ShoeDazzle brings back its subscription model, cites increased engagement and customer satisfaction

By Michael Carney , written on October 15, 2013

From The News Desk

They’re baaaack! Subscriptions that is. Not across the board, mind you, because they never really left. Rather, subscriptions are back at ShoeDazzle, the fast fashion women's etailer that made the model famous, only to depart from it amidst a near-fatal CEO transition in late 2012.

Following a partial resurrection of the business by returning CEO (and co-founder) Brian Lee and a subsequent August 2013 sale to cross-town rival JustFab, ShoeDazzle is hoping to party like its 2011 again. Later this week, the company will bring back the same $39.95 monthly subscription model that allowed it to rocketship to a one-time $200 million valuation nearly two years ago.

Under the new (old) model, members will once again have the option to skip months, but have to log into their personalized showroom by a particular date to do so. In exchange, they will get access to shoes at 10 to 25 percent off their retail price, according to JustFab CEO Adam Goldenberg, as well as free shipping and exclusive access to merchandise and sales.

Critically, that $39.95 will get women a pair of shoes. While ShoeDazzle will continue to offer select products and designer collections at price points above $39.95, it will return to that uber-affordable price point for its core product. As Sarah Lacy wrote about the current VIP model earlier this year:

Lee’s [new] plan encourages the serendipity I loved about being a ShoeDazzle member: An insignificant amount disappears from your bank account every month, and pretty soon you have a big ol’ credit to spend on what feels like a free splurge. ...[But the current plan] doesn’t get you any shoe on the site the way the old one did. It’s somewhere between the old plan and what Amazon offers with Prime.
The subscription model is still optional, for both current and new members. Those signing up for ShoeDazzle for the first time will get the choice between joining its VIP program for the $39.95 plan or shopping the company’s “full priced” collection in a traditional ecommerce model. Current members will be grandfathered into their current $9.95 per month VIP plan or can choose to switch. Under the existing VIP plan, members get access to the same discounts and free shipping, and can also can apply the $9.95 toward future purchases, but cannot skip a month.

“We’ve really found that customers like to have the flexibility to buy or skip,” Goldenberg says. “It works for us too in terms of reducing churn and increasing engagement. It’s not always the case that what’s best for the customer is also good for the company, but luckily, this is such a case.”

Another benefit of ShoeDazzle’s newfound relationship with JustFab not to be overlooked is the impact on cost of customer acquisition. JustFab has always been best in class at this particular skill. Brian Lee has admitted in the past that rapidly rising costs of customer acquisition, not to mention rising costs of shoe production, hindered ShoeDazzle’s ability to be profitable at the $39.95 price point. Thanks to the acquisition, which affords ShoeDazzle access to JustFab’s online marketing expertise and also the sheer scale of the combined company, both issues are now far less problematic.

The decision to return to the original subscription model wasn’t a foregone conclusion when JustFab acquired ShoeDazzle, according to Goldenberg. While he says he had a hunch which model would fare better in an in-depth comparison, the companies waited to spend the time comparing the sales and customer satisfaction data-side by-side before taking any action.

“You’d imagine, given that JustFab has never deviated from this model over the last three plus years, that we had a strong belief that the flexible subscription model would be the best option,” Goldenberg says. “But we were open to evidence that proved otherwise.”

Alas, that was not the case. Ironically, ShoeDazzle and JustFab now offer a near identical membership structure, even though the companies are operating independently – customers have separate accounts with each, and cannot transfer credits across services, for example. It would seem that the move might make it easier to ultimately unify the businesses.

“You’d think so, but really it just comes down to customer satisfaction,” Goldenberg says. “Our ecommerce backend can support both VIP models in parallel and we’ve already migrated ShoeDazzle over without issue.” The two brands are better off separate, he adds, as they target similar but slightly different demographics and are merchandised differently.

Those differences are evident in the celebrity icons that each brand has chosen. In Kimora Lee Simmons, JustFab courts the edgy, urban conscious consumer. By contrast, ShoeDazzle’s relationship with Rachel Zoe (and before her Kim Kardashian) appeals more to a classic, sophisticated fashion consumer. Also, ShoeDazzle is all about shoes, while JustFab offers denim, apparel, and accessories. Both companies have always emphasized value, selection, and convenience.

So it would seem that with several years of data in hand, the scale tips in the favor of subscriptions as the most effective fast fashion business model. But that’s only half the picture. As we’ve written in the past, subscriptions aren’t a silver bullet, and they only work in select cases and when companies can deliver sufficient value in terms of user experience, customer service, and product quality to warrant the commitment from consumers.

“That’s one reason we’re so committed to the $39.95 price point,” Goldenberg says. “We introduced JustFab Luxe in August and started offering shoes priced from $59 to $99, but that’s still niche for us and will likely remain so. Subscriptions requires that you give them incredible value in exchange.”

He continued, “For us, it’s not necessarily about customers buying from us every month, but more about them engaging every month. JustFab’s customers return to the site nearly 30 times per year.”

Originally the model and price point was ShoeDazzle’s idea, and JustFab was the copycat. So it’s only fitting that Goldenberg has belatedly given it back.

[Image via FashionFix]