Zulily Quietly Powers Past 5M Members in Mom-and-Kid Sales
There probably isn’t a startup in Seattle as intriguing as Zulily.
Founded by veterans of e-commerce jewel seller Blue Nile and backed by more than $50 million in venture capital, the company is often said to be the biggest success story among early stage Seattle companies, with supposedly remarkable revenue growth.
Not that you can get them to talk about it. For all the suggestions of its meteoric rise, Zulily is actually not big on hyping up its own results—and that makes the startup stand out among the new breed of e-commerce sites, which have risen to prominence by offering steep discounts for a limited time on goods and services.
There are a few things you can squeeze out to chart Zulily’s growth.
The company now says it has 5 million members—people who have signed up for its daily sale e-mails—which represents growth of 25 percent from a year ago. Zulily had such struggles with shipping contractors being able to handle its rush of orders that it set out to build a whole shipping division—and pulled it off in just two months. And after blowing through four headquarters buildings in about 18 months, Zuilly now says it has more than 300 employees at its base in the industrial SoDo district.
Among those folks are a couple of tech startup veterans who joined the company recently: Doug Aley, formerly of Off & Away and Lockerz, and Kevin Saliba, formerly of CafePress and Zapd. They’re only two hires out of many. But the additions say a lot about the kind of company Zulily appears to have become—a fast-growing startup that has real revenues and a shot to stick around for some time.
That’s notable in a city the size of Seattle, which is still developing the seedbed of its startup scene and has fewer strong and growing companies than you’d see in a bigger city like San Francisco or New York. Saliba, who had previously commuted to the San Francisco Bay Area after CafePress purchased his startup Imagekind, said Zulily seemed like the kind of company he’d expect to encounter in the startup mecca to the south.
“I don’t think I’ve seen growth like this since the days 10 years ago of Expedia or Amazon, the big stars that came out of the Seattle area,” he says.
Aley, who worked at Amazon.com between 2003 and 2007, said that experience also doesn’t compare. “I’ve never seen a company move this fast before—not only move this fast, but move this fast and make a lot of the right decisions,” he says. “It’s an amazing thing to be a part of.”
Zulily has captured that kind of growth in part by capitalizing on a new business model that has found a hungry audience in the U.S. Typically known as flash sales or private sales, companies that follow this playbook sell exclusive and discounted consumer goods to a list of members—you can’t just pop over to the site and buy things a la Amazon or eBay.
There’s also a get-it-while-it’s-hot angle to the sales. Flash sale services typically make their money by liquidating a certain amount of predetermined inventory from a supplier, which means that members have to jump on a sale before the items are gone. The latest crop of startups would probably resist the comparison as low-rent, but they employ the same kind of trick you see on home shopping TV channels where there’s a ticker of items remaining and a clock counting down the end of the sale.
The idea started in Europe and has spread across the U.S. in the past few years, mostly focusing on high-end goods that can withstand a decent markup even at sale prices. Gilt Groupe, ideeli, and Zulily competitor Totsy are all using this model too—and all based in New York, by the way, the center of the universe for consumer retail.
But Seattle has always been a fertile region for retailers, from traditional department store brand Nordstrom and warehouse club giant Costco to outdoor products leader REI, the ubiquitous Amazon, and Zulily’s SoDo neighbor, Starbucks.
There’s also some evidence that the flash-sales model with physical merchandise may be a stronger bet than online coupons or “daily deals,” the other e-commerce sensation of the past few years. Chicago-based Groupon was the leader of that pack, but its performance as a public company has been dismal lately—and investors are seeing a shift at Groupon, away from its profitable business of coupons for dining and services and toward a new category, physical retail.
Aley joined Zulily in March. He sold his previous startup, travel deals provider Off & Away, to the social networking commerce site Lockerz in late 2011. Aley had met Zulily CEO Darrell Cavens before the acquisition, and knew what he was working on when the phone rang one day.
“He called me back three or four months later and said, basically, `Are you bored yet?’” Aley recalls. “Lockerz is a decent company in its own right, but not a great fit for me. And I knew Darrell and the team here and loved what they were doing.”
Although his title is vice president of corporate development, Aley says the the fast growth of Zulily means individual responsibilities can change quite a bit. Most of his time is focused on the product side, including mobile development.
Aley says an enormous part of Zulily’s success thus far is its merchandising team, led by Lori Twomey. Even though Zuilly is a considered a technology company because of its reliance on e-commerce fundamentals, there’s a human element to the product selection that can’t be ignored, he says.
“I think the world of e-commerce is sort of being bifurcated into search and curated,” Aley says. “You wouldn’t go to Amazon, really, to browse for an item.”
Zulily has been diversifying its product base, too. Although known primarily for kids’ gear, the site also features apparel for women and has added some home products as well. In his job as general manager of strategic partnerships, Saliba also works on bringing in new suppliers for sales and promotions, like a recent offer for a free photo book from online picture site Shutterfly.
That means some 1,400 products a day on the site, with a new storefront of featured sales published each morning. Cavens has likened this to operating like an old-school publishing company, with a daily deadline of coming up with a new package of things to offer a hungry audience.
That kind of curation in e-commerce fascinated Saliba, who had also worked at Amazon and his own startup Imagekind, which sells art prints and photographs online. Saliba stayed at CafePress for a couple of years after it acquired Imagekind, but he began looking for new opportunities back in Seattle, where his family is based.
After working with previous investor Kelly Smith’s mobile website builder startup Zapd, Saliba knew he’d found a new home when he met the leaders at Zulily. “They’re probably the smartest group of people I’ve ever seen amassed at one place,” he says. “I knew then and there that it was something I wanted to be a part of.”
Not only does Zulily publish a new version of its site each day, Saliba notes, but it takes advantage of a member’s shopping history to serve up a different version of the site based on what that person has been looking for.
“I don’t want to say it’s personalized, but it’s a step toward personalization. We want to deliver products that are most relevant to you, I think that’s the goal,” Saliba says. “And we think that’s what mom wants as well. Stating the obvious, if she’s not pregnant, she doesn’t want to see maternity clothes.”
Even though it’s had apparent success with the flash sales model, it also doesn’t sound like Zulily is married to the model. It’s not clear how long the novelty of that kind of shopping will drive big growth, but as with most new things that hit the consumer sector, it’s reasonable to assume that the market will become saturated at some point and growth could level off.
What’s Zulily going to do at that point? Aley wouldn’t say, exactly. But he said the company is secure enough in both revenue and user growth that it doesn’t have to go off chasing new “shiny things,” the way a startup might if its underlying business wasn’t living up to the hype.
“We think about it from the customer perspective. We have to deliver a great discovery experience, great brands and value every day. The model is sort of a vehicle through which we work,” Aley says. “I never get concerned about models because the great companies … work their way through different models. But they don’t lose sight of the things that are really core to them.
“What’s really core to us is our customer, our mom … If you keep your customer in mind, you don’t have to limit yourself to that model.”