JustFab Raises $76 Million to Cement Fashion Ecommerce Lead, Pushes International Expansion
If “money talks,” investors are shouting praise from the rooftops for ecommerce fashion retailer JustFab. The company is announcing $76 million in new financing today in an enormous Series B round led by Rho Ventures with participation from existing investors Matrix Partners, Technology Crossover Ventures, and JustFab parent company Intelligent Beauty.
JustFab is one of several large players in the space, which also includes ShoeDazzle and Beachmint. Each of these companies offers some combination of a personal stylist, curated showrooms, and value-oriented pricing. Others have recently changed their business models or seen the departure of key personnel. JustFab, which many users and investors alike have told me offers the best customer service and personalization, has been the steadiest of the bunch with its model. Its appears to be posting some of the healthiest numbers as a result.
With more than six million members and 500,000 new members being added monthly, the company is as healthy and rapidly growing as any in the industry. According to co-founder and co-CEO Adam Goldenberg, JustFab is on pace to generate more than $100 million in revenue in calendar 2012, representing year-over-year growth of four times in that regard, and is quickly approaching profitability.
While JustFab’s revenue seems to be similar to that of ShoeDazzle (as far as it has been publicly reported), it is being driven by less total customers, meaning per customer revenue is actually greater. What this will mean in the long term is yet to be seen. As we reported, recently ShoeDazzle made the surprising decision to walk away from an nearly identical business that was posting similarly nosebleed results precisely in order to get a broader base of customers using its product. Meanwhile, JustFab has stuck to the original plan. The two businesses which once seemed identical are now playing for exactly opposite metrics, with the bragging rights of leading LA commerce giant hanging in the balance.
For Goldberg's part, he's bullish on his chances. His aggressive forecasts calls for $500 million in revenues by 2015. “At a time when others are retreating from the subscriptions and international markets, we see massive growth and opportunity,” he says. “Our rapidly growing, extremely loyal membership base is a resounding endorsement of JustFab’s merchandising and sales model.”
“JustFab has flawlessly executed its plans, proving that there is a right way to do subscriptions,” adds Matrix general partner and JustFab board member Josh Hannah. “It has masterfully done what no one else has been able to do, and the team has accomplished it in record time.”
JustFab is just one of three massive subsidiaries of brand-building juggernaut Intelligent Beauty. The parent company was founded by Goldenberg and his longtime partner Don Ressler after selling their previous venture Intermix Media (parent company to MySpace) to NewsCorp in 2006. The consolidated revenue of the three brands is on pace to reach $400 million this year. The other two brands, Dermstore and Sensa, are both significantly profitable and leaders in their respective categories.
Goldenberg and Ressler are known as masters of online brand building and direct-to-consumer, high ROI marketing. The pair brought in celebrity icon and proven fashion executive Kimora Lee Simmons as president and chief creative officer a little over one year ago. Each of the investors I spoke to were relentless in their praise for the team.
“The really compelling thing for us here was the team of seasoned individuals who really know how to build,” says Rho Ventures managing partner and new JustFab board member Mark Leschly. “They have shown ability to spend media dollars at scale, to attract customers at very exciting economics, and to manage the key fundamentals like customer acquisition, churn, inventory management, and fulfillment. This is one of the more exciting transactions I’ve participated in in a long time.”
Matrix general partner and existing JustFab board member Josh Hanna had similar thoughts, saying, “Ecommerce represents great opportunity as an investor, but it requires incredible execution and the ability to manage hundreds of things simultaneously. Adam and Don’s understanding of the levers and important metrics of the business are like nothing I’ve ever seen.”
According to the company, the new capital will be used to further its international expansion, move into additional fashion categories, and allow for future acquisitions. JustFab currently offers shoes, handbags, jewelry, denim, and accessories but ultimately aims to offer a full fashion catalog along the lines of "fast fashion specialty retailers” Forever 21 and H&M.
The three-year-old JustFab is well established in North America and recently launched its European operations with a continental headquarters in Munich, Germany. According to Goldenberg, adoption and growth in Europe’s largest country has been better than expected, with the company reaching its nine month goals in under 90 days. The next step is expansion into the UK planned for September, with additional European markets to follow shortly thereafter and a longer term eye on Latin America and Asia.
International customers have apparently been cheaper to acquire in the early going, and more lucrative over time, than those domestically. Although the company knows it’s still early and that no definitive conclusions can be drawn, they are ecstatic with the the initial results.
JustFab’s US users visit its online showrooms 30 times per year on average, which is far more traffic than most offline retailers see. With each visit, the showrooms are completely customized to the tastes of the user and the latest merchandise available on the site. One of JustFab’s biggest advantages is its scale. The company has grown to the point where it can access better quality merchandise at more attractive pricing than nearly all of its competitors.
According to Goldenberg, JustFab pays $3 to $8 less per item than do its competitors, and it did itself in the recent past. At hundreds of thousands of unit sales per month, that’s real money. “Very few companies can buy 5,000 or more units per style,” says the chief executive. “You really need to be a $100 million business.”
“We raised a lot more money than we need this time around,” says Goldenberg, after having bootstrapped the company over its first 18 months. “But we like being well capitalized and see an enormous opportunity to change the way women shop for fashion, both in the US and abroad.”