Faire’s business has tripled in the last year as mom-and-pop shops turned to the platform to stock up on in-demand items.
Faire has completed a $170 million Series E round led by Sequoia Capital that more than doubled the valuation of the online wholesaler to $2.5 billion, as the San Francisco-based startup cashes in on pandemic shopping patterns by helping small businesses stock up on in-demand items.
Bloomberg first reported the round last week, saying the company was in talks to raise more than $100 million at a valuation of over $2 billion. Existing investors including Y Combinator, Lightspeed Venture Partners, Forerunner Ventures, Khosla Ventures and Founders Fund participated in the round and were joined by new investors DST Global, D1 Capital Partners, Norwest Venture Partners and Dragoneer. Faire has raised a total of $439 million since it was founded in 2017.
The wholesale marketplace was created by three former Square employees to help mom-and-pop stores compete against Amazon by making it easier to discover and stock new products. A key benefit is that it accepts free returns within 60 days for items that don’t sell, reducing the risk a retailer runs when buying new inventory. It also allows retailers to search for items that are environmentally friendly, handmade or not sold on Amazon.
The pandemic initially forced the majority of stores on the platform to shut their doors, sending inventory orders plunging by more than 60% and leading more than half of its retail customers to warn they could be out of business in three months. In response, Faire offered extensions on its payment terms for retailers who had purchased inventory and waived the fees it charges brands to get paid for orders right away. It also added products in high demand, like masks, cleaning supplies and food, and held its first-ever online trade show, giving retailers easy access to discounted inventory ahead of the holiday season.
Starting in late May, with lockdowns loosening, the small businesses on the platform began to see sales rebound and, as a group, are now roughly flat to where they were a year ago, says Max Rhodes, cofounder and CEO of Faire.
“There has been an outpouring of support from communities and people are going out of their way to shop local right now because they recognize how important they are to the communities and want to make sure they get through what has been a really difficult year,” Rhodes says.
He says Faire’s business has more than tripled in the last 12 months and its customer based doubled, purchasing more than 35 million products on its marketplace and moving as much as $4 million in inventory in a single day during peak times. Faire now offers products from 10,000 brands to more than 100,000 local retailers and boasts that its network of retail partners has more store locations in North America than Starbucks, Walgreens, Walmart, Sephora, Target and Nordstrom combined.
It plans to use the capital raised to expand further internationally, entering the United Kingdom next year and other European countries shortly thereafter. It will also look to expand its customer base with a focus on attracting larger retailers with five to 10 locations and apparel retailers, and to hire more staff for its four offices.
“We think local retail has a tremendous future, but it’s changing,” says Ravi Gupta, a partner at Sequoia and Instacart’s former chief financial officer. “I think Faire helps bring local retailers into the future by being more data-driven, dynamic and omnichannel.”
Many small retailers began investing in their websites and social media presence for the first time this year in the wake of temporary store closures, as well as offering new delivery options and experimenting with livestreaming and other new technologies. To help them manage inventory now sold online and in stores, Faire launched integrations with Square and Shopify and continued to make product recommendations for items it thinks will sell particularly well. A website it piloted called Shop Neighborhood that allowed consumers to shop online for items from small businesses in several communities was shuttered this week as the company looked to redirect resources back into the core business.
Faire still sees massive opportunity ahead: There are more than 2.6 million independent retailers generating almost $1 trillion in annual sales in the U.S. alone, according to the Small Business Administration and Faire. “The best part of this is Faire is just getting started. It may ultimately serve millions of retailers and hundreds of thousands of brands,” says Gupta.
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