DEATH OF PUREPLAY RETAIL

INTELLIGENCE REPORT DEATH OF PUREPLAY RETAIL RETURN ON INVESTMENT

Pureplays: Losers in a Winner-Take-All E-Commerce Economy With outsized winners comes a plethora of losers—many of them pureplay e-tailers who have tumbled from lofty valuations earned several years prior. An obvious example is Fab.com, the flash sale darling of the venture capital community from 2011 to 2013. The company achieved $250 million in sales in its first two years, 30 and following a $150 million Series D round in June 2013, reached “unicorn” status with a $1 billion valuation. Yet during this high-growth period, Fab burned through cash, to the tune of as much as $14 million per month. 31 Shortly after its billion-dollar valuation, the company laid off roughly 1/7 of its staff, 32 as it transitioned from a flash sales site to an inventory-based e-commerce model. 33 30. “ How Fab.com went from a $1 billion valuation to a $15 million fire sale ,” Quartz, November 24, 2014. 31. Ibid. 32. “ Fab Lays Off More Than 100 Employees in Europe, as It Continues Retreat From Flash Sales ,” All Things D, July 30, 2013. 33. “ Fab Pivots Away from Flash Sales, Sets Sights on Amazon and Ikea ,” Forbes, April 30, 2013.

As Fab lost both money and the confidence of its investors, customers abandoned the e-tail site; searches for Fab fell by nearly 50 percent from November 2013 to May 2014. In March 2015, Irish manufacturing company PCH acquired Fab for $15 million, well below its historic $1 billion valuation. 34 In its rush for top-line sales and user growth, Fab used aggressive digital marketing strategies to acquire many customers who failed to make more than one purchase on the site. 35 The retailer also expanded its assortment, and in the process became just another online-only everything-store, undifferentiated from Amazon and big box omnichannel juggernauts.

34. “ PCH International in Talks to Buy Fab for $15 Million ,” TechCrunch, November 20, 2014. 35. “ The Tech ‘Titantic’: How Fab, a fast-growing billion-dollar startup, raised $330 million, then went bust ,” Business Insider Malaysia, “April 20, 2015.

Death of Pureplay Retail: Average Monthly Searches for Keyword “Fab” September 2013—August 2015

Death of Pureplay Retail: Fab.com Valuation & Total Capital Funding Raised Millions of Dollars June 2011—March 2015 ■ Valuation ■ Funding Raised

100k

$1,000

$1 Billion Valuation with ~700 employees

80k

$800

60k

$600 Dollars (In Millions)

Monthly Search Volume

40k

$400

20k

$200

Acquired by PCH for $15 million with~30 employees remaining

$0

0k

Sep. 2013

Jan. 2014

May. 2014

Sep. 2014

Jan. 2015

May. 2015

Aug. 2015

Jun. 2011

Mar. 2012

Dec. 2012

Sep. 2013

Jun. 2014

Mar. 2015

Source: Crunchbase, Press Reports.

Source: Google Keyword Planner.

36

January 12, 2016

Made with FlippingBook - Online catalogs