JustFab Acquires ShoeDazzle

Merger will create the biggest e-commerce entity in the Los Angeles area, on track to profitably reach $400 million in sales in 2014.

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The universe of online shoe subscription companies has shrunk.

This story first appeared in the August 22, 2013 issue of WWD.  Subscribe Today.

Intelligent Beauty Inc.-owned JustFab has agreed to acquire competitor ShoeDazzle for an undisclosed price. The combination of the two companies will create the biggest e-commerce entity in the Los Angeles area, on track to profitably reach $400 million in sales in 2014 and exceed $500 million in 2015.

The deal to bring ShoeDazzle under JustFab’s umbrella developed over the last three months, but Intelligent Beauty co-chief executive officer Adam Goldenberg said, “Really, this is a deal that has been in the making for three-and-a-half to four years. Brian [Lee, ShoeDazzle founder and ceo] and I had already known there would be benefits to putting these companies together, and we were finally able to make it happen.” He added, “There is so much synergy that we reach at scale. It is a combined company that is going to capture about 15 percent of online footwear sales.”

Goldenberg and Don Ressler, co-ceo at Intelligent Beauty, will serve as co-ceo’s of JustFab and ShoeDazzle. MJ Eng, ShoeDazzle’s founding president who came back to the firm last year after leaving to launch Teeology, will be tasked with specifically running ShoeDazzle. Lee will no longer be involved in the day-to-day operations of ShoeDazzle, but will join JustFab’s board. He will turn his full-time attention to online baby products specialist The Honest Co.

A once high-flying startup that spawned a tidal wave of entrants, most notably JustFab, into the online subscription space, ShoeDazzle started stumbling in 2011 when Lee stepped aside in favor of short-lived ceo Bill Strauss. He detached ShoeDazzle’s business model from subscriptions and pushed its presence into categories beyond shoes, including apparel. Lee’s return to the helm last year helped steady the ship, but ShoeDazzle still faced an uncertain future.

Although ShoeDazzle’s sale to JustFab could be seen as a disappointment for a company that had harbored hopes of its own lucrative initial public offering or a splashy sale to a strategic acquirer that isn’t a direct competitor, Lee was sanguine about the prospects of ShoeDazzle under JustFab’s watch. “I’m extremely excited, actually. I wouldn’t say disappointed at all. Our investor base is excited. Our employer base is excited to be part of the largest e-commerce site in Los Angeles,” he said.

Earlier this year, Lee told WWD that ShoeDazzle’s revenues climbed 80 percent last year to $100 million. The company launched in 2009 and had raised $66 million from Andreessen Horowitz, Polaris Partners, Lightspeed Venture Partners and Crosscut Ventures. JustFab has disclosed that its total sales are expected to cross $250 million this year and were more than $100 million in 2012. Jointly, JustFab and ShoeDazzle have roughly 33 million members.

ShoeDazzle and JustFab will retain separate nameplates, but next year will be housed together at an around 70,000-square-foot campus in El Segundo, Calif., where JustFab is based. “They will maintain their own brand identities and dedicated teams. In fashion, women want choice. There is not a single woman who shops at one store for all her fashion,” explained Goldenberg.

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