Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
The social revolution.
Fab.com is one of the more spectacular stories to emerge in e-commerce over the last two years, and social media has been at the heart of its sales strategy from day one. The members-only flash-sale retailer launched in June 2011, following a pre-launch ad campaign it ran on Facebook to recruit its first 200,000 members. Five months later it had 1 million members, had raised $40 million from investors and closed the calendar year with nearly $20 million in sales, enough to make it one of the 500 leading online retailers in North America according to annual sales. It ranks No. 449 in Internet Retailer's 2012 Top 500 Guide.
In 2012 it expanded internationally to sell to consumers in 20 countries, raised $105 million in additional funding and anticipated closing 2012 with about $150 million in sales. It now claims 10 million members, half of which Fab.com says became members as a result of Fab.com's efforts to promote itself through social media. And its existing members did most of that recruitment work on the e-retailer's behalf.
That's how I became a Fab.com customer. A friend I'm linked to on Facebook let Fab.com post news of his purchase of an art poster on his Facebook page. I then saw that action in my news feed. Intrigued by the poster, I clicked the link in the post and joined Fab so I could browse the site. I didn't buy right away, but becoming a member added me to the e-retailer's daily e-mail list. A few weeks later I spent $60 with Fab. And I shared news of that purchase on my own Facebook page.
Fab.com gets 25% of its site traffic referred to it by social networks—that's stunning, but it's not the whole story. A formula devised by Internet Retailer's research staff lets us calculate how traffic from social sites translates into e-retail sales, which we're calling social commerce sales. The Internet Retailer Social Media 300, a new research guide available this month digitally and in print, ranks the top 300 North American e-retailers by the amount of traffic they get from social networks, and the formula translates what that traffic means in sales for each merchant.
The formula estimates Fab.com's social commerce sales for 2012 at $50 million, a third of its expected total sales. And that estimate inevitably understates the impact of social media. Because of tracking limitations, the social commerce sales formula counts only sales completed during the visit that happens following the click from a social network. That means my own $60 purchase isn't included in that total even though my social media exposure to the e-retailer clearly influenced my purchase.
Few e-retailers have been able to harness the power of social media as well as Fab.com, and social commerce traffic and sales levels are substantially lower for most of the 300 e-retailers in the guide. But Fab.com demonstrates the enormous reach and potential of social commerce. You can read more about the creative ways e-retailers, especially web-only merchants like Fab.com, Build.com and PetFlow.com, incorporate social media into their marketing techniques in this month's cover story (page 26) co-authored by Internet Retailer research analyst Stefany Moore and managing editor Zak Stambor.
Elsewhere in this issue you'll find stories covering other challenges facing e-retailers heading into the New Year. Check out our stories on web site design (page 36) and read what is on the 2013 to-do list of top e-retail executives (page 32).
Best wishes for a successful 2013.
Allison Enright, Editor