E-commerce site sets its sights on Asia
IN LESS than two years, e-commerce site Fab.com bought companies in Germany and Britain, relocated the London employees to Berlin, and then cut more than 100 of the workers there.
The New York-based startup now wants to focus on growing its business in Asia. That decision came earlier this year when the company raised US$150 million (S$189 million) from investors such as China's Tencent Holdings, at an eye-popping US$1-billion valuation.
Last week, CEO Jason Goldberg announced that Fab had raised another US$10 million from the venture arm of SingTel.
Mr Goldberg apparently came to the realisation that he had been investing in the wrong global strategy.
"When we were a flash-sales website we essentially launched a new store every day - and a different one in Europe than in the US," he wrote in an e-mail to employees.
"The best global stores don't operate like that. The way that stores operate and scale globally is to sell the same stuff everywhere. That's what Ikea does... That's what ASOS does. That's what Fab needs to do."
Fab's change of heart underscores the difficulty of international expansion for a startup with a business plan still in flux.
Groupon expanded aggressively overseas, partially motivated by copycat competitors.
"The clones just completely lifted everything that we were doing," founder Andrew Mason lamented at a conference in 2011. Groupon's efforts suffered from sluggish growth and other existential challenges with the business. It ended up scaling back its ambitious Chinese operation and then initiated a merger of it last year with a local competitor.
Not every e-commerce company finds going global to be something of a disaster. Gilt Groupe, which hosts flash sales similar to the ones Fab popularised, is having some success by teaming up with SoftBank in Japan.
But some executives are cautious about moving abroad too soon or without the right partners. For example, New York-based ZocDoc, which makes a tool for scheduling doctor's appointments, is waiting until it becomes big enough in the US before trying to go overseas.
Mr Goldberg's motivation for taking Fab into Germany appeared to centre on crushing a copycat, started by the Samwer brothers' clone factory, Rocket Internet.
When that was accomplished, his goals for Europe shifted. The company decided to have just one online store, operated out of New York, and this conflicted with the Fab outfit in Berlin.
Mr Goldberg said in the internal memo that his decision to cut employees in Europe was "personally painful but...not a result of any financial difficulties or a change in commitment to Berlin, Germany, the UK, the broader EU or our overall growth".
He plans to build a billion-dollar business in Europe over time, he wrote to employees. Time will tell.