Fab.com Pops Into New Format

For the founders of Fab.com, a three-month-old flash-sales site, flexibility is part of being fabulous. So today, the New York-based startup that offers eight sales a day on design-centric merchandise at discounts is changing up its routine by adding a series of products that will be on sale for 30 days—far longer than its usual three-day deals.

If you think this sounds like a certain trend that emerged from the brick-and-mortar world (remember those temporary “bodegas” that Target opened up in Manhattan a few years ago or Nike’s recent and temporary opening of The Ball Room in Harlem for basketball fans ), you’d be correct.

“What we’re launching are online pop-up shops,” says Fab.com CEO Jason Goldberg, 39, a serial entrepreneur who also founded Socialmedian (sold to XING AG, where he was chief product officer) and Jobster. “The idea is that they’ll live alongside our other deals. Flash sales are just one way to put interesting designs in front of our customer.”

Fab’s pop-up partner for its debut is Fast Company, which is showcasing design-centric goods in its annual October design issue, where it will spotlight 76 "Made in America" pieces from product designers to watch. Of those designers, 37 will be offering three to four designs for sale apiece on Fab.com.

Extending the length of the online deal may be a risky tactic online when you consider that flash-sales sites were conceived as a way to mimic the urgency and cool factor of a New York sample sale. But what it does allow Fab to do is offer products from a variety of product designers that all fall within a common theme and add eyeballs to its site via the magazine's subscribers.

The pop-up experiment is not the first time Fab.com has played around with an established model. The entire company reinvented itself just this year. It had started out in January 2010 as Fabulis, a social-network site for gay men. But founder Goldberg came to realize that its audience was limited and more widespread acceptance of gay lifestyles—from changes in gay marriage laws to the repeal of Don’t Ask, Don’t Tell—pretty much negated the need for a separate site for gay men.

But what to do with the business? He pivoted and found a better opening in the retail daily deal arena where Goldberg teamed up with cofounder Bradford Shane Shellhammer, 35, a Fabulus and Blu Dot alum and now Fab.com’s chief creative officer, to create a flash-sales site that specializes in goods of all stripes, from artwork to bed frames to T-shirts to jewelry, which are united by one quality: great design.

The price points range as high as $10,000, but the average order is for $100, and the site emphasizes that good design is attainable. Sixty percent of its customers have been referred to Fab via Facebook, Twitter, or Google+, and its top sales are of art and wall posters or jewelry, and after buying once, 60 percent buy again.

Since someone was already squatting on the Fab.com domain name, Goldberg had to negotiate for it—he would not say how much it cost, but said he paid for it with his own personal check. (The misspelling of Fabulous for the site’s first rendition had bothered him a bit, so the change was good.)

Goldberg declined to provide details on the financial arrangement with Fast Company, such as whether product profits would be shared. The publisher is giving a free magazine subscription with every purchase. What he would say is that since its June 9 launch, Fab.com’s membership, aided by its Fabulis beginnings, has grown from 175,000 members to 600,000 members currently. The site achieved profitability in its first month and hits about $100,000 in sales per day. The company expects to have raked in double-digit millions in revenues by the end of the year, after six months of business.

With the influx of cash that includes $1 million from Ashton Kutcher in July and an $8 million Series A funding in late August led by Menlo Ventures, the staff has tripled from 15 at the end of June to 45 in New York City, and the staff totals 75 including its site developers in India and warehouse team in New Jersey.

Like others in the space, Goldberg admires pioneer Gilt Groupe, but questions whether the site, which benefited from manufacturers that needed to liquidate goods during the recession, is too reliant on apparel and fashion.

“Can they be the Amazon of flash sales?” he asks. “My worry is that they’re biting off more than they can chew.”

But observing Gilt helped the self-described "geeky" cofounder and Shellhammer, the creative one, to devise the Fab concept. Others in the space have done a more vertical model, with Gilt Groupe being the flash-sales model primarily for clothing while One Kings Lane is a home decor vertical.

“Design is a horizontal versus a vertical, and we are able to offer items that range from bicycles to tables,” Goldberg says in an interview at his office, where Fab.com products are everywhere—from the art objects on the walls to the receptionist’s desk. “A pen can be design, a cup can be design.”

The next pop-up shop—the company plans to run four per year—will be T-shirts designed by famous artists, to be launched next month. And the company is also focusing on mobile, and will launch iPhone, iPad, and Android apps later this month.

Another way it is gaining in the social commerce arena is through the site's Inspiration Mall, which allows users to upload photos of Fab.com merchandise or other cool design goods from their computers or the Instagram photo app and share it with other members on the site.

“We saw an opportunity to make design more approachable and more affordable to everyone,” Goldberg says. And if everyone wants to share their designs, a la social commerce, which is perhaps the next big thing, all the better.

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Teresa Novellino writes for Portfolio.com