From the valuation of 1 billion dollars to the embarrassing sale, the electric business Nova Fab sudden failure training

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2011, fab in the E-commerce circle quickly red, become a high-profile star Enterprise, around its various electric quotient of the Bible abound. But the latest news from Fab is that it is looking for acquisitions, and the company's core team will turn to another furniture hem. Analysts expect Fab's market capitalisation to be between 1 and 150 million dollars, which was valued at $1 billion when it accepted Tencent and Andreessen Horowitz investment last June.

What happened to fab in just over a year's time?

Hit, but it fell to the bottom.

Fab was originally a gay social networking site Fabulis, followed by an increase in group buying, but after more than a year of trying, the business has not been much improvement. Fabulis then shortened the name to Fab and turned to the design-class flash-purchase site. This transformation has made Fab famous, and Fab has become one of the fastest growing companies in E-commerce history. On the day of the line, Fab sold 65,000 of dollars, 18 days after its sales reached $1 million trillion, and in less than 3.5 months the company had 1 million users. This kind of development speed naturally attracts the attention of a large number of investment institutions, FAB also logically get a lot of financing.

But Fab's good days did not last long and soon suffered a development dilemma.

In the December 2012, although Fab's business is still in rapid development, but its CEO Jason Goldberg decided to gradually abandon the Flash purchase mode, try to switch to the full price of electricity, and developed its own brand and offline entity stores.

In April 2013, Fab announced a strategic transition, from a flash-purchase site to a more traditional design-featured retailer, Jasongoldberg said it wanted to create fab as "the world's largest retailer of creative products" and compete directly with Ikea and Amazon.

Since then Fab has started a series of turbulence. The first was layoffs, and in 2013 Fab carried out a rounds of layoffs, with a total of about 330 employees in Fab from June 2013 to November, about half of its staff at a peak of more than 700. In May 2014, Fab announced that it would lay off one-third of its remaining staff. For layoffs, Fab said the main reason is the company's business model adjustment, from the flash to the traditional electric business model so many employees are no longer suitable for the company's development requirements, the new model will not need so much manpower.

The second is the turbulence of the management team. Since April 2013, more than 10 of Fab's top executives have left, including COO Beth Ferreira, who picked up the merchandise from Esty, Bradford Shellhammer, CPO David Paltiel and so on. In addition, Fab's CEO and CTO have publicly stated that they will waive their 2014-year salary and streamline the company's product line to save costs.

The other is the explosion of traffic. According to Hitwise, a market research firm (pictured below), the September 2013 Fab site visited 1.05 million, compared to 4.2 million in September 2012, with a 75% drop in web traffic for one year. While FAB executives have said that Fab is more interested in high quality repeat customers, focusing on the quality of users rather than quantity, the decline in traffic will not have much impact. But the starting point of E-commerce is the flow, and the collapse of the flow of traffic will seriously affect the growth of the company's performance, more importantly reflects the company's consumers in the hearts of the decline in attractiveness, which is in the development of a start-up company, is definitely a very bad phenomenon.

The Fab's quest for sale basically announces the company's transformation failure. It can be said that the speed of fab fame and the speed of his fall as fast, yesterday or the face of the VC circle of money, the situation happened in the blink of a radical change. Fab has already made four rounds of $336 million trillion in billions of dollars in capital, and the company's valuations have topped 1 billion dollars, and analysts are currently valuing Fab at just 1 to 150 million dollars.

Whose fault is it?

When we go over the development of FAB, we will find that the turning point of the story was at the end of 2012 when Fab gradually abandoned the flash-buy model and tried to switch to the full price, when Fab was still growing at a high speed and still a star in the eyes of investors, In a few months, Fab completed the fourth round of 165 million dollars in financing. We do not know the specific operational data of fab, but we have reason to believe that if there are no such major strategic adjustments, Fab will at least stay on the throne for a while.

Of course, there is no reason for Fab to make such a significant strategic adjustment, the most important of which is the growing loss level, which keeps the company's management and investors from seeing the promise of profitability. To know that after four rounds of up to 336 million U.S. dollars to finance the FAB, if it is still difficult to find an effective way to profit, then find someone to blood transfusion will become very difficult, this is the biggest worry of high-speed growth, instant can let this foundation less solid building collapse. As a result, profitability has become the most important issue for Fab now.

On the issue of why companies continue to see no profit hope, management is targeting the business model. They believe that while the flash-buy model can effectively boost the rapid growth of income, can also achieve significant margin levels, but the operating expenses needed to prop up the flash-purchase business are huge, as new products and marketing are put on line every day, and they want to adopt the model of keeping inventories and making them online for longer periods until they sell out, In fact, the transformation of the traditional electric business model, they think that the operation of the company will be more efficient and easier to achieve the goal of profitability.

From the outside, I think the reason for this transformation is like a joke, a model does not let's try another. Of course, we start with the market situation, the characteristics of consumers and the characteristics of the category, it can be expected that Fab's marketing costs will be higher than the zuily and only items of the same flash site, even in very ideal circumstances, and consumers will be less active and repeat, but the fab gross margin can be as high as 40% Above, this and Zulily's gross margin is also quite, compared with the only product will be less than 25% is too much, so high gross margin I believe is absolutely can support fab operation.

So why does fab in the flash-buying model not see the promise of profit?

The first is that business expands too quickly. June 2011, fab on-line Flash purchase business, focusing on home creative products. But in a very short period of time Fab will expand the product category to men's, women's, children's wear, home textiles, pet goods, all inclusive. Fab has become popular around the world because of its unique temperament and artistic design, and is the embodiment of the FAB team's unique vision and taste for these commodities. But when the fab covers more categories, his features fade away, which many users complain about in social media. In addition, Fab has carried out a series of global expansion, acquired India's start-up technology company True Sparrowsystems, the United States retail website FashionStake, the German group buying website Casadanda, The British creative shop llustre and the custom furniture store in Germany massivkonzept the business to nearly 30 countries in a jiffy. The excessive expansion of business not only consumes a lot of capital, but more importantly, it is more fatal to make Fab lose its original features.

The second is the runaway cost control under the high income growth. This is almost the most direct reason for fab management not to see the profit hope, the operation of E-commerce is a system engineering, the business process and refinement requirements are very high, otherwise the user experience is difficult to reach the standard, the cost is very easy to lose control of the state. Too much attention to the large increase in sales, but the neglect of the details of the back-end operations and the reasonable ratio of cost and efficiency destroyed too many enterprises. Although we do not have the specific operational data for fab, we have reason to believe Fab's seriousness on this issue from marketing costs. 2012 Fab achieved sales revenue of 115 million U.S. dollars, but the marketing cost is as high as 40 million U.S. dollars, accounting for about 34.78% of sales revenue. By contrast, Zulily's 2012 figure was 11.41%, and 2013 fell to 8.6%, compared with only 4.66% in 2012. In the 2013, Fab realised the seriousness of the problem and began slashing marketing costs, which is one of the major causes of the slump in traffic.

Finally, the company's management. We cannot assert this, but the departure of so many senior executives within a year is certainly a matter for introspection.

In short, the rapid expansion of the business has led to a gradual loss of FAB features, has gradually lost its appeal to consumers, while the rapid expansion of runaway cost control has further brought the company into the Abyss, at a time when the company's management has too arbitrarily pointed the finger at the business model of the flash-purchase and embarked on a comprehensive transformation It was a turning point in the Fab story.

I have always believed that fab completely abandoned the purchase of Flash to the full price of the electric business decision-making is too arbitrary, fab management difficulties are not entirely attributable to this business model, but in any case the company made such a decision, and did not withstand the pain of the transition, not to face the situation of forced sale today.

New brand hem lessons to be learned

When Fab is sold, its core team will be the new brand hem. Hem will be online in a few months, but the team has made it clear that this is a furniture electrical goods card, and to become a "both product design, research and development, manufacturing to technology and logistics and many other functions in one company." "For Hem, I think the most important thing is to return to the essence of retailing, to regain the basic principles of business and the user's fundamental respect."

First of all to regain the design of the brand soul. Fab outbreaks are closely related to design and will be one of the key factors in hem success. In the late stages, the collapse of FAB traffic is a big part of its cut in marketing costs, but the most fundamental reason is the loss of self and identity in business expansion. Fab just on the line, whether the selection, pictures or mail marketing have a very strong sense of design and innovation, but also are fine, embodies fab unconventional artistic taste, this is the first fab in various social networking sites widely circulated reasons. But then "taste began to fall", "underachievement", "commodity lack of attraction" and so on are users in social media on their comments. It is worth mentioning that Bradford Shellhammer, once the co-founder and chief design officer of Fab, resigned in November 2013. Earlier, Jason Goldberg said Bradford Shellhammer is the company's secret weapon. A reporter asked Goldberg to rival opinion, Goldberg very proudly said: "This is a need to have the taste of the industry, unfortunately they did not shellhammer." "Unfortunately, there was no shellhammer of fab, and I wonder if this is another important reason for the decline in fab taste," he said. So for new brand Hem, how to regain fab original design taste is particularly critical.

Actually focus and focus. The Fab went too fast to lose the soul, and although Fab also understood this, and carried on the "slimming", cut off some of the "chicken" category, but also contracted the expansion of the region, but ultimately difficult to pull down. So hem can stay focused, and on this basis to do things professionally is the key to determine it, professional is to be from the product, price and service perspective to continuously pursue the continuous improvement of the user experience.

Second, pay attention to the ratio of cost to efficiency. E-commerce is a need to carefully calculate the industry, not only to focus on the growth of the scale, but also to strictly control the cost of expenditure, to ensure that each expenditure can produce the greatest effect. Sometimes earning money is a relatively difficult task, and saving money is relatively easy.

Finally, there must be a lasting battle mentality. Fab can rely on the design of the characteristics and the mode of flash overnight burst red, in a short time to attract a large number of users, but also from the capital market to get a large amount of financing, this is a very successful thing. But E-commerce is a very complex retail model, need to calm down to carefully polish every detail, after 20 years, 30 years or even longer to have a chance to achieve some real achievements, short-term high-speed growth or a night of red is just a sham, Fab's own story is also illustrated this point. Therefore, the new brand Hem management team should be prepared enough, have a peace of mind will hem as a work of art to build 20 years or longer, and avoid the rush.

The author Zhen Yuan, concern about the retail business, focus on how technology changes business, welcome to the micro-letter public number Daosuier99, the original link