JustFab and ShoeDazzle announce 'game-changing' merger to dominate e-commerce

JustFab and ShoeDazzle are merging their fabulousness and dazzle to create “the world’s largest fashion subscription e-commerce company.”

The two Los Angeles-based companies announced the “game-changing” deal this morning. The new umbrella company, JustFab Inc., has 33 million members around the world. The CEOs said in a statement that the combined company is predicted to generate over $400 million sales in 2014 and reach profitability.

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JustFab creates new and updated fashion at a furious rate that is curated, selected, and designed by fashion celebrities and stylists. Women pay $39.95 a month to receive regular shipments of new items based on their preferences. Every month there are new collections with apparel, shoes, purses, accessories, etc. The company owns its own fashion label and designs products in-house, which helps it maintain the rapid pace.

JustFab raised a $76 million round in July 2012. At the time, it was attracting 500,000 new users each month, and CEO Adam Goldenberg said that JustFab is “the next evolution of fast fashion” — the online version of popular brands like Forever21 and H&M. It has 15 million members in the U.S. and Europe.

ShoeDazzle is also a subscription fashion e-commerce company, backed by $60 million in venture capital. ShoeDazzle offers a shoe-of-the-month service for $39.95. It uses an algorithm, similar to what Netflix uses, to target its 18 million members with shoes they will love. Last year it dropped its membership requirement so shoppers could purchase items a la carte, expanded into new areas of fashion, and added a new VIP service. It also got recognition for bringing celebrity stylist Rachel Zoe on board.

Each company will maintain a distinct brand, but together, Goldenberg said, they will be able to take “substantial market share from traditional footwear brands, retail players, and e-commerce competitors.” The portfolio of brands will also include FabKids and Fabletics, which will launch in October 2013.

Direct-to-consumer brands and subscription models are trendy in the world of e-commerce right now. Brands can produce clothes faster and cheaper when they don’t operate through a brick-and-mortar retailer. Consumers seem to like it, and thus a wave of direct-to-consumer brands has hit the tech scene. Another such brand, Fab.com, is valued at over $1 billion and recently raised a whopping $150 million to focus on building its own design-focused brand, and other companies — like Bonobos for men’s fashion and Julep for beauty products — are growing fast and attracting the attention of high-profile investors.

It’s a competitive market with low margins and requires large amounts of money to scale. This merger will put JustFab Inc. in a strong position to grow, as ShoeDazzle CEO Brian Lee put it, a “truly global, multi-brand lifestyle fashion company.”