After rumors surfaced last month that the curated online marketplace Bezar was struggling to stay in business, the company confirmed yesterday that it’s been acquired by the New York-based e-commerce site AHAlife. Bezar founder Bradford Shellhammer says he will stay on as an advisor throughout the transition, and plans to bring the designers who are not yet featured on both platforms over with him. The brand, however, will be completely folded into AHAlife, a curated online marketplace similar to Bezar but with a global reach.
The acquisition could be seen as a harbinger for smaller online design marketplaces, which often find it hard to compete with larger online retailers like Amazon, which promise cheap wares and speedy delivery. When Shellhammer launched Bezar last March, it was to a fair amount of skepticism—many had watched his previous venture Fab.com grow rapidly and then shutter with just as much fanfare (the company was rumored to have lost $90 million in 2013), and felt Bezar's business model was too similar to succeed. Other curation sites have met a similar fate: the social shopping site Svpply, for example, folded in 2014, two years after it was acquired by eBay. In a similar vein, the flash sale pioneer Gilt Groupe was bought last month by the department store operator Hudson Bay for a fraction of the $1 billion valuation it amassed in 2011.
Shellhammer says he started talking to AHAlife founder and CEO Shauna Mei about the acquisition as far back as six months ago, and ultimately felt that the two companies "aligned both aesthetically and vision-wise." He thinks that for smaller design curated sites to survive against their bigger e-commerce adversaries, more consolidations like this one will start taking place. "I think that’s a trend you’ll see more and more," he says. "[E-commerce] is hard enough as it is, so it makes total sense to tackle the problems together rather than separately."
The premise of design-driven curation sites—like Bezar, Of A Kind, and Lauren Conrad's The Little Market—is that each product they sell is hand-picked by a tastemaker, both for its aesthetics and its compelling backstory. They also promise a sense of discovery: if shopping at Amazon saves you from rushing through a big box store with a shopping cart full of essentials, curated online markets aim to be like virtually browsing through your favorite boutique.
The problem is that it's hard to grow. Jaime Cohn-Barr, an analyst at the trend forecasting agency WGSN, says that the key to survival is for boutique marketplaces to expand the consumer base by broadening the scope of their offerings—not just in terms of variety but also geographically. She points toward AHAlife and The Little Market, both of which source their products from all corners of the globe (the latter has a mission of selling women-made artisan wares from around the world). A handmade gold necklace from Monterrey Mexico or a woven duffle bag from Guatemala will be harder to find on a big e-retailer site and, even if you can find it, it feels less special.
But again, you run into problems: To scale at a global level, companies need to have money for international travel and employees available to fly to far-flung parts of the world and handpick the local products. Bezar only shipped within the U.S. and featured mainly designers working in the U.S., which may have narrowed their consumer base. But to expand globally, notes Cohn-Barr, you need the proper budget. (The company raised $2.25 million in funding last year, but last month rumors suggested the site was struggling to raise a new round of funding.) "It’s about having that reach and specialization," Cohn-Barr says. "If they don’t have the manpower and budget to go elsewhere, they’re not going to survive."
Shellhammer seems to agree. Speaking to Co.Design just as the news of the acquisition broke yesterday, Shellhammer was singing the praises of the company that bought him out—in part because of its profitable move to go public in Australia, rather than its native U.S., and in part because of its global reach. "The technology is really stellar, it's amazing what they've built," Shellhammer says about AHAlife, which launched in 2010. "They've dealt with some growing pains and come out thriving. And they developed a great app and international business, where Bezar was 100% a U.S. company."
Utlimately, Shellhammer, one of the first entrepreneurs to popularize online design marketplaces, has watched two of his grow and fail. Consolidation was his way forward with Bezar, and he thinks we'll see more companies joining forces out of necessity. But e-commerce is still a relatively new industry, and there's no one-size-fits all formula for success. "Every store is looking for ways to keep the vision alive. One is to raise money, another is to merge, and another is to make your company public, like AHAlife did," says Shellhammer. "We believe together we are much stronger to deliver on the mission of offering an alternative to big commercial retail and giving designers a platform to sell products."