Here comes the consolidation of the the Web-only fashion industry, which considering the number of sites that have popped up in recent years seemed all but inevitable. The deal between ShoeDazzle and JustFab, both L.A. businesses, is being billed as a merger, but the combined company will operate under the JustFab name, with JustFab's coCEOs, Adam Goldenberg and Don Resssler, running the place and ShoeDazzle CEO Brian Lee joining the new board. ShoeDazzle, which had been fronted by Kim Kardashian, got off to a strong start in 2009 with a subscription model that had members purchasing a new pair of shoes every month. However, business slacked off last year and the subscription idea was abandoned. JustFab has a more diverse product mix. I suspect we'll see lots more dealmaking. From the Business Journal:
Although the companies have been considered fiercely competitive rivals in the subscription e-commerce space, both Lee and Goldenberg said the combined brands were complementary. Footwear accounts for 90 percent of ShoeDazzle's revenue, Lee said. JustFab, meanwhile, has been branching into lifestyle brands, including kids clothing and, soon, athletic wear. With a joined JustFab and ShoeDazzle, Lee said the company is setting its sights on the fast-fashion giants, such as H&M and Zara. "It's all about getting to scale in order to become a large profitable business," Lee said. "The synergies between our companies will almost guarantee that we'll be able to." Lee briefly left ShoeDazzle last year to head up Honest Co., a Santa Monica e-commerce firm he founded with actress Jessica Alba. But ShoeDazzle faltered in his absence and he returned to the company later that year while retaining his position at Honest.
As I point out in the August issue of Los Angeles magazine, the online fashion space has gained many converts, but like so much of digital commerce (Amazon excepted) it remains a sketchy marketplace. Turns out that brick-and-mortar retailers have been pretty resilient to the Web crowd. From my piece:
ShoeDazzle, Beachmint, DailyLook, ThreadSense--L.A. has become a hotbed for online entrepreneurs, many of them in the fashion business. Some have received millions of dollars in venture financing; others are struggling to get beyond early-stage funding. Nearly all are still grappling with how to attract and hold onto a fickle customer who is not entirely sold on Internet shopping. "You want to make sure people like the stuff you're selling, and you want to make sure people know about it," says Jeremy Liew, a partner at Silicon Valley's Lightspeed Venture Partners, which has invested in numerous online sites, including LivingSocial and Flixster.
While just 1 or 2 percent of the fashion market is made up of e-commerce-only sites, sales topped $1 billion in the 12-month period that ended in March, according to the research firm NPD Group--a 31 percent jump from the 12 months before. "You're seeing a lot of capital chasing the business," says Brien Rowe, managing director of the L.A. investment firm Intrepid. "It's the online retailer that provides more than the shopping experience. It's editorial, it's advice, it's community--it's an experience that drives the customer to come back repeatedly."