Fab to lay off 15% of workforce to consolidate in NYC

It's litigation and layoffs for Fab this week, which is decidedly not fabulous

Fab is having a not-so-fab Tuesday. Just hours after news leaked Monday that JustFab is suing Fab for trademark infringement, Fab announced Tuesday morning that it’s laying off 100 people in its Berlin office as it consolidates its U.S. and European businesses in New York.

Fab CEO Jason Goldberg explained via his blog that the decision to eliminate 100 Berlin positions was the natural outgrowth of Fab’s efforts to move away from flash sales towards a more efficient inventory-planning model.

The fact is that flash sales are awesome, but the wait time to receive your items is decidedly not awesome. Waiting two weeks to get your order harkens back to the bad old days of e-commerce, when you could order something and completely forget you ordered it by the time it arrived on your doorstep.

As the key to e-commerce greatness is fast and free shipping, flash sales are an albatross around the neck. And until now, Fab has been essentially running two flash sales businesses—one in the U.S. and one in Europe.

“There is a high percentage of supplier and SKU overlap between the two regions but the nature of flash sales coming and going daily required us to build up large teams in both locations doing much of the same thing,” said Goldberg in a blog post. “To support this evolution of our business model, we are taking big steps today to also evolve our operating model.”

The positions going up for the ax include those in merchandising, operations, and marketing as Fab consolidates those areas in its New York location. Meanwhile, Goldberg says, the company is doubling its engineering team and hiring significantly in its sourcing and planning departments. And Fab will continue to run its local customer service, returns, shipping and logistics, finance, IT and HR positions in Europe at its Berlin office.

Fab currently has 696 employees, so the Berlin layoffs amount to roughly 15% of Fab’s total headcount.  

But layoffs aren’t the only baggage Fab has to deal with today. Subscription commerce platform JustFab is suing Fab for trademark infringement. Fab rebranded from Fabulis back in 2010, when it was still a location-based social network for the gay community. Now, nearly three years and more than $320 million later, a name change isn’t quite so easy.

“We’re in the business of fashion, not in the business of litigation. But we’ve worked very hard to establish our brand,” said JustFab in a prepared statement. “We are not only prepared to protect our intellectual property, but we also believe we have a responsibility to our members and to members of the general public to stop any actual or likely confusion that is created when someone else uses a similar name.”

It was only a matter of time before the Fabs started to turn on one another.

JustFab has raised $109 million since its inception in 2011 and had 15 million members worldwide as of May, 13 million of which are in the U.S. Earlier this year it acquired FabKids and The Fab Shoes.

Fab has 14 million members worldwide, and sales increased 500% in 2012. They’re expected to grow another 100% in 2013.

Image source: memegenerator.net