They say it’s the tough decisions that make us stronger.
Today is a tough day for Fab and our amazingly talented and hard working team as we are putting into effect a considered initiative to centralize much of our operations at our New York headquarters. While the resultant efficiencies will add immense value to our growing global customer base, this change will also eliminate more than 100 positions in our Berlin office due to redundancies by the end of 2013. Fab remains 100% committed to the European market and the Fab Berlin office will continue to support our growing EU presence with a more tightly focused team in place. Fab’s European customers will not see any disruption in service. This is a strategic business decision, endorsed by our investors with whom we discussed this possibility, but that doesn’t obviate the sadness we feel in saying good-bye to the many people who helped put Fab on the amazing path we are on today.
Earlier this year Fab announced that we are pivoting our business model from our roots in flash sales to being a comprehensive online lifestyle shop. Over the past couple of years we realized that in order to exceed the expectations of our customers — including fast, free shipping and free returns on a great assortment of the most exciting lifestyle products in the world – that we would need to shift our business model to an inventory planning model. We are still working our way through that shift.
This evolution of our business model is key to our executing on our mission to be the place where people around the world discover the most exciting things in their lives. We are building a scalable model that allows us to sell the same products simultaneously everywhere around the globe while giving our customers complete confidence in their purchases. That was hard to do with flash sales as products would come and go from Fab daily; the nature of flash sales dictates that products are not kept in inventory and are thus very difficult to ship fast or for free. However, fast and free shipping is possible with an inventory-planning model. We’ve been working towards that, focusing on buying and making Fab products that are unique and special and that we can sell everywhere, again and again and again.
Last month we announced that Fab raised $150 million to fuel this next phase of our business.
With recent investments from Tencent of China and ITOCHU of Japan, and more Asian partners on the way, we’ve been evaluating the best way to bring Fab to consumers in Asia. All signs point to selling the same Fab products as we are selling in the U.S. and Europe.
Up until now Fab essentially ran two separate flash-sales businesses, one in the U.S. and another in Europe. There is a high percentage of supplier and SKU overlap between the two regions but the nature of flash sales coming and going daily required us to build up large teams in both locations doing much of the same thing.
To support this evolution of our business model, we are taking big steps today to also evolve our operating model. Fab will be consolidating much of our merchandising, marketing, and operations teams into a single global team in New York while, at the same time, planning on doubling our engineering team and hiring significantly in our sourcing and planning departments. More than 30 people in our Berlin office are being asked to move to New York. We will continue to maintain local customer service, returns, shipping and logistics, finance, IT and HR positions in Europe at our Berlin and Eindhoven offices. These changes will have zero impact on the Fab customer experience in Germany and the EU overall. Fab Designed By You, our custom furniture line, will also continue to operate out of our Berlin office. Fab will have more than 600 employees following today’s actions.
As noted in the beginning of this post, the evolution of our business model will result in the elimination of many positions from our Berlin office due to redundancy. The entire Fab team in Berlin has poured their heart and soul into this company and we are deeply grateful for their efforts. We promise to be gracious and empathetic to everyone at Fab involved in this transition.
Despite these changes Fab continues to grow. We are currently hiring for more than 70 positions globally.
We’ll have the opportunity in future posts to share the significant benefits to our customers of our decision to centralize operations at our NY headquarters and to talk about new investors. We’d like this post to remain focused on thanking the many people who contributed to creating the resonant, robust, beautiful Fab office in Berlin as it will continue to be crucial to our global success. We promise them that we will maintain the same vibrancy and commitment to the German, EU, and global market that they’ve established.