Fab.com CEO Signals Job Cuts May Be Coming as Site Retools

Fab.com Inc., the e-commerce startup valued at about $1 billion, signaled that job cuts may be coming as the company revamps its approach to selling goods and strives to turn a profit.

As of tomorrow, the company will complete a shift to an inventory-based system, Chief Executive Officer Jason Goldberg said in an e-mailed memo to employees. Fab had been relying on so-called flash sales, where a limited amount of merchandise is sold in bursts. The New York-based company also is rolling out a new website and mobile application by November, he said.

“Our processes are changing, along with our investments in technology that may impact the number of people required to perform various tasks,” Goldberg said in the memo, which directed employees to a detailed letter about the company’s strategy. “At the same time, we are accelerating our path to profitability, with a commitment to get Fab profitable on our current financing by continuously optimizing our cost structure.”

The shake-up follows a move in July to eliminate 100 Fab employees in Berlin. The company also shifted 30 workers from the German office to New York, part of an effort to streamline operations. Fab said last month that no additional job cuts were in the works.

‘Concrete Answers’

“I know that this transition has a caused a lot of our team members to feel uncertainty about how we will be structured going forward,” Goldberg said in the memo. “I promise that we will have concrete answers for everyone in terms of how these changes will affect you in the next few days.”

The two-year-old startup, which rose to prominence with its quirky home goods, art and jewelry, raised $150 million in June from investors such as China’s Tencent Holdings Ltd. The deal valued the retailer at about $1 billion. Additional funding rounds in July and August brought the total amount raised to at least $325 million.

As it grew, Fab struggled with selling its highly curated merchandise on a global scale. Earlier this year, the company shifted from a flash-sale site to an “online lifestyle shop.”

Flash sales, which require shoppers to buy goods in a short amount of time, were hard to operate en masse, Goldberg said in a memo when the Berlin shake-up was announced.

“Running a flash-sales website is very different than running a global store,” he said. “When we were a flash sales website we essentially launched a new store every day. We all worked the long hours and we all felt like there was always more work to do than we could possibly handle.”

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