He’s back! Jason Goldberg–one of the most charismatic and controversial figures in Internet business, who less than 18 months ago was a darling of the new e-commerce with Fab, his fast-growing, design-centric retailer–returns today from his self-imposed 2014 exile with Hem, a new Internet-based furniture shop.
Goldberg describes Hem as the “Nike ID of custom furniture.” Hem is being pitched as a step up from Ikea, a mid-market take on high design for people who are tired of cycling through Billy bookcases or wobbly Lack side tables. “The idea was born out of what we observed in three to five years of growing Fab,” Goldberg tells Fast Company, noting that Fab’s data showed that furniture was the most “exciting” part of the company’s business. “What we’re trying to do here is what Warby Parker has done on glasses, or what Dollar Shave Club has done for shaving. We’re trying to apply that to furniture design.”
Hem is also a chance to push the reset button on a series of bad decisions that hampered Fab in 2013. When the company was flying high, raising $300 million in venture funding and joining the ranks of startups with a $1 billion valuation, Goldberg thought Fab could be a design-minded Amazon, and expanded its product offering to include everything from $8,000 Warhol originals to $17 cardboard stools. It sold everything from frozen steaks to cheesy hamburger sweatshirts. Fab moved away from the flash sales that helped build the company, along with the massive advertising spend it needed to drive customers to those sales. Then things got ugly. Fab fired 300 to 700 of its employees in a series of layoffs. Last November, Fab chief design officer Bradford Shellhammer quietly left the company that he cofounded.
The seeds of Hem have been in Fab’s mid-century modern sofa cushions for some time. In the spring of 2013, Goldberg told media at a press event that customers who bought furniture on Fab were “lifetime customers.” At the time, furniture made up about 5% of Fab’s sales, according to Goldberg, and the company had just acquired a Hamburg, Germany-based company called Massivkonzept that would help it break into the custom furniture market and expand that base. But Goldberg and his company lost focus, and amid the chaos of layoffs and business-model changes and one slightly unhinged blog post-slash-personal pep talk earlier this year, most people forgot that Fab had acquired part of what it would need to reinvent itself.
The second key piece of Hem came via acquisition, the purchase of One Nordic Furniture in June, a design firm that specializes in ready-to-assemble furniture. With roots in Helsinki and Stockholm, it gave Goldberg access to a fresh pool of design talent to help establish the infrastructure necessary for the company to dive headfirst into its own line of trendy furniture.
Hem’s core business can be divided into two main categories. Hem Collection is your standard assortment of products, not so different from what you might order from a CB2 or Muji. With 150 different product offerings, the Collection requires Hem to keep an inventory. (During Fab’s evolution out of flash sales and into traditional e-commerce last year, it began to keep products in inventory so that it could ship orders to customers more quickly.) Goldberg says that Hem will ship to 30 different countries at launch, focusing initially on the United States and Europe.
The second part of the business is the custom design aspect, which will allow customers to place orders for, say, different-sized bookshelves, or different colored throw pillows to match their couches. The competitive advantage, argues Goldberg, who presented his vision for Hem to the Fab board of directors in May, is that the direct-sales model will allow it to undercut the competition. He thinks Hem can be faster, cheaper, and better quality, all at the same time.
“If you go to SoHo or you go to one of the design shops on Wooster street [in New York], you’re gonna wait two to three months for your product,” says Goldberg. “We’re hoping to achieve higher quality at a 10% to 15% lower price by letting you shop the entire collection online and then having it ship to you directly.” Depending on the complexity of the item ordered, the goal is to get Hem’s customers their goods in 8 to 12 weeks. In short, Goldberg now wants to disrupt Design Within Reach and BoConcept, not Amazon.
Indeed, Hem will be at least pivot number four for what started in 2010 as Fabulis, the social network for gay men. Can Tumblr-worthy furniture at non-exorbitant price points help get the company back on track? For what it’s worth, Goldberg has long been optimistic about the promise a direct-sales business like Hem offers.
“Less than 2% of Bed Bath & Beyond sales are online,” Goldberg told Fast Company’s Danielle Sacks in a feature last September, before Shellhammer set out on his own, before all the bad times. “Eleven billion in annual sales and less than 2% online? Talk about a company that’s ready to be Best Buy-ed.”