In its second-largest acquisition, Amazon buys the company for $970 million.
The fashion retailer also plans European expansion, starting with Germany.
Members-only e-retailer JustFabulous today announced it is shifting from selling solely through subscriptions to a hybrid model that enables non-subscribers to pay a premium to purchase items on JustFab.com.
The retailer’s offer to shoppers had been relatively simple. They could go to JustFab.com, fill out fashion personality quizzes and then receive an e-mail featuring six personalized shoe and handbag recommendations each month based on their answers. All products cost $39.95 and shoppers could either buy one or more of the suggested items, opt to skip purchasing anything that month, or request new recommendations. If subscribers didn’t make a selection by the fifth of the month, they’d be charged $39.95 and receive a credit they could use in the future.
The retailer will continue to offer the survey, which it says more than 6 million consumers have taken. And those survey results will continue to inform the recommendations sent to subscribers from the retailer’s more than 150 fashion consultants, who are generally new graduates from fashion schools. However, those who do not take the survey or subscribe can also buy items on JustFab.com at prices ranging from $49 to $69.
Today’s announcement is the second time this year that a retailer with a subscription model shifted its approach. At the end of March, ShoeDazzle.com announced that consumers who subscribe to receive the online shoe retailer’s personalized recommendations no longer need to reply to those picks within six days to avoid being charged.
However, JustFab’s co-CEO Adam Goldenberg says the move is not a reaction to ShoeDazzle’s announcement and that JustFab expects 90% to 95% of its revenue to continue to come from subscribers. JustFab generated roughly $25 million in revenue last year, says Goldenberg, and expects to quadruple that amount this year, based on its performance so far this year.
“The subscription service allows us to give shoppers an incredible product at a great price,” he says. “We expect subscriptions to be the vast majority of our revenue and the primary focus of our business because it drives engagement. But some shoppers are skeptical and want to see what we offer before subscribing. That’s who we’re seeking to serve with pay-as-you-go. Once they see what we offer, we’re confident they’ll subscribe.”
To persuade shoppers to subscribe, JustFab will offer some of its styles exclusively to subscribers. It is also launching an online forum where subscribers can upload photos and get style advice from JustFab fashion consultants, as well as other consumers, around the clock. Goldenberg says that he expects to have JustFab staff respond to consumer questions within 24 hours.
JustFab aims to maintain its subscriber base because the business model lowers customer acquisition costs, says Goldenberg. “Our VIP members shop with us again and again,” he says. “We don’t have to pay to reacquire the customer.” On average, subscribers come to JustFab.com 30 times a year, he says. That’s 18 more than is required, since subscribers have to reply to the retailer’s e-mails within five days.“Subscriptions enable us to have a deeper connection with our customer and remain top of mind,” he says.
It isn’t just U.S. consumers who are interested in building that type of relationship, says Goldenberg, which is why the retailer expanded into Canada last month and is entering Germany this week. The e-retailer plans to expand to other European markets as soon as it reaches undisclosed goals in Germany. Berlin will be the base of the retailer’s European operations.
“We like our competitive positioning in Europe,” he says. “This is a business where you need scale to be efficient. Europe is made up of small, fragmented players. We feel like we’re doing it right where we can leverage our size.”
While JustFab has an aggressive roadmap in Europe and beyond, some others with similar plans have struggled. ShoeDazzle, for instance, earlier this year closed its U.K. spinoff site ShoeDazzle UK after just four months in business.
At the Internet Retailer Conference & Exhibition 2012 in Chicago in June, several sessions will take up international e-commerce. For instance, Felicity Lewis, executive director of global online and CRM, Jurlique Holistic Skin Care Inc., and Maryssa Miller, vice president of e-commerce, Createthe Group, will speak in a session entitled “Bonus: Six keys to an effective global e-commerce operation.”