It kept me wonder why a company with very questionable (I will try to avoid using the word "fraudulent") business model was able to raise big money. Didn't the VCs have to do the due diligence?
I didn't have any direct experience with JustFab. The victim was my girlfriend. Back in January or so, 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. Only 8 months later, in early September 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 geting anything from JustFab.
I then did a bit research on the internet. It turned out my girlfriend wasn't the only victim. Apparently JustFab works like this: once you buy something from their website, you become their "VIP member". 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.
According to the Business insider article, JustFab "will generate about $100 million this year" in sales, 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.
p.s. After JustFab CSR refused to refund, I decide to post this story again, hoping it will get upvoted to the frontpage of HN so that more people get to know what is really going on behind JustFab
pps. Anyone could just simply google "justfab scam" to see how many others have been victimized. It's outrageous such large scale scam got unnoticed.
I've uploaded the credit card section here:
It says you'll be billed month per month on the right hand side under the VIP membership program, but I think it's pretty clear that the page is engineered to be misleading. It looks like a standard upsell, not a mandatory part of the purchase.
They're relying on people clicking the accept terms and conditions check box without realizing that it's signing them up for the membership, i.e. it's the terms and conditions of the program, not the site in general.
Terms and conditions boxes are common in the checkout process and nobody gives them a second thought. I'm not sure I would have caught this one if I went in naively.
Clearly unethical, IMO.
Well, you could, but those terms would be ineffective. Of course, this doesn't help if they succeed to intimidate the victim. But if the victim doesn't pay, there's nothing the scammer can do, because this case would never succeed in court.
Having said that, it might help if the victim complains to the police. Depending on how serious customer protection is taken in the US, this business might be more than merely "unethical".
Enough charge backs and they lose their merchant account.
Most Credit cards users don't realize just how simple it is to run a charge back. It is literally one short phone call.
1. create a profile (answer questions on style)
2. fill in details, click a *JOIN NOW* button
3. get a "*first month* for 50% off" offer
4. get to this payment screen
To me it's pretty clear that it's a recurring service, like many others that exist for chocolate, wine, beer, socks, razors, etc. The right hand side on the checkout is clear enough, and the skip the month part is there highlighted, not in small letters.
EDIT: apparently this is just the flow after choosing something on the home page. If you choose one of the "special" products or go to the Featured section, it does go through a standard add to cart + checkout flow (http://minus.com/lA7snPkHUHOZR). That is actually terribly misleading.
I was prepared to disagree with OP but the model does seem a little customer-hostile.
After all , it would seem strange to be voluntarily charged unnecessarily.
I don't think this is some grey area: if you tricked me into paying a sum I never chose to pay, you're stealing money off my pocket.
Those ads usually seem to target teenagers (they're mostly on music channels or channels aimed at kids) who probably aren't in charge of the bill and if they're not careful they might end up with a bad surprise. This is beyond shoddy.
The law like anything else is a system, justfab is exploiting it for fun and profit.
What exactly could people instead be lured into thinking they're doing here?
(Also you don't get “nothing” for $39.95; you get store credit. That sucks if you didn't want any, of course, but given the fact that people actively sign up to be able to purchase from that store, I can't imagine it's entirely worthless.)
"You must read and agree to the JustFab VIP Membership Terms of Service."
Which makes sense - I bet they're making a killing on zombie subscription fees and little on legitimate users.
For example, maybe they keep enough to funds for last 6 months of chargebacks and have some special kick-back to bank? Or maybe the game plan is to always open a new merchant account after the first one is closed? Or maybe the bar is so low and they never need to worry to lose their merchant account?
Porn sites, bail bonds, check cashing locations, dating sites, weight loss centers, and dozens of other types of businesses use this category of services which has a very high tolerance of chargebacks.
The sad part is if you get enough chargebacks you can actually bake in a higher transaction cost and not have to pay per-chargeback fees like other normal merchants do.
I wonder how they managed to have the site up for so long - may be some kind of a high risk merchant account provider who approved their payment gateway.
I'm sorry: you're talking about the section that explains "How the JustFab VIP Program Works"? Whose 4 bullet points say:
1. Get a boutique the first of the month 2. Browse and Buy 3. Don't like anything, skip 4. If you don't buy or skip by the 5th you'll be charged anyway?
And a default unchecked box that you read and agree?
I think the concept of "engineered to be misleading" might just put the points in say, a small font, or in the terms and conditions behind a link. If someone describes it clearly in bold font in a section explaining how the site works, well, that's a pretty strange way of misleading people.
Think of the people in your life not quite as tech-savvy as yourself, like maybe your next-door neighbour or your mother. Would you expect them not to be misled by this? Sure, I'd hope my mother would be critical enough to notice, but I can easily see it happen otherwise.
Another indication is, I assume that a lot of people who do notice will instead decide to bail out entirely and not buy anything, rather than (like I would do, if I really wanted the item) pay, log in, and cancel the account immediately. Because that's not really an obvious thing to do, given the set expectation of being a regular online shopping store.
That is why the smarter scammers refund to everybody who complains, not refunding is plain dumb. This scam has been around for a long time, usually it's adult companies that sell you a 'free' membership with an age verification which comes with a pack of subscriptions tacked on for other stuff that you will never use.
This practice of selling unsuspecting consumers a subscription with auto-renew when they think they're doing a one time transaction needs to be stamped out.
If the company continues to receive chargebacks claiming fraudulent charges (which this really does appear to be) they will find themselves in a difficult place with card processors.
Some processors drop clients if they crack 0.5% a chargeback rate.
I have also won 3 chargebacks against companies who never delivered their product or used deceptive practices. The process was not too difficult, and I believe the CC companies tend to side with the consumer. Verdicts on the disputes can take several months to process though.
They can take you to court for breach of contract, and if (IANAL) the subscription contract is found to be legit, you have to pay + fees.
For that there would have to be a much more transparent sign up process and actual delivery. Non-performance is not a good basis to start a law suit, especially if you're on the non-performing side.
I'm kind of surprised no one has started a service for merchants to warn them of chargeback prone customers (there are people who go straight for the chargeback without even trying for a refund first).
There are plenty of such services. You don't see them because they don't normally operate on the merchant level, they operate on the IPSP / processor / card company level.
The reason why they don't usually operate on the merchant level is because that would allow a merchant to pollute the pool with their 'known good' cards to stop people from buying a product with competitors. You have to wonder when you buy this information as a merchant whether it is clean or not. But when an IPSP / processor or card company uses their aggregate knowledge then it starts to be really useful.
You can do AVR checks and so on all by yourself as a merchant but most if not all reputable IPSPs will have an anti-fraud system in place that does all kinds of checks.
You can learn more at http://precharge.com/guaranteed_chargeback_protection/
Essentially you pay Precharge to qualify the customer and if it passes their fraud checks, they will reimburse or fight the chargeback.
They might be maintaining their own repository of problem customers here: http://www.chargebackfile.com/
Hope this is helpful to anyone considering mitigating chargeback risk.
You mean processor/bank/merchant account, not merchant. In the parlance of the payment industry justfab is the merchant in this story.
And yes, there are scammers that have processors / banks lined up but they burn through them at a rate of about 1 every 8 weeks or so, and each time that happens they forfeit a large amount of cash. There are not that many merchants willing to play the game that way.
50 chargebacks or 0.5%, whatever gets hit first and you're in trouble. Reputation damage to the CC companies and you're out for good. Merchant account hopping is not a long term viable strategy.
Try it, absolutely still try it, and good luck!
On the other hand, both Visa and Mastercard are pretty much useless to 'protect' you against charges like these.
(disclaimer: I'm not from the US)
I remember evaluating the books for one of those companies back in the day. It was wildly successful at the surface level. But if you dipped below the surface, you noticed that its biggest strategic weakness was "Breakage," i.e., the rate at which people eventually discovered they'd been duped and then cancelled their subscriptions. It turned out that the average subscription lasted 2 to 3 months, and nobody kept a subscription longer than 5 months. This basically meant that the company's entire business model was predicated on scamming new users at a rate quicker than its existing users could break away. While not a Ponzi scheme in the true sense, the model operates on a similar assumption. But the assumption is not sustainable in the long run.
I look at a lot of companies these days -- especially all the companies in the pop-up sale business, the subscription-box business, etc., and wonder how many are following this playbook. And I wonder why VCs keep backing them. Obviously it's a fantastic way to earn tremendous growth up front. And, while the getting lasts, the getting is pretty darned good. But it's sad to think that legitimate startups may get turned down, or underfunded, for the quick buck and easy exit that can be made on this crap.
My phone's a prepaid, so this ran the balance down to the minimum $1.50 in short order, but I didn't know whether perhaps somebody in the family had simply used those minutes - so I recharged it with $50. In three days, it was back at $1.50 and it had done nothing but vibrate in my desk drawer occasionally.
The "premium SMSs" were sent as system SMSs so they wouldn't appear in my Inbox; if I hadn't noticed one or two I wouldn't have seen them at all. I thought they were simply SMS spam, not even knowing that a "service" like premium SMSs even existed. They seemed to include a URL and nothing else - on a phone that only supports Internet on GPRS, which is no longer even available in Budapest.
T-Mobile said that for privacy reasons, they can't divulge the identity of those companies. Of course, T-Mobile gets about half of the cost of each premium SMS, so it's not terribly surprising that they're not highly motivated to stamp out scams. I told them to remove my ability to enjoy the premium SMS service, and they obliged, but that's as far as they would go.
(Nothing against Hungary. Same thing happened to me once in America with 900 numbers; the only thing the phone company would say is that somebody must have plugged a phone into our outside service jack - we turned off 900 numbers then and made sure they were off for every subsequent landline we obtained, but a scam's a scam.)
I have no recourse under Hungarian law, incidentally. Since a subscription was entered from my phone, there's nothing I can do to recover that money. It's no great problem for me, but that's a lot of money to the average Hungarian, who is absolutely powerless against a big foreign company like T-Mobile.
I currently have T-Mobile in the US and haven't had the problem you describe, but based on your story I'll probably be a bit more willing to shop around next time I need to change my contract.
Sometimes they are enabled without your permission. My mom's phone number auto-magically gets subscribed for 'premium SMSs'. She doesn't understand how to send SMS's and cant use the phone interface apart from dialing a few numbers. Yet she often complains of money getting deducted from her pre paid account.
Called the customer care numerous times and every time all we get is - 'We are sorry sir, may there was an error in our system'.
Needless to say these mobile company thieves make millions from these 'errors in the system'.
I never thought that was a shady business model, per se, and whilst it wasn't entirely intuitive how they worked to a 14 year old, I blamed myself for screwing up by joining- not the company.
This site seems to be entirely designed to mislead you into thinking you're just ordering one item, while in fact you are signing up for a membership.
Signing up for the first one (book club) may be a bad business decision on the customers part, but this second style simply seems fraudulent to me.
Not every business is 'sustainable' through repeat customers - funeral homes come to mind. However, if the only way to be sustainable is to break laws, that's where the problem lies.
Sure, but at the scale the ringtone business grew (and burned through users), they eventually ran out of suckers to scam. A lot of them would fold shortly thereafter, or move on to a different market (usually a completely different country), or consolidate with another company overseas and tap the suckerbase there.
This model is basically a modern, bigger-scale version of the old snake oil sales model. Set up a shop in town, sell a bunch of bad merch, get run out of town, find a new town. Rinse and repeat.
Eventually, though, your model catches up to you. Either you're closing up shop in old markets and opening new ones that aren't as big or lucrative, or you're keeping a toehold in the old markets -- but the costs of doing so grow faster than your revenues. Or you flee Market A for Market B, only to have a competitor or two leap into Market B the next month.
Sad thing is, JustFAB seems to be just like these companies. Only it looks good and it is supposed to be a 'legitimate' business.
What's more concerning to me is that the coverage in TechCrunch[0] and Business Insider wasn't able to raise a modicum of doubt. If googling "JustFab" returns "Class Action Lawsuit" in the first 5 results, it would seem that the reporters either didn't do the absolute minimum required for effective journalism, ignored it, or were instructed to ignore it.
We've all heard the "online journalism is broken" refrain, so I won't repeat it here.* I'll just note that if it's so far gone that googling the topic of interest is out of the question, this form of journalism is worse than I thought.
[0] http://techcrunch.com/2012/04/26/fashion-retail-and-styling-...
* Edit: some forms appear to be doing quite well, e.g. nytimes.com. I'd also point out that there are some online articles I've found on TC or TheNextWeb, or AllThingsD that were quite good.
led to an entire industry being changed
That shit is poisonous to the startup sector, some people already think it's some kind of voodoo and this kind of thing doesn't help.
and some more people with similar stories:
http://www.consumeraffairs.com/online/justfab.html
http://www.scambook.com/company/view/146/JustFabcom
http://forum.purseblog.com/the-glass-slipper/justfab-com-sca...
- Any company of any size in America has been sued in a consumer class action -- many reputable companies scores or even hundreds of times. Some lawyers make their living that way. Most of these suits involve highly subjective elements such as whether there was enough disclosure in the right place of the right type to avoid consumers being misled. (Inevitably, in any mass-market consumer business, some consumers will be misled -- not necessarily the sharpest tools in the drawer.)
- Don't ever believe the version of the facts portrayed in a plaintiffs' complaint (in any suit). Ours is an adversarial system, meaning that, as in politics, you can count on each side to overstate its version of reality about 10X or 100X so that it looks like they're inhabiting alternate universes.
JMHO.
This just makes the coregistration first party.
Columbia House and the Columbia Record Club were around for 60 years. I doubt this model will ever go away or be deemed illegal.
[1] - http://en.wikipedia.org/wiki/Columbia_House
edit: hey, there's a wikipedia article about this model
Having to pay for a membership without performance is ridiculous.
The promotional offer was an attention-catcher, but you still saved $4-6 per CD.
Just because you feel like "there must be a trick" doesn't mean there is a trick.
In this case, everyone knows the jig may be up quickly, so they're looking to expand quickly and leave before the known end.
but I didn't find a single mention of membership fees on this page.
I'd heard a lot about this company, but had no idea what they were until now. Disgusting.
We sell a software product and service on a subscription basis (not hidden like justfab...it is clear to the customer that they are buying a subscription--the product is kind of pointless without the subscription).
Occasionally I find someone who bought years ago, and apparently stopped using the product. At least, I can tell that they have not obtained updates through our update servers for a long time. Yet they do not cancel the service. It just goes on re-billing them a few bucks a month, every month.
I'm reluctant to cancel their accounts, because maybe they are obtaining updates some other way, such as downloading the latest version and installing it periodically, and their firewall is blocking the update checks. But I am always conflicted, because it could actually be someone that really just doesn't look at their credit card statement, and has no idea he is still paying us years after they stopped using our product.
Obviously, the next step for you, at the very least, is disputing the charges with the card company, seeing that the company is unwilling to refund the fees.
http://uncrunched.com/2012/08/26/my-undead-credit-card/
Like it or not they have a good business model.
And the VCs probably don't care if they're ethical, as long as they get a good ROI.
The <Series B> Round was led by new investor Rho Ventures, with participation from existing backers Matrix Partners, Technology Crossover Ventures (TCV) and Intelligent Beauty, JustFab’s parent company, which incubated and launched the startup in 2010. The total amount of money now raised by JustFab is $139 million.[2]
______________
From:
[1] http://www.techmeme.com/110921/p29#a110921p29
[2] http://techcrunch.com/2012/07/26/justfab-just-nabbed-another...
IMHO the most important consideration is that the more aggressive any company is about acquiring new customers under this kind of model, the more liberal it should be about returns/refunds/cancellations. There were many lessons learned a couple years ago when discount-membership checkout programs (WebLoyalty, Affinion, Vertrue) and their e-commerce partners (Fandango) got the smackdown from various state AGs. There's enough similarity here to warrant paying close attention and making sure to stay on the right side of a thin line. Here's example coverage of the previous controversy:
http://www.zippycart.com/ecommerce-news/1165-affinion-vertru...
Website pcjyyvafopee.com Blog pcjyyvafopee.com Twitter @mpizldqpida Phone 91857712122 Email juxukt@yhjfkm.com Employees Founded 8/95 Description tPdwOyyKkVKVskrYrIv
http://www.crunchbase.com/financial-organization/technology-...
Note that as someone pointed out below, the billing provides a credit so theoretically your girlfriend has $320 in credit at JustFab and she can go buy some one-price-fits all items which makes no sense to me at all (t-shirt at $39.95 wtf?).
VC investments in LA tend to leverage the celebrity power of the backers since that gives access to a large audience and guarantees marketing/press coverage right off the bat.
There are plenty of legitimate businesses operating on continuity models (monthly charge, keep sending you stuff until you cancel), but they are regulated at both state and federal levels, and many states have laws with very specific requirements about what must be disclosed and how (e.g., CLEAR AND CONSPICUOUS disclosure on the checkout page, not buried in the site TOS, confirmation by e-mail, easy-to-find link to cancel, etc.). I'm not going to give an opinion on this particular site, but we did a meticulous 50-state review at eHarmony for just this reason, to head off any claims that consumers were somehow being misled about recurring charges. It has to be updated as states change or adopt new laws. The FTC also has jurisdiction but it's much easier to get the attention of state regulators and especially class action plaintiffs' lawyers.
To me, the responsible thing to do would send an email to customers that have been billed for the month but have no yet redeemed their credit near the end of the month. Let them know they have a credit and suggest some items that they could purchase with the credit.
At least that would give information to the customer so they are more aware of what's going on sooner rather than later and people may feel less that they are being 'scammed' because the site was actually trying to help them get what they are paying for.
However, I agree that the signup page should make it more clear that it's a recurring charge. In fact, I would support a rule/regulation that required a user check a box that specifically states, "I understand that I am agreeing to a recurring monthly charge of $xx.xx".
I know that I'd be pretty pissed if I saw a recurring charge show up that I wasn't expecting.
The fact some well known VC's pile a ton of money into this does not surprise me one bit. The company is making money and to be fair they do explain it pretty clearly IF YOU GO LOOKING. What they're doing isn't illegal. However, more should and could be done online to protect people from bad practices such as these.
CC companies do offer a form of protection through chargebacks, and over here in the UK whenever I have needed to dispute a transaction the mere mention of 'chargeback' usually kicks the retailer into shape.
One company I have HUGE respect for is TeamTreehouse, I mean look how they manage a subscription service[1]. Best practice indeed.
Is it misleading? Yeah slightly, except it says exactly what will happen with a bright pink numbered list. Did they create the program hoping some people will forget about it? Yes definitely. But, this a common tactic employed by any company with a monthly subscription.
All this outrage is a little ridiculous.
Which also brings up a thought, remember that there was a used one credit card number thing a whole back, I'm betting this will get popular soon enough with all these things happening.
If a business is profitable in the hundreds of millions, as long as it is borderline legal, someone will invest in it. Thats the sad reality of how this stuff works.
Though it is disappointing that Business Insider didn't take a few seconds to make an attempt at journalistic integrity, and do some research here rather than once again simply regurgitating a press release as some fluff piece.
There are companies (like pobieraczek.pl) that tried this scam but they had to take money through courts, and courts decided it was scam and buyers didn't have to pay.
Don't get me wrong, that does not make this right. It's just, I wonder, if their business model is based on these "zombie subscription fees" (as reitzensteinm so aptly called them) would they maybe lose money on actual, singular purchases? (or an unsustainably small profit margin)
All the important info is far away from the button as possible.
Page is 'technically' letting you know that you're signing up for a subscription, yet the button only says "Complete Checkout"...nothing about 'Signing Up'.
They went through some verbal hoops to not use terms like 'subscription', '$39.95 a month' and to keep the '$39.95' away from the word 'month'.
If you're intimidated by the thought of a CSR who will try to argue you out of cancelling, it gets easier to click "Skip this month" until you forget, and get charged.
It's a very dodgy business model.
I went through the checkout process. If you were introduced to this site as a cheap shoe store, rather than as a 'netflix for shoes', you could easily be mislead.
They are definitely in the grey area.
You called them a scam company in the title and the body, so I am curious why the reluctance to use the word fraudulent too. What is the subtle distinction that I'm missing?
Chargebacks don't lie, not at this scale. If customers were being scammed, they wouldn't be able to process cards.
The criticisms are mentions as well as a lawsuit. Also note that this HN page is given as a source.
Was your girlfriend able to redeem her credits?
This comment thread has been quick to conclude that it is a scam, on some fairly sketchy evidence. While I don't dispute that the author's friends experience might be true, the fact that someone didn't notice that they were signing up for a subscription product is somewhat undermined by the fact it took them 8 months to realize the charge was appearing on their credit card. It's possibly not a person who pays attention to details.
If you want to understand the degree to which the company's customer base understands and is in love with the company, check out their facebook page and the consumer engagement. Here's a pair of shoes they posted for a sneak peak this week: https://www.facebook.com/photo.php?fbid=10152125991230508...
90 Comments, 4,800 likes in a few days -- for a commercial promotion. Read the comments on this or any of their threads -- no one is bitching about being scammed or not understanding they are members of a suscription site -- they LOVE it.
Justfab has hundreds of thousands of subscribers. A new subscriber who joined last month will, given churn rates, be likely to be a paying subscriber for more than two years. They will make purchases in more than four months in their first year. They understand the premise: a personal shopper has selected a boutique for them at the beginning of the month, all the products are great value, and their obligation is to come and check the boutique that has been prepared. If they don't want anything that month, they just click skip and they're done.
Now, many of you would clearly prefer a world where you would not have to log in to say "no thanks" -- and that world is available to you at the mall. Justfab shoes are quality identical to shoes twice their price at the mall, because they have crushed the traditional retailer and supply value chain. But to deliver the value that the customers want, they need to be very thoughtful about costs.
The #1 challenge in ecommerce is customer acquisition. Pretty much every company has to spend more to acquire a customer than they will make in margin on the first transaction, so you're dependent on a lifetime value of purchases to make money. The reason few outside of Amazon have been able to make this work, and even Amazon (and it's bought businesses like Zappos and Diapers) make very little money is because you keep having to reacquire the customers to get their business... think of people just clicking through those google ads at the top, whether they've been there before or not.
The idea of the subscription model is to get customers in a regular habit of checking in. When they commit to that, Justfab can in turn commit to pricing for the quality they provide that would be unheard of anywhere else. Justfab's typical customer isn't wealthy but likes to look good, and can't afford to just disregard price, and JF is the place they find a style/quality/affordability combination that works for them.
To be clear: as stated, JustFab is on track to do $100M+ in sales this year, from hundreds of thousands of subscribers who check in every month and understand exactly what they're getting into. The site has a very high net promoter score, a return rate that is less than half of Zappos.
As a general rule, if a customer signs up for a subscription product, doesn't check in and calls in because they got charged, we explain the system and try to keep them as a customer, but if they want a refund they will generally get it. People who don't call for 8 months I'm less sure about what the standard policy is.
If I go to the homepage, the biggest call to action for me (it's customized so not everyone will get the same) is "Buy one get one free sale happening now. JOIN TODAY." If they were trying to trick you, would the call to action say Join?
As has been pointed out, when you join by making your first purchase, the purchase page which others have linked has two key things:
* A very clear description that you are signing up for a subscription program. This says plainly and in bold type, in the same font size as everything else on the page: "If You Do Not Make A Purchase Or Skip The Month By The 5th, You'll Be Charged $39.95 For A Member Credit On The 6th. Each credit can be redeemed for any JustFab style on the site."
* A check box that says you accept the terms of VIP membership. This box is in a clear and large font, uses the word membership, and is not opt-out -- you have to proactively opt-in.
I don't see how a reasonable person could argue that this is a scam or a trick. Not only are the terms presented in plain english and large fonts, the site has a huge number of passionate and loyal customers.
I see your long answer, and, being a bit familiar with companies like Intelligent Beauty, I raise you a long list of questions. I don't expect you to answer them, but in my mind they can help separate "value-enhancing offer" for customers vs. "revenue-enhancing trick" for the company.
1.) How long does the average customer stay in the monthly program before cancelling?
2.) What percentage of customers opt-out on initial sign-up?
3.) On average, what % of the monthly subscription charged to the customer is ultimately spent on merchandise vs. becomes breakage?
4.) If you changed the text next to the check box to say, "You will be charged $39.95/month," do you think opt-in rates would change? If consumers aren't being misled, you should see little-to-no change in opt-in rates.
5) If I call to cancel after N months, do you refund the unused balance? Do I have to use it as a "store credit?" Do you offer me 100 cents on the dollar or some fraction thereof? Are consumers given incentives not to cancel or to convert the remaining unused balance into merchandise before cancelling?
6) Does the unused balance expire? If so, after how long?
7) Do you email customers to let them know they need to log in every month, or is it their responsibility to remember?
8) What portion of the company's revenues (and, more importantly, gross margin dollars) is in product sales vs. unused subscription dollars as breakage?
9) Why must consumers call customer service to cancel vs. doing it online? Is it difficult or time-consuming to reach customer service?
If this subscription is a value-add for customers, one would expect:
- A high portion of the charged dollars converting into merchandise sales vs. becoming breakage. Consumers rarely find it enjoyable to be charged $39.95 and not to get anything for it (even Columbia House sent you the CDs at the same time they collect the money; you get the money first, and I have to remember to come to you to get the shoes).
- A reasonable % of customers opting-out at initial purchase. If 99% opt in, your disclosure is ineffective, as it beggars belief that people are dying to pay $39.95 a month. Or, if you change the language of the text box as I suggest above, no observed difference in opt-in rates.
- A low churn rate in the % of consumers who call to cancel once subscribed.
- A consumer-friendly policy that allows subscribers who cancel to receive 100% on the dollar for the unused balance either in cash or store credit, at their option.
- The majority of the revenues and gross margin dollars come from shoe sales, not subscription fees.
- Easy, online cancellation. Shouldn't it be as easy to get out of the program as to get into it? If not, why not?
[Edit: formatting, again]
Asked the wife if she heard of the site and she recounted a tale similar to the OP, albeit not spanning 8 months, only 2-3. And as I had assumed, was able to get shoes for the months she was charged for before she cancelled...which is cool. But, again, it wasn't overly obvious to her either. And my wife is a smart (and CHEAP) woman who would notice an unobsured message that she'd be billed once a month.
Where's the "every month while you're a member" in that text?
"JOIN TODAY" does not imply subscription with recurring charges, just like "sign up" or "create an account" doesn't.
"there's a box you have to click indicating that you accept the terms" - perhaps that gets you off the hook legally, but not ethically.
If you have to read mice type to find out the full T&C, there's something less than reputable about how you do business.
EDIT: Just looked at the FAQ on the site, they are up front with their 2 options. The shoes are $39.95 if you sign up for the VIP program, otherwise they're full price. So if you want the sale price, you've got to sign up for VIP. http://www.justfab.com/faq.htm#Q02
Did it take your girlfriend 8 months to notice this recurring charge on her statement?
I have a story about forgetting to cancel my online newspaper subscription. Look for that on HN soon!
JustFab isn't going to help disambiguate their business model up front because that would hurt their bottom line.