Faire – B2B Wholesale Marketplace
Building a $12B company in under 4 years
These briefs are produced by leveraging publicly available data sources and information. If you notice a mistake or see an area for improvement, please let us know through this typeform or via email (team@sandhill.io).
Snapshot
Faire is an online wholesale marketplace connecting independent small retailers and brands around the world. Founded in 2017, the company enables small businesses to compete on a more level playing field with the likes of Walmart and Amazon. It benefits and connects both retailers and wholesalers to the vast pool of up-and-coming products across the world.
The company has successfully raised $1.1 Billion in its first 4 years of operations and has offices in Amsterdam, Atlanta, London, Los Angeles, New York, Salt Lake City, San Francisco, São Paulo, Toronto and Waterloo.
About Faire: Website, LinkedIn
Business Overview and Products
Faire offers an online wholesale marketplace that connects small business owners and independent brands to buy and sell wholesale online. For retailers looking to purchase wholesale products on the platform, the marketplace offers convenient financial terms and logistics such as its famed Net 60 terms. These terms, while previously being offered by other businesses, were mostly only available to large retail chains once.
For its brands, Faire’s platform offers powerful sales, marketing, and analytics tools to the sellers. These tools can excessively simplify the operations and business for these sellers.
How It Works
Through its online marketplace, Faire connects retailers seeking brands and wholesalers seeking to sell those products. Once wholesalers join the platform and display their products, retailers can buy from them based on their requirements.
After a retailer purchases merchandise from Faire, they can sell it online or in a brick-and-mortar shop. However, retailers must refrain from selling these purchased products on giant platforms like Amazon, eBay, Etsy and Poshmark, because it goes against Faire’s basic policy. This is due to its ultimate goal to support small businesses, which is why this prohibition is in place.
Technology plays a big part in Faire’s success. The platform leverages machine learning to automatically match local retailers with the most relevant makers for their stores. It has also developed in-house algorithms which aim to improve product recommendations, ranking, search, logistics, and more.
Business Model and Pricing
Faire’s business model depends on joining its online marketplace for free, according to an article in Capitalism.com. Interested wholesalers first have to fill out an online application before they can begin selling on the site. Then Faire makes money through commissions. Wholesalers only pay a commission on new business they obtain from the site. Hence Faire takes this commission whenever a retailer places an order on the site. Commission percentages vary from 25% for first-time orders down to 15% on reorders.
The retailers benefit from Faire’s model through Net 60 payment terms, which let retailers test products completely risk-free. Retailers can buy merchandise they like, stock it on shelves, and then gauge customer response. After 60 days, they can return any unsold merchandise without any obligations. They can even get free returns on any merchandise they send back.
Traction
Faire had a successful response from the get-go. The Capitalism article discusses how within 3 months of the launch of Faire’s net 60 payment terms, it went from doing $100,000 to $1M per month in gross merchandise value by the end of 2017. However, the journey was not entirely easy. In 2018, retailers returned a staggering amount of merchandise and many of them who failed to return the merchandise did not pay up. A rigorous analysis revealed that the issues were stemming from the Net 60 payment terms, and so the terms were updated. Credit limits were imposed and a ranking system was created for wholesalers and products. Within 6 months, return rates dropped by 75%.
When the coronavirus pandemic began, the retailer landscape drastically changed. Trade shows, which were a norm, had to shut down and their virtual counterparts could not keep up. Brick and mortar shops began closing overnight and retailers and wholesalers desperately sought a solution, which Faire presented. However, the company did impressive business in 2020. It tripled its revenues and sold over $75M products to small businesses that year. It must be noted that Faire took clever measures to cater to the issues some of its retailers were struggling with. The pandemic initially forced many of the company’s retailers to the brink of shutting down their businesses, sending their inventory orders plunging by more than 60%. In response, Faire offered extensions on its payment terms for purchased inventory and waived the fees it charges brands to get paid for orders right away.
Today, Faire boasts the following statistics (as listed on its website). There are:
300,000 retailers buying on Faire
15,000 cities with Faire retailers
40,000 brands selling on Faire
2 million connections introduced on Faire
Founder(s)
Max Rhodes: Co-founder & CEO at Faire. Before Faire, Rhodes was the first product manager for many initiatives at Square, including Square Capital and Square Cash. He came up with the idea for Faire while introducing the Blunt Umbrella in the US.
Daniele Perito: Co-Founder and CDO at Faire. Prior to starting Faire, Daniele led Risk and Security for Square Cash, where he designed and implemented the anti-abuse and anti-fraud systems that have made Cash possible.
Jeffrey Kolovson: Co-Founder and COO at Faire. Prior to Faire, he was at Square where led Caviar, Square’s food delivery service.
Marcelo Cortes: Co-founder & CTO at Faire. Prior to the founding of Faire, Marcelo worked as a Staff Software Engineer at Square.
History and Evolution
Before Faire came into existence, the wholesale model was extremely outdated in the sense that small retailers could only discover and purchase new merchandise in-person, through emails, or via telephone. Hence, they were limited in the range of wholesalers they could reach and struggled to keep up and were often subjected to unfair pricing.
In 2017, a group of colleagues working together at a mobile payment platform called Square had an idea. Perito, Kolovson, Cortes and Rhodes all worked in different departments at Square but had a common revelation for the antiquated wholesale model in place. With their different backgrounds, each could bring a variety of skills to the table and so with this idea in hand, Faire was founded in 2017. It was built on the understanding that the old wholesale model needed a revolutionary change. Their mission was to connect small retailers, including mom-and-pop shops, with the right products, so the solution they came up with was an entirely online wholesale marketplace.
In the words of co-founder Rhodes, “We just happened to land on the right idea from day one. The result was that we started growing pretty fast, pretty quickly.” The idea worked out as small business owners also responded well to the online hassle-free model. It ended up benefiting both wholesalers and retailers, as wholesalers could now be connected to up-and-coming brands across the world, while retailers could bid competitively for the latest products without even having to leave their shops. This model would also enable them to compete against giant retailers.
Additional Learnings
The June 2021 funding round coincided with Faire’s decision to expand across continental Europe. Its European market outpaced the US by 230% after only 30 days of launching.
Faire has reported 300% YoY growth after expanding to the largest markets across Europe.
Retail clients who use the payment processing system Square can link their Square account with Faire to get data on how products are selling, and which items are likely to sell out.
Faire uses advanced AI Technology to power its platform which consists of predictive software that features Faire’s own in-house AI-powered image recognition software.
Faire was originally named Indigo Fair.
Market Snapshot
According to the National Retail Federation, the US has close to 3 million small retailers with fewer than 10 employees, accounting for 91% of the retail businesses in this country.
There are millions of thriving small businesses in North America and Europe alone, and it is estimated they collectively represent a $2T market.
Wholesale trade in the US grew 4% from 2020 and has reached a $8.5T market size by mid-2021.
Suggested Next Reads
About Faire (Faire, 2021)
From $0 to $7B in 4 Years - Here’s How the Founders Did It (Capitalism.com, August ‘21)
Faire Nearly Triples its Valuation to $7B With $260M Series F Funding Round Led by Sequoia (Business Wire, June ‘21)
Faire Wholesale Reviews and Makes Tips (Wholesale in a Box, February ‘21)
Review of Faire – The Wholesale Marketplace Platform (Lucky Break Consulting, ‘19)
Competitive Intelligence & Analysis
Click through to dive into the competitive intelligence on the company, including website and mobile analytics, review information on the product and organization, and more.
Enjoying our Deep Dives? Subscribe or share with a friend to help us spread the word
Feedback
Have any feedback or suggestions to enable us to better improve this brief? We’d love to hear it.