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Adam Goldenberg, Founder & CEO of JustFab, shares lessons learned with Bambi Francisco
At Vator Splash Oakland, Adam Goldenberg, Founder and CEO of JustFab sat down with Bambi Francisco to share his lessons learned starting multiple companies, including JustFab, an online fashion retailer, which is on track to generate $500 million in revenue this year.
Here are some highlights:
Francisco said that the number of startups in the "Unicorn" club (companies commanding billion-dollar valuations) has ramped up to about 100, suggesting that perhaps valuations are a bit lofty. What's Goldenberg's view on valuations? Goldenberg didn't really answer, but said, "My gut is that if you can invest in the 100 unicorns as an asset class, it would outperform the broader market. Some Unicorns may be overvalued, but the big dinosaurs are going to die."
On retail dinosaurs:
On who are the dinosaurs in the retail space? Goldenberg says Zara, Forever21, H&M and the Gap, explaining that five years from now, the amount of online retail purchases will double to $100 billion, and "the offline guys [won't] be ready to capture that online."
On revenue breakdown:
Fabletics, which is JustFab's activewear line, acounts for 30% of all revenue, up from zero 18 months ago, when Fabletics launched. Even though activewear is growing super fast, Goldenberg expects activewear to account for 30% by the end of 2016. JustFab's other lines fall under its "Fast Fashion" category, which accounts for 70% of its revenue. Since JustFab started as an online shoe retailer and purchased competitor ShoeDazzle, shoes still account for 60% of all revenue in the Fast Fashion category.
On the VIP subscription model:
Over 95% of sales come from 3.5 million VIP members, who pay $39.95 a month for discounted products. Members can opt out of shopping or pay the monthly fee as long as they opt out within the first five days of each month. This model has been in place from the start since Goldenberg learned from his earlier company DermStore.com, which was sold to Target in 2012, that it's expensive to acquire customers. More than a third of the company's marketing budget went toward re-acquiring customers they already had. By instituting a subscription model, JustFab could have a high degree of customer loyalty and engagement. Customers are six to eight times more likely to buy products when they're subscribers.
Asked what percent of the subscription revenue come from people who forget to opt out (like I did) during the first five days of the month, Goldenberg said it's a small percent.
On brand building:
The barrier to entry for an e-commerce company has dropped down significantly, making free shipping and 24/7 customer service a must-have. "To compete with guys like Amazon, you need to have your own proprietary product... Also, we never looked at ourselves as a technology company. We're building fashion brands and not an e-commerce company... "
On Fab.com, biggest challenges, and an IPO:
The team has been too stubborn to fail, says Goldenberg. "We never thought about quitting... The greatest difficulty we had was that it's a capital-intensive business. When something like a Fab.com blows up, it scares all the investors. Fundraising has been difficult sometimes."
"In 2010, when there were five of us, we said: We'd build a billion-dollar company. It's going to be hard. It's supposed to be hard... [Today] We're IPO ready. We'll go IPO at some point. But it's easier to build enterprise value as a private company. The pre-IPO round was to stay private longer."
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JustFab (www.JustFab.com) is an online fashion styling service and
lifestyle fashion brand that offers members a fun and engaging personalized
shopping experience. Members of the fashion service are given the celebrity
treatment every month as they receive a customized selection of shoes and
handbags, handpicked by stylists, along with the JustFab basics of denim and
other fashion essentials. VIP members can purchase items for $39.95 and
shipping is always free.