Zulily Rides High on Flash Sales Trend in Kids Category

Many analysts believe that the future of e-commerce retail lies in flash sale shopping. The model was pioneered by Vente Privee in Europe and has gradually been adopted by e-commerce players worldwide. In a flash sale, an e-retailer offers products at big discounts for a limited time and at limited quantities. According to Experian Hitwise, within the U.S., visits to flash sales sites last year grew 109% over the year. In the U.S., the flash sales market is dominated by a mom-and-kid focused e-retailer, Zulily. Data show that Zulily.com leads the pack with a 16% share.

Zulily’s Financials
Seattle-based Zulily was founded by former Blue Nile executives Darrell Cavens, former SVP of marketing and technology, and Mark Vadon, the chairman and founder of Blue Nile. The site launched their daily deals site in 2010 with a reported member base of more than 15,000 to offer flash sales on clothes for moms and kids. However, membership has grown rapidly to more than four million as of August 2011.

Zulily follows a Gilt Groupe–like model that gets users to register with them and offers high-end products at huge discounts through tie-ups with more than 2,200 vendors. Zulily publishes their deals each day at 6:00 a.m. Pacific Time. Most deals have limited availability and expire within 72 hours. Zulily’s business model deals with buying overstock items from brand-name designers and then retailing them on heavy discounts in rush sales.

By August 2011, Zulily had received more than $53.6 million in venture funding with investors that include Maveron, August Capital, Trinity Ventures, and Meritech Capital Ventures. Their latest round of funding of $43 million pegged their valuation at $750 million. Trinity had also invested in Mark Vadon’s previous company, Blue Nile.

Zulily’s financials are not publicly known. However, a report estimated their revenues for 2011 at $150 million.

Zulily’s Mobile Expansion
Earlier last year, Zulily also launched their first ever mobile application. The free app is currently available on iTunes for use on the iPhone, iPod, and iPad. The app offers access to Zulily’s deals and provides users information on upcoming deals, set alerts, and even share the information with friends. Zulily’s app is targeted at the comScore estimates of 78 million people in the U.S. who use their smartphones for retail shopping.

Zulily hasn’t confirmed their plans of coming up with an IPO. However, they claim they are in the segment for the long haul. Their founders estimate that the market for the kid products they focus on is worth $60 billion in the U.S. and do not wish to diversify into other demographics just to amass a customer base. With their current market leadership  and the projected market potential, Zulily’s investors should be pleased.