Updated: This story was updated throughout on March 4 to add comments from Liam Casey, CEO of PCH.
PCH, the Irish manufacturing and fulfillment shop that has made big inroads helping startups in the internet of things space go from idea to mass production, has purchased Fab.com and taken on 35 employees in a deal that was once valued at up to $15 million. The actual value of the sale is undisclosed and Fab.com founder Jason Goldberg will not be joining PCH. Aside from the employees and domain name, Liam Casey, the CEO of PCH says the acquisition will give PCH an outlet to consumers that’s more compelling than the typical U.S. retail experience.
He reminisced about his former days in retail and walking into luxury brand stores in European cities where the experience was designed to entice users in and get them to browse and experience the brand.
“If you look at the kind of stores where we buy most hardware products today it’s pretty boring,” Casey said. “They aren’t destination stores. Consumers only go if they have to go there to pick something up, not to browse.” But thanks to e-commerce and brands like Fab.com Casey thinks there is an opportunity through curation and storytelling to recreate that sense of excitement. Plus, people are already buying these products online. In the future, Casey says they might even buy them at Fab or PCH pop up stores.
In an interview with Re/code, PCH CEO Liam Casey said Fab.com would become a sales channel for the products sold by its hardware startups, like Ringly, the Drop kitchen scale, the newly launched Podo camera and others. Re/code also included this paraphrase:
Casey said Fab has come a long way since it gave up on the ‘distraction’ of holding inventory in favor of drop-shipping, and that its current model is friendlier to hardware startups that get taken advantage of by the economics of brick-and-mortar retail.
Casey explained that by friendlier he meant that most retailers expected pretty onerous terms for a smaller startup trying to get a product onto their shelves. For a startup with limited cash, these retail deals can be both a boon and a curse, as they have to produce the inventory in advance and ship them to the stores to sit on shelves. Retailers also usually demand that a startup produce a set amount, for example 10,000 units. The partner might demand a fee for good placement and may also require certain buybacks in the case of high return rates or a lack of sales.The thinking, however, is that such an expense is worth it, because it gets them in front of the mainstream consumer.
Last summer PCH signed a deal with the now-bankrupt RadioShack to stock products from some of its startups such as LittleBits in its stores. Casey said that the deal was much friendlier to PCH companies than a traditional retailer arrangement, which meant that when RadioShack went bankrupt, the PCH startups weren’t stuck holding the bag.
In light of the hopes for reducing the risks for startups and rebuilding retail excitement for hardware products, it’s no wonder that PCH decided that the Fab.com deal made sense. Since people already supported many PCH products online via crowdfunding and later via bought the products from the PCH-backed startups’ own websites, offering them through Fab only made sense. Like Amazon, maybe that’s just another stepping stone to help a product mature and reach the mainstream before committing to the investment needed to get into a big box store.
LittleBits is backed by True Ventures, a venture capital firm that is an investor in the parent company of Gigaom.