According to a Forrester release, US e-commerce sales are projected to grow from $294 billion in 2014 to $414 billion by the year 2018 at a compound annual growth rate of 9.5% between 2013 and 2018. However, that market still has a long way to grow considering that the total retail market in the country is $3 trillion.
Los Angeles-based JustFab is among the leading fashion e-tailers that allows its patrons access to celebrity style fashion without paying the high prices associated with such products. The site began as a subscription service for shoes and since then has expanded to handbags, jewelry, denim, athletic gear, and kids clothing that they design and manufacture. Their team includes expert Hollywood stylists, industry insiders, and trendsetters who curate trendy products across their four brands JustFab, ShoeDazzle, Fabletics, and FabKids.
JustFab operates on a subscription commerce model charging their customers a monthly membership for their products. JustFab believes that when bought from a traditional retailer, a customer already pays five times the production price of the product. By cutting out middlemen and department store overheads, JustFab is able to offer the same product for a much lower price.
To sign up, a user needs to create their style profile to help JustFab determine what design products they would like. The first purchase made on their site enables the member to become a VIP Club patron which lets them buy one product each month for a price of $39.95 including features such as free shipping and free returns. From the first day of every month the user has access to a personalized boutique created for them. They then need to either make a purchase or opt out of the purchase for the month by the fifth day of the month. If the user does not opt out, they are charged the monthly fee and issued a corresponding credit for the store.
There has been some criticism for JustFab’s subscription model as customers have complained of “deceptive marketing” saying that they are automatically signed up for the subscription when they make their first non-subscription-based purchase.
But that has not stopped their growth. JustFab’s model is doing rather well with a customer churn of less than 3%. They have 1.5 million active members and target to reach 3 million by the end of the year. They expect to earn $400 million in revenues in 2014 with projections to turn in $500 million in revenues by next year. JustFab also claims that their US operations have turned in profits for all months this year. They have also expanded their operations internationally and have retail operations in Europe as well.
JustFab has been venture funded so far with $249 million in funding from investors including Technology Crossover Ventures, Matrix Partners, Shining Capital, Passport Capital, Rho Ventures, and Intelligent Beauty. Last month, JustFab also entered the billion dollar club when they raised $85 million at a valuation of $1 billion from their existing investors. Given their success, an IPO may soon be on the cards.