The site, featuring 4,500 moms’ and kids’ clothing and other items each day for its flash-sale limited-time events that advertise prices at least half off regular tickets, was launched in January 2010. Co-founders Darrell Cavens, CEO of the company, and Mark Vadon, chairman, and some other executives were formerly veterans with online jewelry retailer Blue Nile NILE , which Vadon founded before it went public in 2004.
Zulily, touting itself as a “disruptive e-commerce company,” said it aims to change moms’ retail experience that it said “has become uninspiring due to the concentration of sales among mass retailers and commoditization of merchandise.” It said it’s worked with over 12,000 brands, many small emerging and boutique brands, and used its proprietary technology to personalize the shopping experience.
So far, growth looked to be impressive. Its active customers jumped to 1.58 million last year from 157,000 in 2010, with sales surging to $331 million from $18 million over the same period. Like recent IPO star Twitter, the site has lost money in each of the past three years, even though it returned to a profit the first nine months of this year. Google-backed RetailMeNot SALE , an online coupon site, had its IPO in July.
Zulily acknowledged competition including Wal-Mart (WMT), Amazon AMZN and Toys “R” Us is “an ongoing threat” to the success of its business. One of its other business risks includes not ordering inventory from its vendors to be held in its fulfillment centers until after products have been ordered, a strategy that frees it from inventory risk but contrasts with other retailers’ efforts to expedite shipping. Its average order-to-ship time from its fulfillment centers in the third quarter was 11.4 days.
The company also acknowledged the flash sales model is “dynamic and new,” and “this growth may not be sustainable” if customers lose interest or the market segment becomes saturated. Indeed, Fab.com this year made a move away from its flash sale format, reportedly calling it a “flawed” model. It announced in its CEO’s blog in October that it was cutting about one-fifth of its staff at the time, a second round of major layoffs since the summer, as it’s on a “path to profitability” and be as “self-sustainable” as soon as possible.
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