Zulily, Off to Fast Start in Private Sale E-Commerce, Raises $6M More from August Capital, Maveron

8/4/10

Seattle-based private-sales company Zulily is announcing today it has closed $6 million in Series B financing led by August Capital, along with existing investor Seattle-based Maveron. The website, which went live on January 27, rolled out of stealth back in December with the support of an initial $4.6 million round.

Six short months later, co-founder and CEO Darrell Cavens says Zulily has carved out a specialty shopping market focused on baby gear, children’s apparel, kid’s toys, and maternity items. And the company is seeing greater success than it envisioned in the early going.

“It’s been a wild ride,” Cavens says. “We just passed the six month mark and have been very, very excited about our growth here.”

E-commerce sites in niche markets, like Zulily, have been popping up all over the place, from France’s pioneer Vente-Privee, to New York-based Gilt Groupe, Los Angeles-based HauteLook, and Boston-based Rue La La, which all focus on higher-end, luxury brands. The term ‘private sales’ simply means that users have to first sign up as members in order to access and purchase items on the site.

Much like the increasingly popular group-buying sites like Groupon, Tippr, and DealPop, private sales sites offer daily deals that incorporate e-mail marketing and “social shopping” trends. However, with group-buying, the more people who buy into an offer, the cheaper it gets. With private sales, all deals are negotiated beforehand, regardless of how many people participate (although Zulily does offer incentives—credits against future purchases—to members who refer friends). Another vital difference between the two models and Zulily in particular, according to Cavens, is the emphasis on the variety of brands and offerings available on a daily basis.

“On the private sales side, it’s generally selling a product as opposed to local services. The group buying sites, the majority of them have local service business models,” he says. On any given day, that means most group buying sites will offer one local deal—whether a coupon for a $100 meal at a local restaurant for $50, or 30 percent off a haircut at your neighborhood salon.

Darrell Cavens, CEO and president Zulily

Darrell Cavens

Group buying site deals typically expire between 24 and 48 hours after they are put online, and are limiting, Cavens says, because each single offer may not necessarily appeal to the wide audience it is sent out to.

In contrast, Zulily offers an average of five new ‘events’ (i.e. brands) offering deals of 50 to 70 percent off on the site each day. Within each new brand are five to 10 different products, and within each item, a handful of varying styles, meaning that consumers have an average of 150 new styles of products to choose from each day from both big name brands and up-and-coming boutique labels looking for a way to get broader distribution.

“You’d see a set of products that might have everything from blocks to a stroller, to a play house,” Cravens says. And because events expire after 48 to 72 hours on average, “At any one time there’s maybe 500 or so active items available on the site,” he says.

Having more items available on the site on a daily basis has resulted in Zulily’s quick-paced success, garnering it more sales and a loyal fan base, Cavens says.

“What we’re seeing is that the group buying sites typically have one-off a day, [while] we’re having a large number of our members buying multiple items a day and coming back for repeat business,” he says. “The things you see there is the diversity of brands. It’s not so much about one or two brands. You see different brands every day—it’s part of what gets people excited to come back and see what we have.”

And though Cavens says the company is not releasing any official numbers regarding its finances or its membership, he did comment on the return rate.

“Of people that have bought—and it’s not a metric we have generally shared—we’re seeing almost 40 percent of consumers that have bought for us come back and repeat again,” Cavens says. “For being six months old, that’s a very high repeat rate…they’re coming back again and again to buy.”

And when compared to direct competitors The Mini Social, founded in 2008, and New York-based bTrendie, founded in 2009—also in the private sales market for moms, babies, and kids—Cavens points to an advantage his company has in web traffic. According to web analytics service Compete.com, Zulily’s traffic surpassed the other two within weeks of launching. As of June 20, Compete’s statistics show that Zulily’s site brought in an average of 217,544 unique visitors a month, followed by bTrendie at 54,929, and The Mini Social at 26,198.

“These two were both before us, and we’ve run by them in terms of traffic to be considerably larger,” Cravens says. “We’re very pleased with the momentum we’ve got, and we’re not seeing the competitive set keeping up with us at that point.”

As for the new funding, Cavens says the company wasn’t in need of more financial support when August approached it.

“We weren’t initially going out and looking for funding,” he says. “But we found a great team with August, and we felt like they really understood the team here, so they made us an offer, and really put some gas in the tank that will let us take off.”

Zulily plans to use the additional funds to continue to improve the experience for both consumers and retailers.

“In retail, it’s doing 1,000 little things right and not necessarily going after one big thing,” Cavens says.

One of the items on the Zulily ‘to do’ list: rolling out a mobile functionality that would allow brands to “engage more deeply with members.”

“I think there’s a great opportunity in mobile here when the sales go live. The moms may be running errands or dropping the kids off at school,” he says, adding that with mobile capabilities, they’ll be able to follow—and purchase—deals on the site from anywhere.

The company also will be hiring new staff both on the tech development side and the buying department, so that it can expand the number of brands represented and the number of events. And although Cavens couldn’t comment on specific numbers, he did add the team has grown rapidly—from four employees back in December, to more than 40 now—and he fully expects that trend to continue.

“When I look a year out it’s reasonable that we’ll be double what we are now,” he says. “We’re growing faster than we expected.”

Thea Chard is a correspondent for Xconomy Seattle. You can e-mail her at theachard@gmail.com or follow her on Twitter at http://twitter.com/theachard. Follow @

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