Zulily keeps it simple to drive growth
September 15, 2014 11:43 AM
It’s shaping up to be another record year for flash-sale retailer zulily Inc., as it’s projecting 100% growth and $1.21 billion in revenue in 2014. And the merchant has a pretty simple plan to maintain that momentum: Keep it simple and master the fundamentals.
“Focus on the basics pays off so much more than chasing random marketing-focused things,” CEO Darrell Cavens told analysts last week in a site visit to its upgraded fulfillment center in Ohio. “[Things like] the site design experience and shipping has paid off much, much more than affinity-type programs.”
The merchant is also not putting all of its eggs in one online basket, as it makes a concerted effort to spread its marketing dollars across many channels. For the first time, the retailer of gear and apparel for moms and babies broke out details on its marketing spend and revealed it spends a lot less on search engine marketing and optimization than many of its competitors.
During the second quarter of 2014, zulily spent 36% of its marketing budget on display ads, 24% on social media ads, 23% on search, 10% on television and 7% on other channels. “As we look at investing our marketing dollars, it’s very much aimed at getting e-mail subscribers signed up on the site, and we then work very hard to make sure they buy over time,” he told analysts. “We are not dependent on any one channel. Many others are going to talk about search as their number one channel and that’s because people come in with a certain product in mind.”
“The State Of Retailing Online 2014,” a Shop.org study conducted in July 2014 by Forrester Research, found that 50% of online retailers spend 31% or more of their online marketing budgets on paid search.
Zulily, on the other hand, is built around members discovering new products from brands that they can’t get anywhere else, Cavens adds. So customers often aren’t searching for a particular item when they go to zulily.com.
In terms of 2014 capital spending, zulily will spend 78% of its budget on fulfillment centers and automation. It will spend around 10% on office space, 12% on technology it develops in-house, and the remainder on smaller miscellaneous efforts.
As of now, delivery times can sometimes stretch out two to three weeks, and this is often the chief complaint about zulily among investors and customers alike. Delivery times are so long because zulily doesn’t stock much inventory, instead placing orders with suppliers after taking orders from consumers. For example, if zulily.com runs a week-long sale on products from Toms Shoes and gets 1,000 orders, at the end of the week zulily will place an order with Toms for those 1,000 pairs of shoes. Once zulily receives those shoes at one of its two warehouses the e-retailer combines those items with other purchases a customer may have made during that time, and ships the purchases out itself.
To keep up with demand and automate this process, the merchant has been working to expand fulfillment capacity and speed up with pick, pack and ship process with automated conveyor systems and custom-build order management technology. The e-retailer recently announced it’s opening a third fulfillment facility measuring 800,000 square feet, in Bethlehem, PA, in 2015.
With $695.7 million on 2013 web sales, zulily is ranked No. 55 in the Internet Retailer Top 500 Guide and is the second largest flash-sale retailer in North America behind Groupon Goods, the pure-commerce arm of Groupon Inc. A flash-sale retailer is one that sells a select group of items for a limited period of time. Gilt Groupe, which brought in an estimated $600 million in sales last year which earns the merchant a No. 59 ranking in the Top 500 Guide, is the third-largest flash-sale merchant in North America.