This is an updated blog post on the customer experience driven innovation story of Fab.com.
In January 2010, Jason Goldberg and Bradford Shellhammer launched Fabulis.com, a social networking website for gay people. The initial vision of the founders was to become Yelp, Groupon and Facebook for gay people. Jason Goldberg was a successful serial entrepreneur who had successfully exited a couple of ventures before and Bradford Shellhammer was good with design. They both launched this social networking website which managed to attract 110,000 total customers and about 30,000 active users. Though they built a good website, Fabulis.com did not deliver a differentiated customer experience compared to Yelp, Groupon or Facebook, so gay people did not feel the need to use this website.
By early 2011, the founders realized that they need to do something different. So they shut down the site in order to develop a newer, un-served niche where they could be much more successful — one based on design. In June 2011, they launched Fab.com, a flash sales website (i.e. a site that offers products at deep discounts for a limited time) for the fashion-oriented customer segment.
When Fab.com decided to move away from the gay market to a flash sales market, they entered an overcrowded marketplace with players like amazon.com, branded retail stores/websites, and many flash sales websites. All these retail outlets offered price discounts and had spent a lot of money to attract customers to their sites/stores. So how could a start-up compete against these seasoned incumbents? Fab.com did so by focusing on delivering a customer experience that was different from any other retailer.
Online/Retail shoppers have different expectations based on what the shopper is looking for and the time of the year. During holidays they want a wide choice of gifts at throw away prices; at times like Valentine’s Day they want to find cool surprises. And throughout the year it is about finding the items that they need at a reasonable price or with a memorable customer experience. Retailers and websites that have successfully differentiated themselves on the customer experience they deliver have seen repeat customers.
In order to understand how Fab.com differentiated itself in the overcrowded retail space, let us compare them with the customer experience delivered by other types of retailers in a variety of shopping situations.
High-end retailers, like Niemen Marcus or Louis Vuitton, attract shoppers who are looking for specific high-end fashion products. Over the years these high-end retailers have improved their ability to attract and sell to both impulse shoppers and fashion oriented shoppers by delivering a good customer experience. They meet customer requirements by providing them the products they are looking for; hence the requirements aspect of customer experience is high. They make it convenient for the customer to shop in their stores, provide good service, and deliver high quality products that are very fashionable. So these high-end retailers score high on convenience, service/support, quality and fashion. They cannot guarantee that the specific item that the customer is shopping for is available in the store, but they can get it shipped to the customer’s home through their online stores. Hence they typically rate as “medium” on availability aspect of customer experience. The customer experience delivered by these high-end retailers is shown in the figure below.
Customer Experience delivered by High-end Retailers
Now let’s review the shopping experience delivered by online retailers like Amazon.com. The key to Amazon.com’s success is to deliver a customer experience that makes the customer think of them first while shopping online. They are focused on attracting customers who know what they want, and are looking to buy soon. So they make sure that they have what the customer is looking for, at the right price, in a convenient online location, and with reasonable customer support. They have a variety of items available, from books, toys, electronics, games, watches etc. But the primary factors that they differentiate on are Price, Convenience and Availability. The price factor is very important for online shopping and they deliver this by making sure that the prices of items sold on Amazon.com are highly competitive. Amazon.com makes it convenient for customers to find the products they want to buy through a very efficient search engine. Also they have a good recommendation engine which suggests products to the customer based on the buying history of other similar users. These coupled with free two day shipping for Prime customers, and free regular shipping for all customers on most items, make it convenient for the customers to shop at Amazon.com. The customer experience delivered by Amazon.com is shown in Figure 4 below.
Amazon.com Customer Experience
Between the high-end retailers and Amazon.com, fashion, convenience, price, service/support and quality aspects of customer experience have already been covered. So how could Fab.com differentiate itself from Amazon.com and these high-end retailers by offering something new to fashion oriented customers?
First and foremost they achieved this by focusing on design, delivered through an attractive website that offers cool products with high visual appeal to fashion-oriented shoppers. Visitors to Fab.com are not necessarily looking for a specific item; they do, however, want access to some cool, visually appealing products they wouldn’t find anywhere else. Every day at Fab.com, customers can find wide variety of products including artwork, jewelry, and designer furniture with prices ranging from $1 to $1000+. Fab.com does not restrict itself to a core set of designers; rather it offers any product that has cool design that would appeal to its customer base. This kind of variety is difficult to find in high-end retail stores, which is how Fab.com offers more to its customers.
Fab.com also offers deep discounts for limited time, which tempts customers to make impulse purchases. These discounts include their daily sales of up to 70%, with most prominent discounts in the 25% to 45% range. These sales are offered for 72 hours and shoppers see a counter on top of each product page that creates an urgency to buy. Also, when the customer adds the item to the shopping cart they have 15 minutes to make the purchase. After 15 minutes the item is automatically removed from the cart. This creates a sense of urgency for the customer, and helps the impulse buyer to make that purchase.
It is great to offer fashionable products at deep discounts and get impulse buyers to make that purchase. But for a business to be successful and attract enough paying customers, it needs to satisfy the customer experience across at least three factors. And this is true for Fab.com as well, as it needs customers to visit its website and trust it to share their credit card information with the website. Also, since a website creates a sense of urgency for buying the products it is essential for customer to trust the company for making the purchase. This is where the need for a strong brand comes in for Fab.com, and the founders did a great job of building the brand within a limited budget.
Before launching the website Fab.com signed up about 175,000 customers through various viral marketing activities and strategic advertising. This ensured that the sellers were willing to sell the products at Fab.com as the site had a decent customer base. Fab.com built social sharing capability within the website and encouraged their customers to share their purchase information with their friends on social networks like Facebook. Many customers were happy to share the information about the cool products that they bought at Fab.com. This created further brand recognition and attracted more customers to the website.
After getting an initial set of customers and modest success, Fab.com founders shared their story of converting a failure to success with media and on social media. This topic is of interest many people and after reading about this success story people started exploring Fab.com. Blogs, news articles, presentations, videos, twitter feeds and Facebook shares went buzzing with the Fab.com success story. This created global brand value for Fab.com, and they saw their customer base increase exponentially. Within seven months of launching the website, Fab.com had two million subscribers with about $200,000 daily sales on average.
Fab.com Customer Experience
The above picture depicts the customer experience delivered by Fab.com, which is high on three factors Fashion, Brand and Price. It is not a website that customers visit when they want to buy a specific product as that product might not be available on the website. Fab.com does not store any inventory, and it passes the order out to the seller for fulfillment. This leads to long delays in shipment of the orders. Most customers expect an ecommerce website to have the products they need and ship it to them as soon as the order is placed. So Fab.com does not meet the requirements of online shopper and hence scores low on requirements aspect of customer experience.
The site conducts product flash sales for 72 hours, and after that the product might not be available. Also, there are limited quantity of items available for sale, hence Fab.com scores low on availability. Lack of search engine to search for products, brand names or designers make it less convenient for the customers, hence it scores low on convenience aspect of customer experience. Long wait times for receiving the product without a way to track the true status of the order and no return policy make Fab.com score low on support/service. Like many online retailers it would be difficult for Fab.com to control the quality aspect of the product as it is really the experience delivered by the seller. Hence it scores low on quality aspect of customer experience as well.
Overall Fab.com has experienced good growth and profitability by focusing on three aspects of customer experience (Price, Fashion and Brand). But to continue growing it would need to offer better customer experience across a few other factors as well.
Fab.com is a great example of how innovative companies can be successful by delivering good customer experience on just three factors, the minimum number required for achieving customer attention. Similarly, innovative companies looking to differentiate themselves in a crowded marketplace should figure out the three factors that can help them differentiate and deliver good experience across those three factors.