Fab has lost its special sauce

Fab has lost its special sauce

BY ERIN GRIFFITH 
ON NOVEMBER 1, 2013

Fab CEO Jason Goldberg has always said that no other site could compete with his because “This is a taste business,” and “They don’t have a Bradford.” Guess what? Now, neither does Fab. The news that Fab’s co-founder and Chief Creative Officer is leaving the company does not bode well. Bradford Shellhammer has been touted as the secret ingredient to the biggest, most well-funded, fastest-growing e-commerce company of the last few years. Goldberg has said many times: He built the company around Bradford’s taste. (That taste, for the unfamiliar, is a sort of a cross between the MoMA store and Spencer’s Gifts.) Bradford Shellhammer is Fab. Or was.Shellhammer has made a career out of selling his taste. That move has been key to the latest wave of ecommerce. His departure raises questions about all the other companies riding the wave of “curation” that Fab has led. Shellhammer’s role as Chief Creative Officer has been copied by many other companies looking to inject a point of view into their offerings. Last week eBay announcedMichael Phillips Moskowitz, CEO of curation site Bureau of Trade, will become eBay’s Editorial Director and Chief Curator.

It’s been said countless times: If something has a UPC code, Amazon will beat you. In other words, it’s impossible to compete with Amazon on price. So your only hope as an ecommerce site is to compete on selection. Look at Fab, Etsy, Gilt Groupe, Birchbox, One Kings Lane and Zulilly. They all offer something that Amazon doesn’t. A point of view, a curated selection and interesting grouping of items from a variety of sources you wouldn’t find at the mall (aka, Amazon).

It’s not clear why Shellhammer left. People close to the company are saying this was in the works for some time. The company outgrew him, as is the case with many high profile co-founder departures (Foursquare comes to mind). Some even described Shellhammer as mercurial and “crazy.”

A blog post by Goldberg reads almost like an apology.

Along the way Bradford and I had the privilege of traveling the world together. He was best man at my wedding. I was best man at his wedding. We laughed. We cried. We smiled. We are family.

and

To my friend and co-founder: I love you. Thank you for just being you. We’re all just lucky to have been touched by your magic.

He noted that Fab will “aim to honor Bradford daily” by fulfilling his original mission. That’s going to be tough — Fab was created specifically to sell Shellhammer’s quirky taste to the masses.

If Bradford’s creative genius is as important to the brand as Goldberg has said, it is a negative reflection of Goldberg’s ability to “manage crazy”– something many media company CEO’s need to do. The broader story here may be that Fab has ultimately been forced to pick commerce over content.

Goldberg has said that Fab has hired or bred many “mini-Bradfords,” aka lieutenant tastemakers who can copy his taste. Scaling is an issue for any company built on taste and human curation — taste is the one thing algorithms can’t predict.

Then again, copying the tastes and aesthetic of others may be the key to Fab’s strategy going forward. The site is focusing more on its private label business, or goods designed and made in-house. Currently that business makes up 5 percent of Fab’s sales, but Goldberg wants it to be closer to 30 or 40 percent. Shellhammer was no stranger to  knock-offs, as evidenced in a Fast Company profile from this year.

 ”The Expedit–” he says, reciting the ubiquitous Swedish shelf’s name. “Knock that off. See what you can do with that.” Then he corrects himself. “The world doesn’t need another–we don’t need to copy Ikea shelves. Let’s do something that’s inspired by it, but different.”

Lucky for Fab, it doesn’t take great taste to make a knock-off.

On the business side, Fab has had a rough year. The company has been transitioning from flash sales to regular old e-commerce, but there has been some pain in the process. Fab has undergone several rounds of layoffs, totaling 250 employees.

Before that, the company’s finances were messy: When it raised its latest round of funding in April, Fab expected to lose $50 million this year. (It lost $90 million last year as first reported by PandoDaily.) The layoffs have helped the company drop its burn rate significantly. Goldberg has said he hopes to reach profitability next year, and he and CTO Nishith Shah even forfeited their salaries.

On the product side, the company recently killed its Feed, a feature on its website which Goldberg said drove purchases two times more than the homepage.

Goldberg is wildly ambitious about Fab. As I wrote in April, his eyes are bigger than his wallet. He wants it to become a billion-dollar company, and he’s raised $336 million to do it. With an army of “mini-Bradfords” trained to copy Shellhammer’s taste (and, apparently, that of others, too), he has a strong brand. It’s up to him whether the business he’s built around that brand lives up to it.

Fab’s investors include The Washington Post Company, Allen Morgan, Lars Hinrichs, Don Baer, Baroda Ventures, Thrive Capital, First Round Capital (where Partner Josh Kopelman is a personal investor in PandoDaily), Baroda Ventures, Zelkova Ventures, SoftTech VC, SV Angel, Menlo Ventures (which invested in Pandodaily via its Talent Fund), Ashton Kutcher, Guy Oseary, Kevin Rose, Jon Anderson, Dave Morgan, Ben Ling, David Tisch, A-Grade Investments, Andreessen Horowitz (where partners Marc Andreessen, Chris Dixon and Jeff Jordan are personal investors in PandoDaily), RTP Ventures, Pinnacle Ventures, DoCoMo Capital, Mayfield Fund, Atomico, VTB Capital Investment Management, and Phenomen Ventures.

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Bamboo Innovator Institute is set up to establish the thought leadership of resilient value creators around the world. KB Kee is the Managing Editor of the Moat Report Asia (www.moatreport.com), a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia. The Moat Report is developed together with our European partners The Manual of Ideas (www.manualofideas.com), the idea-oriented acclaimed monthly research publication for institutional and private investors. The MRA’s paid-subscribers from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities and savvy private individual investors. KB has presented his thought leadership as a keynote speaker in global investing conferences. KB has trained CEOs, entrepreneurs, CFOs, management executives in business strategy, macroeconomic and industry trends in Singapore, HK and China. KB has been rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets. He was head of research and fund manager at a Singapore-based value investment firm since 2002. As a member of the investment committee, he helped the firm’s Asia-focused equity funds significantly outperform the benchmark index. He was previously the portfolio manager for Asia-Pacific equities at Mirae Asset Global Investments, Korea’s largest mutual fund company. He holds a Masters in Finance and degrees in Accountancy and Business Management, summa cum laude, from the Singapore Management University (SMU). He had published cutting-edge empirical research in the Special Issue of Istanbul Stock Exchange 25th Year Anniversary of the Boğaziçi Journal, Review of Social and Economic Studies, as well as wrote articles about value investing and corporate governance in the media. KB is currently a faculty member at the School of Accountancy, Singapore Management University, where he teaches accounting courses that include Management Accounting and Accounting Fraud in Asia.

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