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In the past year, LA-based ShoeDazzle has experienced more drama than most startups do in their entire existence. Brian Lee, co-founder and CEO of the company, offered a post-mortem at PandoMonthly in LA this evening.

In early 2012, Shoedazzle was coasting on its fast rise to the top of the subscription shoe category — a category that it basically created. Lee stepped aside to work on his new company, The Honest Co, and brought in Bill Strauss, former CEO of ProFlowers, to take over.

Strauss had the fundamentals of ecommerce down cold, having worked at ProFlowers for 13 years. He was particularly strong on data and analytics, and he had big plans to bring ShoeDazzle into new categories, continuing the company’s growth.

That’s when things went sideways. Strauss decided to kill ShoeDazzle’s subscription requirement, and it sent revenues into a downward spiral. (Pandodaily diligently documented the mess.) In retrospect, Lee said he only saw one red flag when handing his company off to Strauss, and that was Strauss’s lack of fashion and branding experience. That fear was not unfounded — Strauss didn’t understand the damage he could do to a fashion brand with discounting and direct marketing mailer campaigns that killed anything “aspirational” about ShoeDazzle. “Getting a 25 percent off coupon in the value pack isn’t the right brand,” Lee noted.

Now, Lee recognizes that getting rid of subscriptions was a death knell for a company that had once thrived on that model. “We were all nervous about it, even Bill (Strauss),” Lee said. But Strauss had staked his and the company’s reputation on it, and Lee had to let him do his job.

When it didn’t work, Strauss was out. Lee returned to the company to save it, starting by laying off 40 percent of the staff. He implemented a new form of subscriptions called VIP, which he compared to Amazon Prime. Clients pay $10 a month for credits and have a reason to be drawn back into the site each month. Shoedazzle is now close to 100,000 VIP subscribers who engage 35 percent more with Shoedazzle than non-subscribing customers and purchase twice as many more pairs of shoes, Lee said.

Bringing back subscriptions was one of Lee’s five-part recovery plan. Watch him describe the other four steps below.

Now, ShoeDazzle is stablized, but not growing. Lee said in order to grow, the company will have to raise more capital. He’s not giving up without a fight. “I don’t want to end my career saying that this one company did well, but the other two, not so much,” he said, referring to his other companies, LegalZoom and The Honest Co. “The reason I came back was to assure that ShoeDazzle had a happy ending.”

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