Live data from Hacker News

Why can a scam company raise $40 Million Series C + $76 Million Series B?

news.ycombinator.com

411–420 of 480 posts

Re: Why can a scam company raise $40 Million Series C + $76 Million Series B?

#411
post #383

Earlier quoted context omitted.

"Try it free for 30 days" is very different from "Try it free for 30 days but if you don't cancel, we'll charge you from then onwards" - especially when Amazon already have my card on file from previous purchases.

To me it seems implied? "It is free for 30 days but then it is not free anymore." I don't know, maybe I read too much into it - but when I signed up, I was aware that I was both getting 30 days free, and that I would pay for it after. And I don't recall that I had to read any fine print to glean that understanding.

I may have been naive and I won't make the same mistake again. However, most people are used to trials expiring and being forced to explicitly upgrade to continue using X product. This practice seems scammy because it is something unexpected to a lot of users, and I'm sure whoever came up with it knew full well that people would be misled.

Re: Why can a scam company raise $40 Million Series C + $76 Million Series B?

#412
RoadRunnerSports has the same model. I got VIP on checkout (actually the agent on the phone gave it to me) four years ago for free shipping. It them autorenewed for $25/year the last three years, despite no interaction on my part with the company.

The reason it annoyed me is there was no billy email telling you you'd been renewed, no disclosure that this would happen, and even your billing and purchase history when you logged into the site had no mention at all of the charges. Clearly an effort to prevent you from noticing. Also a reason they've got a heap of BBB complaints. Quite sad that this remains a business model.

Re: Why can a scam company raise $40 Million Series C + $76 Million Series B?

#413
Pay attention. There is no solution to this dark design short of caveat emptor. I agree, justfab.com are using deceptive design practices; dark design frustrates me as well as many who understand that it is designed to take advantage of the less sophisticated consumers.

Why did your girlfriend not look at her credit card bill for 8 months?

Godaddy.com was one of the first to cross the line to unethical dark shopping cart design. what about their domain registration privacy product. It is free for the first year but impossible to cancel.

Re: Why can a scam company raise $40 Million Series C + $76 Million Series B?

#414

Earlier quoted context omitted.

Absolutely agree with this comment. Here's the impression that I see at a "first glance" that page: 1.) The item to purchase, along with the price of the item. 2.) A bright magenta "Continue Checkout" button. 3.) An ad for an upsell on the right hand side which I'm generally not interested in. (on the right side, light grey text, etc) Only after carefully scanning the page do I notice the following: 3.) This isn't an…

This is the end result of blind A/B testing.

That's the most generous interpretation I can find. Still not an excuse though.

Re: Why can a scam company raise $40 Million Series C + $76 Million Series B?

#415

Earlier quoted context omitted.

The other commenters are being too nice in their replies. You're full of shit. JustFab is a shoe of the month club masquerading as a normal online shoe store. The VIP Membership Program is the essence of JustFab's business model and yet it's missing entirely from the home page of their site. It looks like any other shoe store. And yet you think it's clear that the user is being signed up for a shoe of the month membe…

And remember, my fellow entrepreneurs: if an investor is ok with cheating customers, there's no reason to think they will have a problem cheating you.

Can't be modded up enough. A person who is nice to you, but mean to the waitstaff, is not a nice person.

Re: Why can a scam company raise $40 Million Series C + $76 Million Series B?

#416
post #23

I'm the Series A investor in this company. We in fact have done plenty of due diligence, and you will be pleased to know it is not a scam company. In fact, the company has very high customer satisfaction ratings, including an NPS that is in the ballpark of Amazon, and a very high customer retention rate. More than half of the people who subscribe to the service are still subscribers after two years, which is unusuall…

I usually dont comment on HN but just came to say you're full of shit. Thats a classic dark pattern on tricking customers into things that they didn't want in first place.

Re: Why can a scam company raise $40 Million Series C + $76 Million Series B?

#417
Hey HN- I am an insider to this business and in the subscription commerce space and know these companies well. Here are a couple high level insights about this business:

Dark Pattern: of course, but we call this conversion optimization. We try to make the checkout process as easy as possible to minimize friction. Give customers a great offer, get the credit card, and they will opt-in to the subscription and forget tomorrow.

Negative Option: The billing model is one in where you purchase, or get a free trial, and you are automatically enrolled until you cancel. Think about the old Columbia House DVD club or BMG (if you are old enough to remember). We call this "breakage". This is what makes the model work. If every customer picked out shoes every month, or they automatically shipped every month, they would lose money. This is because the cost of the shoes + shipping doesn't leave to much room for margin. This also allows them to front load their marketing dollars and scale - spending $50+ to acquire customers, which eventually become profitable as customers continue to get billed month over month.

Tricks & FTC Compliance: I do notice on the billing screenshot that they have an opt-in checkbox to the VIP club (subscription terms). However, these are behind a link, which is against the FTC guidance on negative option marketing. The FTC and Visa & MasterCard require any subscription to have an opt-in box which the customer agrees to the amount, billing frequency, and customer support info to cancel. They clearly are not doing this, and apparently haven't been caught since it "looks" like just typical ecommmerce.

eCommerce vs. Subscription: Interestingly, JustFab recently acquired ShoeDazzle, who was their primary competitor for years. That was, until ShoeDazzle decided to move away from the subscription model, and go to a retail model. Pando Daily did a whole series about this, and the CEO they brought in to lead it. Guess what? The pure e-commerce model didn't work, ShoeDazzle struggled, returned to subscription, but eventually sold the company for a deep discount of the valuation to JustFab.

Bottom line, they shoes they sell are cheap and fashionable. In fact, they lose money on a unit basis. Yes, there is a small percentage of the revenue from customers that love the service, pick out shoes and pay monthly, but a a majority of the revenue is coming from consumers who just wanted a deal on one pair of shoes.

Re: Why can a scam company raise $40 Million Series C + $76 Million Series B?

#418
post #211

Earlier quoted context omitted.

A note on this: I do believe the website to be a scam and parent to be obtuse or lying, but for the specific case of your comment studies have proved that people are more likely to stick with the default choice made for them, so you example wouldn't work. Even if the two offers were providing an absolutely identical end value, the default one would have more adoption.

Good point. The reasonable solution would be to leave it the default option and just make it much more clear what is happening after you buy the shoes.

Or offer 2 equally sized checkout buttons next to each other: "Checkout" and "VIP Checkout"

Re: Why can a scam company raise $40 Million Series C + $76 Million Series B?

#419

Earlier quoted context omitted.

Correct, and indeed, this business model is nothing new or unusual in the EU in general, or in Germany in particular. Back in the early, pre-smartphone days of mobile, a lot of European companies made fortunes by selling ringtones through a misleading subscription model similar to JustFab's. Their success soon led to a lot of imitators in the US market. Remember those "Text 53646 to this number to get your NSync ring…

Pre-internet, or at least widespread internet, there was a similar scam with music tapes, perhaps records even before that. The first month's selections would be free but for shipping, after that they would send you a bunch every month if they didn't hear from you — and a hefty bill.

Yes, it's called "negative-option billing," as practiced by the Book of the Month Club, Columbia Record Club, and others.

Re: Why can a scam company raise $40 Million Series C + $76 Million Series B?

#420
post #23

I'm the Series A investor in this company. We in fact have done plenty of due diligence, and you will be pleased to know it is not a scam company. In fact, the company has very high customer satisfaction ratings, including an NPS that is in the ballpark of Amazon, and a very high customer retention rate. More than half of the people who subscribe to the service are still subscribers after two years, which is unusuall…

You sound like the Ebay scammer that got pwned by Judge Judy on national TV who just kept saying "it's not my fault she couldn't read."

http://www.youtube.com/watch?v=W5i_m9k7Wos

Post reply on HN