Nobody loves you when you’re down and out: Everyone loved Fab when they were a $65,000 worth of products in its first 24 hours success story. VCs were lining up to invest and tech writers were singing their praises. Then their luck changed and it turned out everyone has something to say about Jason Goldberg’s management style and how bad it was for business.

So let me start off by saying, though I don’t know Goldberg in person, I admire him from a far. I love that he’s not another suit (though he really looks good in one), I love his personal no BS, direct style, it’s refreshing. But most of all I admire him for not jumping ship. Staying on board when the going gets tough, that’s what true leadership is about. It’s about assuming responsibility. That’s something no one can take away from Goldberg. And now:

Why Fab Really Failed — True or False

Oversized Marketing Budget — False

Yes, Fab had a huge Marketing budget, but no company fails because of a huge marketing budget. It’s not about the size of your budget, it’s about ROI. If you can turn $1 into $2+, by all means, you should have a big marketing budget. In 2012, Apple spent $1B in Advertising. You don’t hear anyone complaining about that.

Global Expenditure — False

Fab did try to expand too fast and yes, being “razor-focused on expanding globally” is a contradiction in terms (you can be razor-focused on expanding into one country, or even one geographical region, but not the whole world). Still, this is not the main reason for Fab’s trouble.

Lavish Offices — False

So its “New York City offices” had “beer on tap and an ice cream machine” and “one of its conference rooms had scratch-and-sniff wallpaper.” So what. Sure, one could choose to be more modest. But you can also say that Fab was all about design ingenuity and that it practiced what it preached. I’m not a big believer in offices with pool tables and endless snacks myself, but it’s not the break or make of a company — it just makes for good gossip and juicy stories.

A bad business model — False

“Fab raised a ton of money on a bad business model.” This is the common belief, that flash sales are dead, and that the trouble encountered by Groupon and GILT is proof. That’s not true. Groupon’s problem, as one of the company’s top executives in Europe told me, was its need to “constantly feed the beast”: On the one hand you have to keep creating new deals and on the other you need to keep acquiring new shoppers. And this, in turn, calls for a huge sales team along with their salaries and personal expenses.

Fab certainly didn't have a problem with the shoppers side of the “feeding the beast” equation. It reached a record 1M users in its first 5 months and kept growing from there. The rate of its recurring purchases was also very high.

GILT’s problem wasn't the flash sales model either, it was trying to expand into too many areas too soon, as its new CEO acknowledged by trying to re-focus the company around its original value proposition.

No, flash sales are not a fad nor a bad business model, time and quantity constraints coupled with nice discounts are still a strong call to action, as Zulily, now valued at $4.76 billion, demonstrates.

Wanting to be Amazon — Truth

I must have read everything written about why Fab failed. Everyone mentions Marketing costs, pivots, Goldberg and flash sales, even the global expansion gets a few mentions (though mostly from the German brick and mortar angle) but no one speaks of how operation-heavy it was, and why.

In September 2013, for example, Etsy sold $109.5 million of goods (after refunds and cancellations). That represents 5,558,230 items. Both numbers are an increase compared to the previous month. Even if we assume that the monthly average for Etsy in 2013 is $80M, that’s still $960m a year. Not too shabby. Sure, Etsy has been around since 2005, but that’s my point. Rome wasn't build in a day. It takes time to build a truly successful business, one that’s stable and shows ongoing growth. One that has both vendors and shoppers committed and even reliant. One that has a community of advocates around it.

But it seemed like Fab wasn't looking up to the likes of Etsy — with its graduate sustainable growth, nor to Zulily — with its truly razor-focus on one segment only and one business model only. It was looking to become Amazon, with its one day shipping. This required that it will be everything to everyone. It also required that it would purchase the inventory, store it in its own warehouses, take its own photos of it and ship it. This is a very very very operation-heavy business. It mean a big expenditure. But it also means a huge logistic overhead. Something they needed, as my grandmother would put it, like a hole in the head.

I’ll touch on the one-day shipping model as a possible moral and cultural issue another time. Here I’ll just say, this path, more than any other, was the reason for Fab’s failure. A source inside GILT told me that after numerous attempts to reduce the cost of a single product photo (packshot) for the site, including building in-house studios and having full time photographers, the company managed to bring it down only to $12 a photo. Now go ahead and do the math for Fab.

The thing is, Fab wanted to be as unique as a crossover between MoMA store, Etsy and Kiosk and as big as Amazon, and it wanted it now. Well, you don’t get to be both MoMa and Amazon — not in 3 years time anyway.

Fab had something good, great in fact, going for it. A distinct unique offering. It had designed goods that were both unique but did have mass appeal, and that (mostly) could not have been found anywhere else. In fact, 90% of their products could not have been found on Amazon. That in itself is a huge differentiator and a strong competitive advantage. Growing that overtime in a sustainable way was supposed to be their razor-focus.

What Can Still Be Done

There are a few things Fab can still do:

1. Reducing logistic overhead by empowering vendors #1:
As I mentioned above, Fab’s problem was not on the shoppers’ side of the feed-the-beast equation. The problem was creating all those deals and the huge sales team needed to do so. This could be overcome by re-targeting Sales efforts on finding attractive vendors rather than attractive deals. Then giving those vendors an interface to add deals themselves as often as they like, as long as they match certain predefined criteria. Those deals can then be approved, moderated and timed by the Fab team. A move like that will also fortify the vendors’ commitment to Fab, thus giving Fab an unfair advantage against other existing flash sales players and raising the barrier to entry for new players. Based on talks I had with a number of designers who were featured on Fab, and who enjoyed the sales peak they got thanks to Fab, they would have been only too happy to extend this collaboration. A proof of concept of this model, conducted by myself and my team at Grab It, while local and on a very small scale, shows amazing results for this model.

2. Reducing logistic overhead by empowering vendors #2:
Fab could consider switching into a marketplace model. A marketplace’s nightmare, as any founder in this field will tell you, is the need to bring in both the vendors/designers as well as the shoppers. This makes for two completely different go-t0-market strategies and is very difficult to master. But Fab isn't starting from scratch. And I’m not referring only to the $120 M in the bank they keep bringing up, I actually mean they already have both devoted shoppers and vendors. Moving to a marketplace, while focusing on one segment only at first (home decor) would remove the operational overhead and give them space to focus on what’s important: i.e sustainable growth, including nurturing that marketplace community.

3. Reducing logistic overhead by empowering vendors #3:
A third option, as a transitional phase, could be to go for a drop-ship model. Fab could supply vendors with packaging and get a great deal on shipping for its vendors. It’s probably not the way to go long term, but it can certainly be good for a while.

And if I could say one thing to Goldberg personally I’d say:
Succeed — you’re designed to.