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SAN FRANCISCO (Reuters) - Online retailers JustFab and ShoeDazzle are making a bigger-is-better play and merging in an effort to grow faster, the companies said Wednesday.
"Ecommerce is all about that mass scale," said Adam Goldenberg, currently co-chief executive of JustFab. "Having that scale allows us to work with the very best factories."
The combined companies should have revenue of over $400 million next year, said ShoeDazzle Chief Executive Brian Lee, and become profitable on an operating basis. ShoeDazzle focuses mainly shoes, whereas JustFab sells a broader range including shoes, accessories and apparel.
Many online retailers are feeling the heat from Amazon.com, (AMZN.O) but Goldenberg and Lee said they do not view the Seattle-based giant as a major competitor. That is because they sell their own products that are not available at other retailers, whereas Amazon tends to sell products that are widely available.
Online retail was a hot sector last year, with venture capitalists ploughing money into start-ups such as furnishings company One Kings Lane; children's clothing-company Zulily; and flash-sales site Fab.com. These companies specialize in unique wares.
But some sites have floundered with their business plans. ShoeDazzle, for example, has gone from a monthly subscription site to nonsubscription and back to subscription again earlier this year.
Terms of the deal between the two southern California firms were not disclosed. The combined company will operate under the name JustFab. Goldenberg and Don Resssler will continue to serve as co-CEOs of JustFab, and Lee will join the company's board of directors.
JustFab's backers include: Rho Ventures, Matrix Partners, and Technology Crossover Ventures; it last raised $76 million in December on top of $33 million previously. ShoeDazzle's backers include: Andreessen Horowitz, Lightspeed Venture Partners, and Polaris Venture Partners; it last raised $6 million in 2012 on top of $60 million raised earlier.
Reporting by Sarah McBride; Editing by Leslie Gevirtz