Faire: Helping Small Brands and Retailers Succeed Together in the Digital Age

Online marketplace helping retailers find their next big hit by empowering small brands to go into wholesale.

 

In the words of its CEO, Max Rhodes, Faire was built on the conviction that small businesses are vital to our communities.[i] Centered around this conviction, in 2017, Max left Square, along with his cofounding team to solve the problem of sustaining an exciting and profitable inventory of unique offerings for small retailers while giving small new brands the ability to scale into the wholesale channel through friendly trade terms afforded through the scale of the digital marketplace they have created. They do this through the following mechanisms:

Retailers

Faire offers an online wholesale marketplace where over 100,000 independent retailers find cool new products to carry in their stores, while mitigating the inventory risk that introducing new unproven products entails for these retailers in their platform. They accomplish this through very friendly scaled trade terms that no independent brand can offer. The two key trade terms offered to retailers are[ii]:

  • Free Returns Retailers opening order with each brand is eligible for free returns within 60 days from the date of order and they will even send you a prepaid shipping label to send back the items that didn’t sell.
  • Flexible Accounts Payable Net 60 payment terms are available for all of your orders (for eligible retailers)

Under these very friendly terms retailers in the platform can try the products before they buy them and can get a refund for what doesn’t sell in 60 days, increasing the demand for yet to be discovered hits in the consumer retail space from upstart brands with little name recognition at a very low risk.

Brands

Faire’s marketplace brings over 10,000 small consumer retail brands that have been carefully selected and curated by Faire’s team and are still gaining scale primarily across the apparel, home goods, and gastronomic verticals with a market reach and group trade terms that none of them could afford on a standalone basis. Alongside this, Faire provides its marketplace participating brands with digital and analytical tools to improve the strategic and operational decision-making capacity of their small, and usually unsophisticated, management teams through tools such as Faire Direct that helps them manage and analyze their multiple sales channels and vendor relationships beyond those participating in the Faire platform.

 

Faire raised a noteworthy $170 million Series E funding round last October, clearly proving that its business model was resilient to the pandemic which had a critical downward hit on both of its target markets, small local brands and retailers. This has placed its valuation at up to $2.5 billion USD— more than double its value a year before in its Series D. In the 12 months, since its Series D round, Faire has more than doubled its business, selling over 35 million products during this time compared with 15 million in the prior period.[iii] Faire  offers products from 10,000 brands to more than 100,000 local retailers and boasts that its network of retail partners has more store locations in North America than Starbucks, Walgreens, Walmart, Sephora, Target and Nordstrom combined, moving as much as $4 million in inventory in a single day during peak times.[iv] It was reported by the company, that Faire plans to use the proceeds from its megafunding round to expand into the United Kingdom next year and eventually the rest of Europe.

The future looks bright for Faire as they project there are more than 2.6 million independent retailers generating almost $1 trillion in annual sales in the U.S. alone according to estimates by the Small Business Administration. Its ability to scale in the local small independent brand and retailer wholesale niche is clearly present given the size of its Total Addressable Market. However, in order to sustain its growth, it will have to leverage its recently acquired financial strength to create a defensible moat and tip the market before new startups replicate its business model. Given the commoditized nature of the market solution, the high direct network effects between local retailers and brands, and the supply side economies of scale of building such a high-quality digital solution. In order for Faire to make this a winner takes all market and sustain its success it needs to find a way to mitigate the low multihoming cost of its platform by leveraging its three previously stated strengths. One thing is for certain, local small businesses will continue thriving as long as Faire continues in its conviction to serve them.

 

[i] Max Rhodes, “Investing in the Future of Local Retail”, October 27, 2020. URL: https://blog.faire.com/thestorefront/investing-in-the-future-of-local-retail/

[ii] “How Do I Start Buying on Faire”. URL: https://www.faire.com/support/articles/360015892572

[iii] Dan Kawamoto, SF Business Times. “How Faire snagged $170M in funding and supersized its multibillion dollar valuation in just a year”, October 27, 2020. URL: https://www.bizjournals.com/sanfrancisco/news/2020/10/27/how-faire-snagged-170m.html

[iv] Lauren Debter, Forbes. “Wholesale Marketplace Faire Valued At $2.5 Billion After Sequoia-Led Round”, October 27, 2020. URL: https://www.forbes.com/sites/laurendebter/2020/10/27/wholesale-marketplace-faire-valued-at-25-billion-after-raising-170-million-series-e/?sh=373ef5f97abb

 

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Student comments on Faire: Helping Small Brands and Retailers Succeed Together in the Digital Age

  1. I never knew this type of business existed! It seems like it lives at a really interesting stage in the development of a brand between a start up testing out things on a platform like Etsy and a more established brand with its own proven DTC channels. It looks like Faire charges a 15-25% commission on all sales it sources, so brands would have an incentive to branch out as soon as they reach sufficient scale / virality. It seems like all the value added services Faire provides are meant to create stickiness. However, it would be really interesting to understand how successful they have been with brand retention to date, or whether they even encourage brands to outgrow them as a sign to future brands of what they can achieve with Faire.

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