According to comScore, during the quarter ended December 2012, overall e-commerce sales in the US grew 14% over the year. Researcher IBISWorld estimates that during the same period, flash sales site Zulily saw revenues double over the year. It is this rapid growth that has spurred the high valuations for the company, along with speculation of a possible IPO coming soon.
Unlike local deals sites, which publish deals offered by local merchants, flash deals sites offer deep discounts on products or services stocked by these sites for a limited time. Founded in 2010, Zulily buys overstock items from big designer brands and subsequently retails them at heavy discounts in rush sales. It is a niche flash deals site that offers deals only on products for children and mothers. According to analysts, Zulily is able to stand apart from giants like Amazon because of their ability to connect with smaller, but talented, designers who lack a channel for “extensive national distribution.”
The products the company offers have managed to attract a big following. Last year, Zulily reported more than 10 million subscribers worldwide accessing more than 35 deals published daily on the site. In fact, last year it grew so fast that the Fortune 500 organization Zulily outsourced its logistics to could not handle the operations. Zulily had to step in and set up its own fulfillment center. Last year, Zulily expanded its operations to Europe by establishing a presence in the UK. The UK site ships to 17 European countries, and the American site is able to ship to more than 100 countries.
While its financials are largely unpublished, market reports suggest that Zuliliy is operating at an annual revenue rate of more than $500 million compared with revenues of over $150 million two years ago. Zulily’s margins are also unknown, but it was not earning profits two years ago and was working to turn profitable this year.
Zulily remains venture funded and has received investments of $139 million so far from investors, including Maveron, August Capital, Trinity Ventures, Meritech Capital Ventures, and Andreessen Horowitz. The latest round of funding was held in November 2012 and raised $85 million in a round led by Andreessen Horowitz at a valuation of $1 billion. According to market rumors, the company is now evaluating an IPO and has hired investment bankers from Goldman Sachs, Bank of America Merrill Lynch, and Citigroup to help with the stock issuance. Zulily has remained silent about these rumors.
Globally, the children’s apparel market is estimated to grow to $173.6 billion by 2017, which of course represents a big market for Zulily to grow into. We’ve also recently covered Steals.com, a Utah company in the same space.