’s words, “It is the right partner. Rakuten is on the look out for ways to be creative to achieve success. We help connect the dots by providing value to different parts of the organization.”

But there was also the issue of competition. Gambrell says Fits.me tracked more than 320 competitors in the market, ranging from others providing online fitting room technology like Metail through to those who help personalise what selection an online shopper sees when browsing on a site.

On top of this, there was already a consolidation trend underway, with eBay buying PhiSixMyntra buying Fitiquette (and eventually itself getting acquired by Flipkart), and even Fits.me buying Clothes Horse. In that regard, joining Rakuten helps Fits.me scale and stay in the game.

Fits.me and Rakuten are not disclosing the price of this acquisition, but one source says “investors were happy.”

Prior to this, Rakuten’s most recent acquisition was of Japanese travel site Voyagin. Other acquisitions in Europe have included the messaging app Viber, headquartered in Cyprus; and video streaming site Wuaki; and French e-commerce portal Priceminister.