Fab to Buy European Company, May Create New Furniture Shopping Site
Fab’s board of directors has approved yet another new strategic plan for the e-commerce company that will include the purchase of a European furniture company and the likely creation of a new shopping site, several sources with knowledge of the discussions told Re/code.
The latest developments are part of an attempt to resuscitate a flailing global e-commerce business that was once a darling of the technology investment community.
Fab spokeswoman Amy Juaristi confirmed that Fab has signed a term sheet to spend an undisclosed amount of money on an unnamed Finland-based company that designs and manufactures furniture and then sells it online. The cash and stock deal is not final but is expected to happen soon. Fab previously acquired German custom furniture company Massivkonzept.
The potential acquisition is expected to help Fab with furniture design and manufacturing as the company refocuses its efforts on building a line of sofas, dining tables and other home furnishings — what Juaristi called Fab’s “most profitable business stream.” Fab.com will continue to exist and sell an assortment of design products, one source said.
Fab, according to two sources, is also working on creating a new shopping website to feature and sell its own home furnishings. Juaristi declined to comment on the plan.
News of the acquisition comes as a report in Valleywag claimed the company was likely to shut down by January 2015. Juaristi said the report was untrue and that it had no plans to shut down, adding that it had “several years” of cash to sustain the business at the current burn rate, which is $1.6 million a month after the latest restructuring. A source close to the company said Fab had about 40 months’ worth of cash in the bank.
“By all accounts Fab is not the rocket ship that it was forecasted to be by many investors, but it’s still in orbit,” one of the company’s investors told Re/code.
As part of its new plan, Fab has cut staff in the U.S. and will concentrate most of its workforce in India, Eastern Europe and Germany, where CEO Jason Goldberg is expected to spend a good deal of his time for the foreseeable future.
Fab’s U.S. workforce, which has already been gutted, may suffer further cuts, one source said. Yet several sources and the company spokeswoman maintain that Fab intends to continue to employ some people in the U.S.
The speed of Fab’s deterioration over the last 11 months has been startling. In July, the company announced a $150 million investment round that valued the company at $1 billion and pushed total funding north of $300 million. But since then Fab has undergone four rounds of layoffs, prompting comparisons to Goldberg’s failed stint at his previous company, Jobster, where he raised a bunch of cash only to see the business eventually spiral out of control.
Goldberg has said past layoffs at Fab were necessary cost reductions as he shifted the company’s focus from a labor-intensive flash-sale model, where tons of new products had to be sourced and prepped every day, to a more standard e-commerce shop with predictable inventory needs. The shift was meant to give Fab more control over the entire shopping experience from order through delivery and help the business reach profitability more quickly.
The latest plan is expected to see Fab double down on its private label business, which it believes is critical in order to sell products that Fab customers can’t find anywhere else, most notably on Amazon.com, while simultaneously boosting margins. But it is doing so in a category — furniture — that is still largely an offline business.