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Fab.com: Wooing Shoppers Back with Faster Shipping

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Fab.com: Wooing Shoppers Back with Faster Shipping
 
 

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Fab.com: Wooing Shoppers Back with Faster Shipping

Since moving away from flash sales and dealing with layoffs and the departure of a cofounder, it looks like Fab.com has bet on a new way to regain its old mojo: dramatically improved shipping quality and speed–even at a price.

Fab had its last flash sale in September of 2013. Since then, its shipping and fulfillment times have gone from mediocre for the overall slow flash category to among the fastest for retailers of any type, according to data from customer service tracker StellaService.

StellaService ships test packages to four regions of the United States each month from the top 125 retailers, measuring fulfillment and delivery times as well as package quality. The company’s tracking for Fab shows the site going from one of the slowest to up there alongside the gold standard for the industry, Amazon.com.

As a flash sales site from April 2012 to September 2013, it took Fab 9 days and 16 hours to complete a typical delivery, compared to 8 days and 17 hours for the flash sales category as a whole and about 5 days for the typical mass merchant. After the switch, that time dropped to 3 days and 16 hours, compared to 10 days for the flash merchants and almost 5 days for the typical mass merchant like Target or Wal-Mart.

Fab’s done even better in improving its fulfillment times, Stella says, joining Amazon in the ranks of retailers offering same-day fulfillment. Fab packages now get out the door in 6 hours, compared to almost 3 days during its flash sales model. Its erstwhile flash sale cohort today is much slower, taking 5 days and 19 hours, and it’s faster than the typical mass merchant, too–they take 1 day and 10 hours, according to the research.

“The more retailers we talk to, it comes back to how well do they forecast sales,” says Kevon Hills, Stella’s vice president of research. “Getting to same day fulfillment is pretty impressive.”

Fulfillment is easier when you have the inventory at hand as opposed to sent indirectly through the vendors you sign up for flash sales, says Forrester analyst Sucharita Mulpuru-Kodali. Flash sales make money by avoiding holding excess inventory. Fab now holds much of the inventory, though it says it drop ships from “reliable shipper” partners some, too. So happy, return customers are the future, not one-off buyers looking for a quick deal.

That helps explain Stella’s most surprising finding–that Fab has been quietly paying out of pocket to upgrade standard-shipping orders going cross country. While shoppers can pay $10 extra for a faster shipping experience, Fab’s keeping its order times at 3 days or less by paying the difference for orders heading to the West Coast. It’s a tactic out of Amazon’s playbook, but Amazon can get better rates with its massive economy of scale.

“Amazon upgrades orders all the time for exactly that reason,” says Mulpuru-Kodali at Forrester. “I don’t think there’s any huge mystery to it. It’s just bloody expensive which is why more companies don’t do it.”

Fab says it’s saving millions by shipping from its New Jersey warehouse called ‘The Rack’ compared to the tens of millions it could cost to operate a warehouse in California. The company recently retreated from its non-furniture sales in Europe by shuttering a costly warehouse project in Eindhoven in The Netherlands after the holiday rush. Now the company ships across the United States, Canada and Australia from its one facility.

For a company with a reputation for burning through cash– Fab’s raised $330 million to date–it may seem risky to be spending more money for faster orders. But even if Fab were losing money from this model, it could still benefit in the long-term, says Needham analyst Kerry Rice.

“The goal is to reduce friction as much as possible with repeat orders,” Rice says. “It’s a lot less expensive to retain a customer than to find a new one, so you want them to come back again.”

Still, fast service is not a guarantee of success—Rice points to Zulily as a winner with long wait times—and Fab could also be faster because its inventory-based order flow is a much lower volume than the low-cost, high frequency volume of its flash sales days. Fab says its typical order has more items now than it did during its flash sales, but the company declined to comment on its overall sales volume.

StellaService, which also tracks and rates retailers by their customer service (it had Fab.com tops in email responses and shipping for January, but dropping out of the top five in phone support) says it’s noticed Fab is spending more on marketing its brand on its packaging, too as part of this push for quality.

Happier customers may be what Fab needs to get back on its feet in the public eye after a tough fall. The company lost its early tastemaker, cofounder Bradford Shellhammer, who departed in November. And Fab has had to lay off several hundred people since the summer, losing key executives like its chief operating officer.

If Fab is to bounce back, it will need to do so on the strength of its product offerings that made it so popular through Shellhammer’s buyer efforts to stand out in a crowded commerce group. Pleasing its existing customers with strong shipping compared to those competitors would see a good place to start. And Rice, the Needham analyst, may prove right. Even retaining a diminished customer base for return orders is much cheaper in the long run than spending tens of millions on marketing, a tactic Fab has come to regret.

Follow me on ForbesTwitter and Facebook for more tech coverage in startups, ad tech, enterprise software and venture capital.

Source: Forbes

 

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