How does Fabletics work and make money?

Company: Fabletics
Founders: Kate Hudson, Adam Goldenberg, Don Ressler
Year founded: 2013
CEO: Don Ressler and Adam Goldenberg
Headquarter: El Segundo, CA
Employees (2020): Est. 500
Annual Revenue (2020): Est. $300M

Products & Services: Athletic Apparel and Accessories
Competitors: Lululemon Athletica | Nike | Outdoor Voices | Gap | Victoria Secret

Fun Fact – Did you know that each Fabletics store is equipped with an iPad-based POS system that allows customers to shop for products on the brand’s website that they can’t find in-store?

About Fabletics

Fabletics is an athletic wear and accessories brand that focuses on high quality, stylish, and affordable activewear. While the brand primarily targets women, the company also has a men’s line called FL2.

Fablectics offers a wide selection of apparel and accessories designed for both highly physical activities, like pilates and power yoga, as well as casual outings.

The brand was “designed with the modern woman’s busy lifestyle in mind” and therefore meant to easily transition throughout the customer’s daily activities.

Fabletics serves eight regions through its e-commerce site: the U.S., Canada, Germany, Spain, France, U.K., Netherlands, Sweden, and Denmark. While the brand began as a purely e-commerce retailer, the company now operates 27 physical retail stores in the U.S.

How Fabletics works

Membership

Fabletics is largely known for its distinctive membership business model, which sets it apart from other activewear retailers. Rather than making one-time purchases (although that is still an option), the majority of Fabletics’ customers pay a membership fee to receive credits for a new outfit each month.

Customers pick out the outfits themselves and also have the ability to skip a month if they don’t want to receive an outfit that month. As long as the customer chooses the “Skip the Month” option in their accounts by the 5^th of the month, they won’t be charged the monthly membership fee.

If the member forgets to choose the “Skip the Month” option but doesn’t actually shop that month, they will still be able to use the credits until the end of the year.

Being a VIP member has more perks than just a new outfit each month. Membership also provides customers with early access to the brand’s new launches, a rewards program that allows members to earn points to receive free products and rewards, and discounts of up to 50% on all Fabletics gear.

Fabletics launches a new collection every month, so members have plenty of variety to shop from. Customers can also take a quiz through the website and receive personalized recommendations from the brand’s collection each month.

Customers who don’t wish to become a member can still shop from the brand, though they will have to buy the items at their regular retail price rather than at the discounted prices for VIP members. They also won’t be able to earn points toward the company’s rewards program.

Rewards program

Fabletics’ VIP members are automatically enrolled in the brand’s rewards program, which offers three different tiers: VIP, Gold, and Elite.

Members can collect more points each time they purchase in order to be upgraded to a higher tier. Each tier comes with corresponding benefits; the higher the tier, the more benefits.

• VIP status comes with special discounted prices, an extra discount on your first purchase, and the ability to earn points for rewards.
• Gold status comes with early access to sales and promotions, early access to a personalized boutique with curated items from the brand’s new collection, and double-point bonus events.
• Elite status offers triple-point bonus events, free shipping days, and inventions to exclusive in-store events.

Members earn reward points for every dollar they spend at Fabletics, as well as by submitting reviews on the company’s website. The brand also occasionally offers promotions with the opportunity to earn bonus points.

How Fabletics makes money?

Fabletics largely earns revenue through its monthly membership fees. Additionally, the company uses a traditional retail model, allowing one-time purchases of its clothing and accessories in-store or through its website.

• Subscription model
• Retailer model

Subscription model

Fabletics’ VIP Membership model charges customers $49.95 each month to use as credits toward a hand-picked outfit (unless the customer chooses to skip the month). New VIP members can purchase two pairs of leggings for just $24, for instance, which leaves them $26 for additional items.

While VIP members purchase the items at a discounted price, the frequency of purchases generates a high volume of sales and revenue for the company.

Retailer model

Fabletics also offers the ability to purchase its products without membership, either in-store or through the brand’s online shop. This model allows the brand to sell its products at full price, so although these purchases are less frequent, each sale is more profitable.

As the company launches brand new products every single month, and even sometimes weekly, the company relies on highly efficient supply chain management, logistics, and operations to keep its profits high.

How Fabletics compares to competitors

Fabletics has experienced substantial growth in its six years of operation. As previously mentioned, the company currently operates 27 U.S. stores and serves 1.5 million members in eight regions around the world through its e-commerce store. The company’s annual revenue reportedly exceeds $300 million, with its in-store sales growing at an annual pace of 20%.

A large part of the brand’s success comes from the large following of its founder, Kate Hudson, who is a famous actress with a film career that boasts numerous hits.

Additionally, the brand’s high-quality products, affordable price point, and body-positive messaging are a big draw for a large audience of women interested in activewear.

Fabletics has even more plans to grow, as the company currently plans to enter the Philippines and other international regions. Fablectics also plans to expand its physical retail presence in the U.S. with 12 additional stores in Texas, Florida, California, New York, and Pennsylvania. Eventually, the brand’s goal is to reach 100 retail stores throughout the U.S.

While the company is an inarguable success, it hasn’t quite caught up to its larger competitors in the athletic wear space. For instance, Lululemon, Nike, and Gap, three of its largest rivals, all have estimated annual revenues of $3.6 billion, $39.8 billion and $16.4 billion, respectively.

This is partly due to Fabletics’ significantly lower prices, as a single pair of leggings at Lululemon costs $98. While Fabletics lower prices are part of its appeal, Lululemon and similar competitors like Nike have loyal followings, with customers who are willing to pay more premium prices for the brands.

Conclusion

While Fabletics may not be rubbing shoulders with Nike just yet, the company’s attractive membership model, innovative in-store tech, and effective operational and supply chain management strategies should provide future growth in the highly competitive activewear market.

References & more information

• Image by Renata Hille from Pixabay 
• Crook, J. (2019, April 30). Fabletics, the activewear brand from Kate Hudson, launches NYC pop-up shop. Retrieved from Techcrunch.
• fabletics.com
• Lad, B. (2018, July 12). Kate Hudson Wants Fabletics To Rule The World. Retrieved from Forbes.
• Thomas, L. (2018, July 10). Kate Hudson’s Fabletics athleisure line plans to open 75 new stores in a global push. Retrieved from CNBC.
• Wilson, M. (2019, April 30). Celebrity-founded Fabletics begins 2019 expansion with its first NYC store. Retrieved from Chain Store Age.

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