Fab CEO Jason Goldberg announced Tuesday that the company is laying off over 100 people in its Berlin office the end of the year in order to “reduce redundancies,” as the company shifts away from the business of flash sales and moves toward being a global, design-oriented e-commerce site. Bloomberg previously reported that the company had expanded to employ about 650 people in total. And Tuesday’s announcement said the company would be moving some people from Berlin to New York, where it would be hiring further and “centralizing operations.”
Fab raised $150 million in June of this year to expand the business, with the goal of becoming one of “next great iconic shopping brands,” Goldberg wrote. But for Fab, this meant moving away from flash sales and carrying more consistent inventory, which is better-suited to running a stable, scalable business. In his blog post Tuesday morning, Goldberg explained why the layoffs tied in with this change:
“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.”
Goldberg said the layoffs don’t represent weaknesses at the company, that the company is hiring for more positions in New York, and that it’s part of the natural restructuring process. However, there have been recent questions about Fab’s ability to make a profit. Bloomberg reported that Fab missed its targets for revenue by almost 20 percent, and that it’s still a “money-losing” company. And as I wrote last week, building a global e-commerce business around beautiful items that people might want, but not really need, is tough.