
Why can a scam company raise $40 Million Series C + $76 Million Series B? - wenxun
Just learned from Venturebeat &amp; Techcrunch that JustFab closed $40 million in a Series C round of funding [1][2].<p>It kept me wonder why a company with very questionable (I will try to avoid using the word &quot;fraudulent&quot;) business model was able to raise big money. Didn&#x27;t the VCs have to do the due diligence?<p>I didn&#x27;t have any direct experience with JustFab. The victim was my girlfriend. Back in January 2012, one of her friends emailed her a link to JustFab, then she bought a pair of shoes from www.justfab.com and never visit the website again. Then 8 months later, in September 2013 she finished her Master study in the US and returned to her home country. She was appalled to find out that her credit card has been charged a $39.95 fee for the last eight months. Yes, $39.95 for 8 months, without getting anything from JustFab.<p>I then did a bit research on the internet. It turned out my girlfriend wasn&#x27;t the only victim. Apparently JustFab works like this: once you buy something from their website, you become their &quot;VIP member&quot; without your knowledge. Then you will have to log into their website between the 1st-5th of each month and click “Skip This Month”. If no action is taken (either skip this month, or cancel your account), they just charge you a $39.95 fee every month.<p>According to article published on BusinessInsider, JustFab &quot;generate about $100 million this year&quot; in sales, I wonder how much of this $100 million are from people like my girlfriend who simply didn&#x27;t read their entire 2,500 words Terms of Service and were unaware that they were charged $39.95 a month for nothing.<p>[1] http:&#x2F;&#x2F;venturebeat.com&#x2F;2013&#x2F;09&#x2F;26&#x2F;justfab-sews-up-40m-to-become-global-fast-fashion-empire&#x2F;<p>[2] http:&#x2F;&#x2F;techcrunch.com&#x2F;2013&#x2F;09&#x2F;26&#x2F;justfab-has-raised-another-40m-led-by-hong-kongs-shining-capital-to-take-its-fashion-subscription-commerce-model-to-asia&#x2F;<p>ps. This is a re-post of my last year&#x27;s post [3], hoping it will get upvoted to the frontpage of HN so that more people get to know the shady business JustFab does. Apparently VCs don&#x27;t do due diligence any more, as long as scam companies like JustFab can bring them money.<p>[3] https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=4592778
======
abalone
Every single person who has been misled into signing up for a recurring charge
should do this one thing:

Dispute the charge with their credit card company.

You'll get your money back and it will issue a bunch of chargebacks to
JustFab, which will penalize them financially. If enough people complain their
penalties will escalate and their credit card processing rates will go through
the roof. This is how the credit card system weeds out crappy businesses like
this.

Unfortunately the very people who this model is designed to exploit are the
least likely to know about their consumer protections.

~~~
ghshephard
Totally not the case that you get your money back, at least with WellsFargo
Visa, they will investigate to determine whether your card was used by some
other party.

Saying, "I didn't read the terms of the agreement" is not grounds for a
chargeback.

What's worse is when you've signed up for a One year recurring payment and you
have to jump through hoops to cancel such as a registered letter to cancel.

Wells fargo will refuse to cancel for you, saying it is between you and the
vendor. Further to that, you can't even cancel your credit card, as Wells
Fargo will transfer the recurring charge to a new card.

About the only way I could figure out how to get out of that type of recurring
scam is to just cancel my bank account.

~~~
jseliger
_Wells fargo will refuse to cancel for you, saying it is between you and the
vendor. Further to that, you can 't even cancel your credit card, as Wells
Fargo will transfer the recurring charge to a new card._

That's not been my experience with AmEx. Some scammy company began billing me
for monthly charges, and I couldn't get anywhere through the telephone number
listed on the bill. I called AmEx, disputed the charges, and got all the money
back—but the company kept charging me every month anyway! AmEx said they'd put
a block on the company, and since then I've been fine.

~~~
rickyc091
I can't speak for Wells Fargo, but I've had zero problems issuing charge backs
with Chase Signature. I generally file a claim on their ridiculously
unpleasant web form and I get temporarily reimbursed immediately while they
investigate the issue.

~~~
ghshephard
Yes - that's the way it works with Wellsfargo. You are not required to pay the
charge until they've completed their investigation. But, as long as the vendor
has evidence that you submitted the card number, and that the vendor
documented the recurring charge, and you agreed to the charge - you are
responsible for the charges on your card.

------
cs702
JustFab is not a 'scam company' (in the sense that they may not be doing
anything technically illegal), but they are using DARK DESIGN PATTERNS[1] to
trick at least some people into doing things they don't want to do.

The checkout page[2], in particular, seems designed _specifically_ to trick
people into signing up for recurring monthly charges. Any person who adds
merchandise to the cart and then clicks the big 'Continue Checkout' button --
without stopping to read all the surrounding text -- will unintentionally sign
up for the $39.95/month "VIP" plan.

My mom, who is trusting by nature, would _never_ stop to read all that
surrounding text, because she has been conditioned by years of online ordering
to add items to a cart and then find and click the big checkout button. She
would be tricked into signing up for recurring charges.

\--

[1] See [http://darkpatterns.org/](http://darkpatterns.org/)

[2]
[http://imagesup.net/?di=15138026329215](http://imagesup.net/?di=15138026329215)
\-- this was posted by one of the company's investors elsewhere on this
thread. It's a canonical example of a dark design pattern.

~~~
DrJokepu
No, seriously, if your business model is based on tricking people into paying
for something they don’t want and didn’t realize they’re getting charged for
(no meeting of the minds), your company is a scam company. It’s simple as
that.

~~~
iggym001
exactly, a business model that tricks customers is not a business model, it is
a scam and fraudulent

~~~
sbov
It really depends upon the percentages. From my experiences pretty much any
website will trick someone, regardless of your intentions otherwise.

Despite having to: choose a price, click a "I agree to be charged $<dollar
amount> every month" checkbox, and enter their credit card information, a
subscription-based website I used to run still got emails from people
complaining, saying that they didn't want us to charge them yet.

~~~
unclebucknasty
It depends more on intent than percentages. If you set out to mislead and only
a few people fall for it, then it is still a scam, albeit not a very effective
one.

On the other hand, if your intentions are honest, but a ton of people are
confused, then it is not a scam. It is just poor execution. Of course, if you
become aware of this but do nothing to address it, then your intent becomes
questionable.

------
tonywebster
This sort of thing is infuriating. Nowhere on this page does it say "we will
charge you every month."
[http://i.imgur.com/ctMDiCJ.png](http://i.imgur.com/ctMDiCJ.png)

I just went through the whole checkout process to see how bad it really is.
There were upsell interstitials at least four times, they did the 20-minute
countdown clock thing to add a little pressure, and the checkout page looked
like I was getting boots for $19.95. If you look on the right side in pretty
small grey text it says that you're activating your VIP membership. You have
to read down several paragraphs to figure out what they're trying to get away
with, and nowhere does it actually say in clear terms "we will charge you
every month." Entering in your shipping and payment information and it again
completely fails to indicate there's a monthly fee — just a little checkbox "I
accept the terms..."

All the state attorney generals should join together to sue them and get their
victims' money back. At least we know they have the cash to pay the settlement
now thanks to RHO, Matrix, and TCV.

------
cortfm
Heh, yeah. There's a class action against them filed in 2011, though not being
a part of it I haven't heard anything since.

I wonder sometimes if the corporate shield isn't too strong -- that is, if
someone (say, Adam Goldenberg or Don Ressler, the co-CEOs (that always goes
well) of Justfab)) is executive of a company which conducts deceptive
practices, why shouldn't they be personally responsible? Where, exactly, do we
draw the line? I would argue that once the Notional Reasonable People learn
about the fraud, we have not only a responsibility but a duty to admit
justice. More specifically -- if you know about this deception, but you do
nothing, you are complicit. You are now responsible. It's not a matter of
choosing to ignore it -- as a participant in the venture economy, you have an
obligation. And it would be entirely legitimate to punish you for failing to
live up to it.

Specifically, the executives and funders of the VC companies that invested in
JustFab should be held personally accountable. The people who reveal the names
and home addresses of the executives of those companies will be fulfilling
their obligation and doing the world a service -- permitting these individuals
to hide behind layer after layer of legal protection is tantamount to
personally committing that fraud. Individuals must fear the punishment for
them and their families that comes after the commission or effective
endorsement of fraud; they must know that we, the technical community, will
not protect their abandonment of ethics.

------
wenxun
Some people asked why it took her 8 months to find out [3]: she was studying
for her Master degree in the US, didn't have a SSN, was using a credit card
issued by a bank in her home country, her father paid the bill for her at home
and didn't notice anything unusual until she finished her study and came home
to look at the credit card bills.

[3]
[https://news.ycombinator.com/item?id=4592778](https://news.ycombinator.com/item?id=4592778)

~~~
phyalow
Total scam.

~~~
tiatia
Yes, great Business. Great ROI if your are into it ;-)

------
kokey
What worries me is that the what is probably one of the major credit check
agencies in the UK and some other countries is also running business the same
way. Experian offers a service where you can check your own credit score
online for around £6, but actually also signs you up for a £13/month service
after that which is also easy to miss in the small print. You also can't
cancel this online, you have to phone them. The whole phone call covers two
things, one is that it's another method to retain you by letting you update
your personal information and then letting you check within a day or two if
the updates brought you more information about your credit score. The other is
that the personal information helps them have better information about you to
give to their customers who use them for credit checks.

~~~
stuaxo
The law should be:

Where reasonable you should be able to cancel by the same method as you signed
up.

E.G. if you can sign up on a website, you should be able to cancel on the same
website.

------
Erwin
In DK (possibly EU) we have laws that mandate the actual total minimum cost to
be prominently shown when you buy something and companies are regularly fined
by the marketing board for misleading information there.

So if you buy a $1 cell phone, but it requires you to sign up for a 12-month
$50/plan and oh, there's also several $5/month fees in small print -- then
that's the total minimum cost you pay must be shown

For loan type products, the effective yearly percentage cost for the loan must
be shown. So if you look at one of those typical "quick loans" like
[https://folkia.dk/](https://folkia.dk/) where everybody can get a loan...,
well you an see that borrowing 3000 DKK for 30 days is going to cost you a
yearly effective interest of 987% if you asked a bank for it.

~~~
_delirium
While that helps in a lot of cases, I don't think it would here: the _minimum_
cost is not any higher than the one pair of shoes, because there's no required
contract period, and you can cancel immediately. The scammy part is that this
isn't made particularly clear at all, and so people end up unwittingly paying
for months of a subscription before they realize and cancel.

------
drakaal
Most of you are too young to remember, "Buy now and we'll send you CD's each
month for just $9.95 per month, keep only the ones you want, cancel anytime"

This is the same thing. It may feel scuzzy, but they do tell you this up
front, and while they hope you forget, it isn't a scam, it is just preying on
the uninformed.

~~~
etchalon
If your business depends on people not reading things, then yes, your business
is a scam.

And generally speaking, things which "feel scuzzy", are.

~~~
jessedhillon
Almost all commercial software, movies and pretty much the entire licensing
business model are scams then. Nobody reads the EULAs or equivalent thereof.
And if people did read them, and consider thoroughly their implications, then
you might see significant drop offs in purchases. Then again this is HN so
that sentiment may actually garner a lot of support.

~~~
drob
That's different. For most software and movies, people not reading legalese
isn't the core of your business. You make money on people buying your DVD, not
on gotchas buried in license agreements. (Or, at least, I hope.)

JustFab is different. JustFab's viability depends on people not reading the
fine print on the side. As I understand it, their "VIP Program" is their main
differentiator.

------
bane
Thanks for the post. My wife shops online _a lot_ and has a new sites checkout
process almost in muscle memory. After looking at the site and the screenshots
here I can say that she would absolutely fall for this scam and we'd end up
dealing with the hassle of cancelling things and reversing charges and all
that.

Total and outright scam. I bet in a class action, the plaintiff could even
make a decent RICO case out of it and triple the damages.

------
mrtron
Clearly indicated on:

[http://en.wikipedia.org/wiki/JustFab](http://en.wikipedia.org/wiki/JustFab)

Obviously the VCs did diligence - however they must have considered the shady
business as an acceptable risk factor.

I think the answer to what you are asking is many businesses start in the grey
zone. Recently many folks made huge bank with recurring billing with no
notice. Ring tones and internet games both went that path. Justfab seems to be
breaking into a new industry with that same business model.

You should consider that most people consider this nonsense the fault of the
purchaser, 'buyer beware'. Gym memberships are a classic example of this.

~~~
wenxun
If you look at the edit history of JustFab wiki page, you'll see most of the
stuff related to their shady business practice was added after last year's
discussion [3]

[3]
[https://news.ycombinator.com/item?id=4592778](https://news.ycombinator.com/item?id=4592778)

------
unclebucknasty
The company's tactics have been thoroughly eviscerated here, as they should
be. This is clearly misleading and I don't think I can add much there.

But, here's something else that I find funny: the membership fee is
$39.95/month, which then entitles you to buy a pair of shoes for an additional
$39.95/month. They state that this price is " _up to_ 50% off". So, if you
only buy one pair of shoes in a month, and the discount is anything less than
50% off, then you actually _lose_ by being a VIP member.

And, even given the maximum discount of 50% off, you would have to buy at
least _two_ pairs of shoes each month to come out ahead vs. just breaking
even.

I am sure that there are people who buy shoes at this rate, but I am willing
to bet that many do not consider this in their calculus, and the company knows
it. I would guess that many assume they are getting a deal, as long as they
"use their memberships" and buy at least one pair of shoes each month. And,
almost certainly, none of them think think they could actually _lose_ as a
VIP, so long as they make one purchase.

This is not as overtly deceptive as their site design, but it underscores that
their primary business model relies upon their customers' lack of
understanding in one way or another.

~~~
FiloSottile
Even if I agree that this is a scam and a dark pattern, with the subscription
they give you a "credit" to buy a pair of shoes, so you get (at least) one
pair each month for (at least) $39.95/month.

IF, you go there to choose them.

~~~
unclebucknasty
Thanks for the clarification. I stand corrected. So, we're just back to the
original scam, then.

------
stickydink
Just checked out their UK fan page for Facebook, 20k likes.

Of the most recent 15 "posts by others", all in the past week, 5 of them are
people that appear to be furious about being tricked into subscribing.

[http://i.imgur.com/NDVZbHM.png](http://i.imgur.com/NDVZbHM.png)

------
farrel
Because VCs aren't interested in building a sustainable business, only
something they can dump on a greater fool in 3 - 5 years for 10x return.

~~~
ryan-allen
The spin of the whole "disrupt everything" kind of cons the young and
energetic in to do the hard yards before the flip.

You don't often hear about individuals making any kind of real difference in
social areas of society that are hurting, yet if you build some kind of online
service that provides some kind of marginal benefit you're cast as a hero as
long as some cashed-up multinational buys you out?

I'm all for fun and profit, but I'll call a spade a spade, and all this
flipping at the expensive of multibillionare corporations ain't really
disrupting anything. Especially if the service is bought out and shut down,
which appears to happen often.

It seems a nice safe bet is to iterate quickly on a niche that big-co is
trying to break in to. They see you as a threat and their strategy is to buy
you out and either a) integrate you, or b) shut you down completely.

Hooray for progress! Or is this the bad side of capitalism?

------
jdh
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
unusually high for a subscription service.

I obviously cannot speak to your girlfriend's experience. With nearly a
million subscribers, there are certainly people with bad experiences -- same
is true with any service. Netflix is great but I am sure there are a number of
people who have had a bad experience.

I would encourage the HackerNews community to consider the opposite: if we
assume the investors in this business do perform due diligence, is there
another possible explanation? Is it possible that this case is not
representative of the average case?

But hey, we don't have to be he-said-she-said here, anyone can just go to the
site and verify if this claim is true. In essence, the claim is: "The site
tricked me. I went to buy a single pair of shoes, and in doing so, they
actually started taxing my credit card every month, and no one warned me."

Folks are right to be skeptical -- a lot of businesses have done this, tried
to hide the fact there would be future charges. Does JustFab?

I just went to the site -- you can do this -- picked a random pair of boots
and put them in my shopping cart. I then clicked checkout, and here is what
that page looked like:

[http://imagesup.net/?di=15138026329215](http://imagesup.net/?di=15138026329215)

"I wonder how much of this $100 million are from people like my girlfriend who
simply didn't read their entire 2,500 words Terms of Service and were unaware
that they were charged $39.95 a month for nothing" \-- Seriously, please look
at the link above to the checkout flow and tell me that's how you see it, that
you have to read the 2,500 word TOS to figure out that this is the case.

Seems pretty clear to me. You can get the boots for $39 if you join the VIP
program. "With this purchase, you will be activating your VIP membership"

Under "How VIP Membership Works", it explains: " If you do not take action
between the 1st and the 5th of the month, you will be charged $39.95 for a
member credit on the 6th. Each credit can be redeemed for 1 JustFab item, so
use it to shop later!"

It's in plain English, and in the same font size as everything else on the
page. Over 800,000 people can manage their subscription account every month
without racking up credits. I'm sorry it didn't work for your girlfriend, and
I recognize she is not the only one who has not grokked the subscription
element and been surprised -- but it's a tiny minority, and the information is
quite clear on the site.

Finally, one may ask: why subscription at all? Well, $39 for a high quality
pair of boots is a really, really good deal. Most e-commerce merchants have to
reacquire their customers for every transaction. By asking members to commit
to come back to the site once a month, the company doesn't have to constantly
pay google or other traffic sources to acquire members, and to have prices
like this you have to keep costs low. That's the deal. There are plenty of
higher priced places to buy shoes if you don't want to subscribe.

Double finally: credits never expire. If you have 8 credits in your account,
you can go get 8 pairs of shoes.

Justfab is an awesome company and is creating and H&M or Zara experience
online: fast fashion at great prices. I'm not sure HN is the target
demographic, but it's a great service and customers love it, and VCs have
poured money into because of that.

~~~
avalaunch
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 membership when they
originally clicked through to buy a single pair of shoes.

The entire checkout process is engineered to get people to sign up for the
"VIP Membership Program" without realizing what it is. If they wanted to be up
front about it, they'd explain it on the home page. They'd include it in the
list of items that you're purchasing. They'd include the relevant terms (not
just a link to them) on the page where you enter your credit card information.
They'd put the terms higher on the page so that you're more likely to read
them. They'd put the "Checkout as a regular member" link next to the "normal"
checkout button and they'd make it just as big. And they'd make it a button.
They don't do any of these things.

When a user goes to checkout of any online store, they're not going to read
everything on every page. It's a process they're very familiar with so they're
going to skim and click through quickly. I know this, you know this, and
JustFab knows this. That's why the program details are listed on the first
page of the checkout process and not the last. That's why they're listed on a
page where the user has but one action to take. Click the big pink button and
get on with the checkout process.

JustFab is not an awesome company as you claim. It is a scam and you are a
horrible investor for investing in them.

~~~
testing12341234
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 ad, it's actually something important for me to read. 4.)
There is a tiny magenta link on the right hand side with explanation text that
says to click it if I don't want to save 50%. 5.) Way down at the bottom of
the page is text.

So I went ahead and did try it out myself. I borrowed a friend's laptop (that
doesn't have a developer-level screen resolution). The screen resolution was
1333 x 768 and FF is maximized there. Here is what it looked like
[http://imgur.com/9rHhhLV](http://imgur.com/9rHhhLV)

What's missing from that page, is all of the important information about the
VIP program. What is present is the price of the item, the quantity and a
magenta "Continue Checkout" button.

I'm definitely calling "Dark Pattern" on this one. Hiding important text off
the screen, coloring the important text a light grey, even when the text is
visible it is far down the right side in a small font.

~~~
abersek
Even worse, should you click on 'Checkout as a Pay As You Go member', the
order summary still shows VIP status. It appears there is no way out.

~~~
calinet6
It's because the shoe itself is the first item in the VIP membership by
nature. If you buy something, you're buying into their whole service.

------
akrymski
Just Wow, what a clever scam. Hardest thing must have been getting a merchant
account for this - does anyone know who provides them with a merchant account
/ credit card processing? And how do they manage to tolerate the chargeback
rate without being shut down by Visa etc?

Lots of these operations around, but usually remain small due to credit card
companies shutting them down quickly. JustFab has been around for a couple of
years. How did they manage to stay under the radar of credit card companies?
And/or keep their chargebacks under the limit?

~~~
sudonim
My girlfriend's sister got bitten by the Justfab scam. Apparently when she
called to cancel, they refunded her easily. That's probably how they manage
chargebacks. If people are pissed enough to call, don't make it so hard they
do a chargeback.

------
pbreit
It's not quite that bad. The 39.95 ends up being a credit that can be applied
to a future purpose. And they are pretty upfront about how it works without
one needing to "read the entire 2,500 word" TOS.

I don't love the model but I don't think "scam" or "fraud" is accurate.

~~~
mschaecher
Here's the above the fold of their How it Works page as seen on an apple LCD.

[http://d.pr/i/ltch](http://d.pr/i/ltch)

Is how it works clear or am I missing something?

Here is their FAQ

[http://d.pr/i/beRt](http://d.pr/i/beRt)

It takes over 2800 characters and 507 words before a single mention of a
membership charge with no mention of recurring until the following paragraph.

Is that clear?

------
shiven
It is because of websites like these, I love my credit card's Virtual Account
Number generator. It gives me a new CC number every time, with 'Dollar amount'
and 'Valid until' limits. I always use a new number to sign up for all sorts
of 'trials' etc. Never ran into problems with zombie billing.

That said, scammy company is very scammy!

~~~
mratzloff
Which credit card company is that, in which country?

~~~
aestra
There was a discussion earlier in this thread about virtual card numbers.

[https://news.ycombinator.com/item?id=6456044](https://news.ycombinator.com/item?id=6456044)

------
mehwoot
Because it's not technically illegal what they are doing and they're doing it
successfully. If there are people who think it's ethically ok to run a website
that way, then there are probably people who will invest in it.

To me, it seems borderline.

~~~
alan_cx
When some thing is not technically illegal, but still fools consumers, it is a
scam. Other wise, it would be illegal. The borderline, is exactly where
scammers try to dance.

------
javert
"The company's business model and credit card practices have been criticized
as deceptive. In October 2011 a national class action lawsuit was filed
against Just Fabulous, Inc."

\- Wikipedia:
[http://en.wikipedia.org/wiki/JustFab](http://en.wikipedia.org/wiki/JustFab)

------
limejuice
I've never heard of this site before, but looking at their page 'How it
works', it seems clear it me it's a shoe-of-the-month club, and works similar
to things like Disney Movie club, Harry and David Fruit of the month club, or
one of various Book Clubs.

The only scummy part would be if they still charge $39.99/month if you don't
cancel / skip / select a shoe, without sending you anything. Compare to Disney
Movie of the month club where if you don't make a selection or skip that
month, you get sent the "Featured" title for that month. Maybe justfab should
send you the shoe of the month if you don't make a selection, or maybe they
should send a "beauty gift basket".

Otherwise, it looks legit, if you like this sort of thing.

~~~
avalaunch
But why would anyone ever look at the "How it works" page? Even if a link to
the page were prominently featured on the site (it's not - it's only in the
footer), how often do you wonder how a shoe store works?

People go to JustFab to buy a pair of shoes, not to join a shoe of the month
club. Check out their front page. It looks like a online shoe store. It
doesn't mention the VIP program at all. That's tossed in during the checkout
process and it's pretty easy to miss the fact that you're buying more than a
pair of shoes.

------
priley
This website should definitely be part of the Dark Patterns UX Library. It's
sad how people compose UX (and investors invest in) shady user experiences
designed to trick people.

[http://darkpatterns.org/](http://darkpatterns.org/)

------
tuananh
Ah, I still remembered your old post.

To me, trying to mislead people (on purpose) is equivalent to scamming. the
purpose is the same, just a different method of doing thing.

------
seferphier
Wow, they have a lot of negative reviews.

[http://www.consumeraffairs.com/online/justfab.html](http://www.consumeraffairs.com/online/justfab.html)

~~~
jdh
Oh for god's sakes, did you even look at the site you just linked to? A site
that gathers negative reviews to get companies to pay them>

Did you read Amazon's review -- 1 out of 5 stars with 690 reviews, worse than
JustFab's?
[http://www.consumeraffairs.com/online/amazon.html](http://www.consumeraffairs.com/online/amazon.html)

I'm sure you'll enjoy 1SaleADay, with 5000 reviews and a 4 star rating!
[http://www.consumeraffairs.com/online/1saleaday.html](http://www.consumeraffairs.com/online/1saleaday.html)

~~~
mmvvaa
Are you really going to try to keep repeating yourself in an attempt to
compare this shady business to amazon?

Amazon is in it for the very long run (they just turned a profit this year).
Good luck trying to continue to dance this song to the tune of amazon. It
won't last. It is likely a legal practice, and your background might blind you
into believing that unintended actions by well-meaning consumers is a
perfectly reasonable business model to profit from (at least it is more
transparent in the beating industry). At least you know that you are in it
against the house, in most cases.

Shame on you.

~~~
bumbledraven
The point is that the ratings on consumeraffairs alone are meaningless as a
criticism of JustFab, given that they rank Amazon so low and 1SaleADay so
high.

------
ericd
Huh, sounds like a rebill scam with the lent legitimacy of VC funding.

~~~
brazzy
> lent legitimacy of VC funding.

Does VC funding really lend legitimacy to anyone except other VCs?

~~~
ericd
Sure, someone public who was given lots of money by big institutions voted for
it with their money. There are a lot of fly by night operations doing this
kind of thing, not many VC funded ones that I'm aware of.

~~~
brazzy
> voted for it with their money.

That is "voted for its likelihood to generate profits or be acquired at a high
valuation". That's not exactly equivalent to my definition of "legitimacy".

~~~
ericd
Some people assume that VCs have a reasonable minimum ethical bar.

------
rdl
I'd expect Amex to charge back the full amount (including the cost of the
shoes, actually). If it didn't, I'd be inclined to go for small claims court
action against the company, as it's unlikely they'd send an employee to defend
$39.95.

------
gozmike
Frank and Oak (frankandoak.com) does something similar to JustFab. They just
raised a large Series A.

I've been burned by this personally, but ultimately it's really a case of
buyer beware so I can't really hold a grudge - even if the tactic is sleazy
imo.

------
nutanc
This is the reason in India the central bank does not allow companies to store
credit card information. In such a case, the consumer has to authorize every
transaction, so scammers cannot get away by taking the credit card details
once.

------
twistedpair
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.

------
goshx
Funny thing... this post just disappeared from the home page.

~~~
LispShmisp
At first I thought it would be on a second page, or third but it's not. Story
has a lot of comments/upvotes, isn't it what makes story stay on the first
page, high up top? How does it work? Was story moved manually?

~~~
goshx
Very likely. Big money talking here, it seems. It was almost at the top when I
first spotted it, I opened the link on a second tab and after going through
the comments I went back to the previous tab to refresh and see how many
upvotes it received since I started reading it. And... it was gone.

~~~
kzahel
I am honestly more than shocked that it has disappeared from the main page.
Today I asked a friend that I met for lunch if he had heard about the JustFab
article today. I was certain he would have, because he frequently looks over
the top HN articles during the day. I wish there were more transparency in how
articles get buried like this one was.

~~~
goshx
Me too. Some posts just show up on the top of home page with no discussion and
not many votes. Also, how can a comment get downvoted? (is that a word?)

[Edit: found the answers for my questions:
[http://ycombinator.com/newsfaq.html](http://ycombinator.com/newsfaq.html)]

------
ttt_
Business such as this is what makes us have to raise our consumer shields up
100% of the time.

I'm so very fucking tired of this.

------
bane
Lots of speculation about how hard this is for people to navigate, here's some
examples of people bitten by this

[http://www.elkgroveonline.com/forums/topic/105057/beware-
onl...](http://www.elkgroveonline.com/forums/topic/105057/beware-online-rip-
off-quot-ju/view/post_id/866160)

and the text of the class action filed in 2011

[http://www.scambook.com/blog/2011/10/justfab-com-
justfabulou...](http://www.scambook.com/blog/2011/10/justfab-com-justfabulous-
class-action-lawsuit/)

------
sgustard
Their "how it works" page explains this, with far fewer than "2500 words",
though it could be clearer.

[http://www.justfab.com/how-justfab-works.htm](http://www.justfab.com/how-
justfab-works.htm)

They have 2 million likes on Facebook. Were all these users scammed?

The "monthly subscription" has recently been a hot e-commerce category. Other
sites with a similar model are shoedazzle.com, fabkids.com,
musthave.popsugar.com and so on. See: [http://www.quora.com/E-Commerce/What-
are-the-most-interestin...](http://www.quora.com/E-Commerce/What-are-the-most-
interesting-eCommerce-subscription-businesses-going-on-right-now)

So a question is, what's the tradeoff between transparency & making it easy
for the customer to cancel at any time, versus locking them in? Lots of
businesses make money off of customer inertia where the easy path is to keep
paying. Netflix, Tivo, your cable service, phone service, could all plausibly
have much worse retention rates if they actively asked you each month if you
want to continue paying. Additionally, my cable company certainly isn't going
to tell me when my one-year promotional rate is expired and my rate suddenly
doubles. Does that make cable service a scam?

Beyond that, you are labeling the business a "scam" because you assert they
are hiding the recurring payments from their users. Maybe so, but it would
help to have data, rather than "wondering" how many users were unaware of the
payments. When they become aware, does the company refund their money? Do they
a/b test their signup process to optimize signups versus the later
cancellation rate? I would certainly expect they do, and that they have a
pretty specific idea of what their dissatistfied customer rate is, what the
acceptable (non-zero) rate is for them, and how to avoid skyrocketing it while
increasing their signups.

It's not a pretty business on those terms, but it's real, and plays on human
behavior, both positive -- people like to receive new stuff in the mail every
month, it's an addictive cycle for many -- and negative -- people sign up for
stuff online without reading the fine print, or bothering to check their
credit card statements.

~~~
wenxun
A quick count from these three websites showed several hundreds customers have
fallen victims:

[http://www.sitejabber.com/reviews/www.justfab.com](http://www.sitejabber.com/reviews/www.justfab.com)

[http://www.scambook.com/company/view/146/JustFabcom](http://www.scambook.com/company/view/146/JustFabcom)

[http://www.consumeraffairs.com/online/justfab.html](http://www.consumeraffairs.com/online/justfab.html)

If you google "justfab review" or "justfab scam" or "justfab fraud", there are
surely many more.

~~~
jdh
You've posted this comment three times, and I won't reply on every thread, but
let's be clear: these "review" sites are shady operations that extort
retailers by aggregating negative reviews and charging to hide them.

Amazon's review is worse than JustFab's on the same site:
[http://www.consumeraffairs.com/online/amazon.html](http://www.consumeraffairs.com/online/amazon.html)

You can Google a lot of e-commerce sites with the word "fraud" or "scam" and
find a lot of negative stuff. This is the internet.

I don't dispute the fact that there are probably several hundred unhappy
customers, as reported the site will do >$100M in revenue and everything costs
$40 or less, with 2.5MM+ transactions, it's inevitable, but it's not
indicative of a problem.

~~~
jaap_w
That's true, but that doesn't mean that JustFab's businessmethods are not a
scam. See the discussion above about not including the Vip-membership in the
checkout-flow.

~~~
bumbledraven
Let's stick to sound reasoning here. Whatever problems JustFab may have, since
consumeraffairs ranks amazon at 1 star and 1saleaday at 4 stars, its ratings
have _no bearing whatsoever_ on actual consumer satisfaction with JustFab.

------
benologist
Leeching money off people this way is a time honored tradition - record,
cassette, cd and book clubs etc, arguably AOL dialup, any "free trial" that
discretely rolls over into indefinitely charged accounts till you realize and
go back and cancel that service you barely tried once.

They can raise money because it works, it's legal if not ethical or tasteful,
and in their particular case ... they've figured out how to scale enormously.

~~~
avalaunch
I think the big difference is that each of your examples are clearly marked as
X of the month clubs. You know what you're buying. With JustFab, you don't.
You think you're buying a pair of shoes.

------
mktgtheweb
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.

------
Nitramp
Never invest in a company that doesn't provide a genuine profit to its
customers (and other stakeholders). Businesses are cooperative relationships
between stakeholders, if a business just exploits its customers, it won't be a
business very long.

Whether the checkout page is deceptive or not (and it is!): does anyone
actually _want_ to get a 40$/month minimum 1 year membership? Who would _want_
to buy all their shoes on this one particular website, an willingly enter a
contract where they have to click a button once per month or get a 40$
penalty? That's just bogus, all of the conditions are so strongly in favour of
the vendor that it's clearly not a business - it's just exploitation/a scam.

You might be able to make a quick win and run away with something like this
before the business falters, but more likely you won't be that lucky.

------
tyang
Most VCs delegate diligence to 22 year olds that don't really try the site or
startup of the startup they invest in.

This should not be surprising.

VCs deliver risk-adjusted returns way below the S&P 500Most

[http://www.avc.com/a_vc/2013/02/venture-capital-
returns.html](http://www.avc.com/a_vc/2013/02/venture-capital-returns.html)

[http://www.kauffman.org/newsroom/institutional-limited-
partn...](http://www.kauffman.org/newsroom/institutional-limited-partners-
must-accept-blame-for-poor-long-term-returns-from-venture-capital.aspx)

And VC's subtract value from the startups they invest in.

[http://techcrunch.com/2013/09/11/vinod-
khosla/](http://techcrunch.com/2013/09/11/vinod-khosla/)

------
yashg
I think it is definitely fraudulent on the website's part, but I am intrigued
by the fact that you girlfriend did not notice the charge on her card for 8
months? May be she was away from her home and busy with her studies but didn't
keep a tab on her finances? Where the money is coming and where it is going?
Didn't she get her credit card statement in email or she can't see it online
on her card issuer's website?

I really don't understand how can one fail to notice a monthly charge, month
after month after month. I think this kind of gross financial negligence on
part of the customers is what bolsters these fraudsters and their business
model of charging a monthly subscription.

~~~
wenxun
The credit card was issued by China Construction Bank. China's financial &
banking system is not as advanced as the US, many Chinese people don't use
online banking at all.

Her father was the main card holder, and she was using the second card, her
father paid the bills every month as soon as he received the paper statement,
he didn't notice anything suspicious.

------
jacquesm
This thread and it's companion thread about the class action suit against
justfab have just been pushed right off the homepage. Too bad, it seems like
it is a thing that can't be spread far and wide enough.

------
Pxtl
See, this is why PayPal manages to skim off the top of everybody's purchases
and make bank - I no longer trust any online purchase company with my credit
card information, because credit card companies don't do a great job at
preventing this stuff except for after-the-fact chargeback mess (which is bad
for both consumers and vendors).

Paypal et al force this kind of agreement to be properly explained up-front.
Paypal's monthly recurring thing is clumsy and half-broken, but it's not
unclear and can't trick you.

------
protez
What an innovative company that wraps up a questionable practice into an yet
another good looking shop with "amazing growth." The VCs might have taken that
as an innovation.

------
dleskov
This is why I keep the balance on the debit card I use online at $1.xx,
trading the inconvenience of having to transfer funds to it before each
transaction for peace of mind.

------
stef25
She didn't check her credit card statements in 8 months?

------
rms
They must have unusually low chargeback rates. It doesn't seem like they are
that bad of a deal in the scheme of purchasing clubs like this, right?

------
fartface
this has the potential to be much worse than a shady checkout screen. for
every vip charge they aren't even shipping a real product. they give credits.
if a company files bankruptcy those credits and gift cards will be worthless
because it is considered a liability. so they don't even have to keep a real
inventory (which would be an asset with real value).

(1) get funding (2) ? (3) bankruptcy (4) profit

------
Tichy
I think it's a scam, however I'd like to point out that by virtue of being
honest, it could be avoided. If you are honest, you'll think "this is too good
to be true", and rather than thinking "ha ha, fools, they'll make a minus on
this and I get cheap shoes" you'll look closely for a catch.

That's not an excuse for the company at all, of course.

~~~
aestra
"This is too good to be true?"

Um... no... Not at all. Not in the least.

They are your classic fast fashion shoes
([http://en.wikipedia.org/wiki/Fast_fashion](http://en.wikipedia.org/wiki/Fast_fashion))
fast fashion is cheap. Go into your local Forever 21 and look at the prices,
especially the shoe prices. I can buy a whole wardrobe there for under $100.

These shoes aren't built to last. They are built fast and cheaply to
capitalize on current trends.

I bought some boots last year for $30, and now they need replacing this year
because they are starting to fall apart. I don't wear them every day, or even
close to every day, and not during the summer. They were not built to last. I
knew they weren't built to last.

~~~
Tichy
Yeah but I think they said the shoes cost 79$ for non-members and 30$ for
members (don't recall the exact prices). So you could wonder what they get out
of membership to make up for that.

~~~
aestra
No. That appears to be a marketing ploy. There appears to be no way to buy it
without joining "VIP". "Regular" price is just to tell you how much you
"saved" to make it look like you're getting a great deal. It's the oldest
marketing ploy in the books.

------
tzs
Interesting that I don't see these kind of complaints at this level about book
clubs.

The most popular book clubs all use a negative response model, where when you
sign up you get a certain number of books at a great price, and agree to buy a
certain number of additional books at the regular club price.

They send you a monthly list of books available that month, with one marked as
that month's featured selection.

If you do nothing, you automatically receive the featured selection and are
charged for it at the regular club price. If you do not want the featured
selection, you tell them via a return card or their website.

An example is the Science Fiction Book Club [1]. The front page has a link to
a "how it works" page [2]. Note that the "how it works" page doesn't actually
tell you about the negative response aspect. It tells you to read the
membership agreement for complete details and links to the agreement [3]. It
is in there that you get the details of automatically receiving the featured
selection.

(Things are similar for the Book of the Month Club, the Scientific American
Book Club, and a whole bunch of others--because they are all actually run by
the same company, and are using the same template for their web sites. The
Columbia House DVD Club too).

Compare this to the JustFab page. That too has a "how it works" page [4],
which is linked to from the front page. That page tells you about the negative
response part.

The front page of the book club does say, when touting the initial book offer,
that it is "with membership", so it is clear on the front page that you are
going to probably have to sign up for some kind of membership to get that
deal. The JustFab page does not make it clear that you must become a member to
purchase.

With the book club, if you fail to make your negative response, you get a book
not of your choosing. With JustFab, you get a credit that you can use on an
item of your choosing. My guess is that the vast majority of JustFab's
customers buy several times a year, and so they are able to fairly quickly put
the credit to use.

So why does JustFab draw so much more fire, when the seem ostensibly quite
similar to the book club? I wonder if the fact that their subscription if for
credits makes a big difference? The book club pushes a featured selection each
month, presumably something they have made a volume deal for in order to get a
good price. For this to work, they really need their featured selections to
sell well. With JustFab, the credit is generic. If they need to push some
specific item in order to support a good price for it, selling credits does
not help. Would people find JustFab more acceptable if instead of a credit,
they actually sent you an item once a month?

[1] [http://www.sfbc.com](http://www.sfbc.com)

[2] [http://www.sfbc.com/howitworks](http://www.sfbc.com/howitworks)

[3] [http://www.sfbc.com/membership-agreement](http://www.sfbc.com/membership-
agreement)

[4] [http://www.justfab.com/how-justfab-works.htm](http://www.justfab.com/how-
justfab-works.htm)

~~~
notacoward
With a book club, you receive something of at least nominal value each month,
which also serves as a clear reminder of your ongoing relationship with them.
The "club" in the name is also a not-so-subtle cue. JustFab has none of these
aspects. No cues, no hints, no reminders, nothing of value unless/until you go
there again or check your credit card bill. You might think that's a trivial
difference, but I think it's enough to explain the different reactions.

------
thenewone
Here's the Form D for the latest JustFab raise:
[http://www.sec.gov/Archives/edgar/data/1531017/0001531017130...](http://www.sec.gov/Archives/edgar/data/1531017/000153101713000002/xslFormDX01/primary_doc.xml)

Confirms JH (see above..) sits on the Board and represents Matrix

------
useflyer
I will never accept venture funding from anyone who has invested in JustFab.
Investors are the gatekeepers, and in this case have failed their moral
obligation.

[https://twitter.com/rleshner/status/383675138153017344](https://twitter.com/rleshner/status/383675138153017344)

------
purpleD
While it seems to me like this is a scam, the bottom line is that everyone's
interpretation of the communication of the terms of service is subjective.

The site could stay exactly as is and not be a scam if they let you at any
time "return" your $39.95 shoe credits for a full refund, no questions asked.

------
brianmcconnell
This is why I have my credit/debit cards cancelled and re-issued once or twice
a year. I can't be bothered to spend several hours on the phone trying to
cancel scumbag/parasite operators like this (AOL was notorious for this back
in the day).

------
cicloon
I don't see this different from what MS used to do with Xbox Live
subscriptions in summer... at first the charged $1 for one month, but you have
to cancel the subscription before the month ends in order to not being charged
again.

------
alain94040
Taken straight from Matrix Partners's website (investor in JustFab): "Don and
I are aggressive guys, and Matrix approaches our business the same way. \-
Adam Goldenberg, JustFab"

Choose investors that match your ethics I guess.

------
zby
How can I short this stock?

------
mattsfrey
Nobody seems to have mentioned the fact that a well known celebrity, Kimora
Lee Simmons, is the president and creative director of this company, no doubt
a huge factor in attracting VC attention.

------
mkr-hn
This will be a great sample for the study a few years from now that tries to
identify the source of the next boom and bust. I hear the real estate market
is heating up globally.

------
batemanesque
guess it's time for HN to wise up to the fact that investors aren't just
benevolent gods handing out opportunities from above

------
ethanazir
meetup.com misled me into a recurring charge. i thought I would need renew the
next month. guess i didnt read the fine print right.

------
guilloche
voted up the topic and let more people be aware of it to avoid traps.

------
calimac
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.

------
contextual
Let's face it, the owners and investors of this scam are likely engaging in
criminal behaviour and should be charged. Have the police been notified?

------
onurozkan
launder all the moneys!

just kiddin.

------
ds_
Amazon do basically the same thing with their prime membership, although they
do refund if you notice and complain early enough (offer a free month and then
start charging unless you opt out, whilst making it far from obvious that you
have to do so).

~~~
smsm42
Amazon explicitly says it's a paid program that costs money and you have to
explicitly join it through process separate from buying stuff. Offering free
trial period and then charging is very standard approach, automatically
enrolling with sale is not.

~~~
ds_
They were offering it with a purchase (as a way of getting free shipping), if
I remember correctly. Alright, I wasn't automatically enrolled, I had to check
a box. It was still deliberately misleading.

