January 3, 2024
©inkdrop via Canva.com | Credit: Zulily
What Led to Zulily’s Demise?
Zulily, once valued at approximately $9 billion, last week moved to shutter operations about two weeks after filing a lawsuit against Amazon, accusing the e-commerce giant of price fixing.
The Seattle-based online retailer of children’s and women’s apparel, founded by former Blue Nile executives in 2010, blamed “the challenging business environment” for its closure without citing specifics.
Zulily peaked around the time of its multibillion-dollar IPO in 2013. According to its IPO filing, Zulily launched with “the goal of revolutionizing the way moms shop,” as mobile shopping was just starting to take off. Partnering with smaller and emerging vendors, the platform offered a limited number of daily deals and flash sales.
Co-founder Mark Vadon recently told GeekWire that shoppers loved that kind of experience and came back day after day to find new items. He said, “They were getting entertainment out of the act of shopping itself. Not many companies were doing that.”
Zulily also stood out for taking customer orders before purchasing inventory from vendors, supporting an expansive offering for customers and open-to-buy opportunities for vendors. Zulily said in its IPO prospectus, “Our large and growing customer base in a highly desirable demographic has allowed us to attract and retain vendors offering high quality and unique products.”
By 2015, QVC-parent Qurate acquired Zulily at a discount to its IPO price as competition for customers and inventory in the flash space arrived from Rue La La and Gilt as well as mainstream retailers such as Walmart and Amazon. In recent years, Qurate has attributed Zulily’s challenges to reduced availability of products from national brands, escalating online marketing costs, and reduced marketing spend. This past May, Zulily was sold to Regent, a Los Angeles-based investment firm.
Reports covering Zulily’s collapse also cited the arrival of Chinese fast-fashion retailers like SHEIN and Temu for Zulily’s recent struggles.
In Zulily’s recent lawsuit, Amazon is charged with coercing vendors to “artificially raise Zulily prices at or above Amazon’s, and to punish any sellers who cheated,” preventing Zulily from competing against similar products on Amazon. The allegations mirror those from the FTC’s ongoing antitrust lawsuit filed against Amazon. Amazon has disputed the allegations.
Speaking to FOX 13 Seattle, Anna Fuller, founder and CEO of Halo, a startup offering weekly flash deals for new moms, said that while Zulily was a pioneer, it wasn’t able to keep up with advances in mobile shopping. She said, “They changed ownership several times. They’ve changed their focus a couple of times. It’s not on the radar of the millennial mom in the same way that it was 10 years ago, I can tell you that.
BrainTrust
Melissa Minkow
Director, Retail Strategy, CI&T
Gene Detroyer
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Kenneth Leung
Retail and Customer Experience Expert
Recent Discussions
Discussion Questions
Was Zulily’s closure due more to self-inflicted mistakes or external pressures? What was it missing from its business model?
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Zulily was once a mainstay of the e-commerce market but over recent years it completely lost its luster and, alongside that, it lost customers and market share. Its prices, which were once a point of differentiation via various flash sales and one-off deals, became very weak compared to new platforms like Shein and Temu which offer everyday low prices. Zulily also had a much weaker range and worse delivery than Amazon, which successfully pulled customers away. Zulily also made numerous marketing missteps by not communicating points of difference effectively and by failing to drive new customer acquisition. Ultimately, Zulily was just not strong enough to compete and survive.
This is an important lesson that success in the beginning doesn’t equal maintained success. You have to keep a constant pulse on the market and keep relevant. Slashing prices without being able to continually drive volume is unsustainable for obvious reasons.
Let’s be honest here: the “real” story here isn’t that a start-up business failed – many most do – it’s how, or really why, it was ever given a $9B valuation.
Amazon apparently forced Zulily to raise prices artificially and to pull its “Best Price Promise” with price comparisons from its website after it forced third-party suppliers to maintain “price parity” for both companies.
Zulily’s suppliers had no choice but to comply with Amazon’s price-fixing terms, as they could not afford to lose Amazon sales.
Deliveries didn’t match Zulily’s flash sales. It often took up to two weeks for Zulily to sort and deliver products after orders were placed, delaying customers’ instant gratification. -Db
SHEIN and Temu siphoned an enormous amount of $$$ out of the market in recent years. Those $$$ had to come from some where, and any brand or retailer that was operating on the edge of viability was at risk of being pushed over the edge. Cutthroat competition can be wickedly cruel to any brand or retailer in the midst of making their own missteps. There’s very little room for error these days.
In the simplest terms, they got lost in the shuffle.
When start-ups go through three different ownerships in ten years, let’s recognize that there was something seriously wrong with the original business model from the beginning. It was apparently unfixable.
Execution and competitive pressures aside – is it just possible than an online only apparel business (high returns, delivery costs etc) with “normal margin ranges” just isn’t a feasible business even within a range of execution competence.
I remember when QVC bought Zuilily. I spoke to them about it. Their theory was that their core customer (QVC) was very sticky, but aging out. Zuilily, on the flip side, was not so sticky but had a younger audience.their theory was that they’d get the best of both worlds, and find younger customers that they could make sticky.
Obviously, the product wasn’t compelling enough to really give QVC a shot. I could say Zuililiy’s fate was sealed when QVC gave up on them. At that point, a company will roll through the holidays and declare when inventory is low and cash is high.
overall, I would say its product offerings just weren’t compelling enough.
I think it was more than one single mistake that brought them down. They blew up during the flash sale fad, and managed to exit before its collapse. After that it became a brand without a value proposition pretty quickly, and shifting to everyday low price from the flash sale / treasure hunt offering probably lost it a lot of customers. I’m not sure that these shoppers all flocked to Shein or Temu – especially for kids clothing, etc., I think moms are a bit more wary of products that don’t come from name brand sources, which was part of the Zulily appeal. But once a PE acquired it, its days were already numbered.
Online-only retailers cannot compete with omnichannel retailers who can ship from stores. I question the viability of any pure-play.
There is a cautionary tale to be told with Zulily’s shutting down their operations. Considering the accelerating rate of change and disruption, Zulily never truly adapted its business model in an industry that necessitates flexibility, agility, and scalability to meet evolving consumer behaviors. This is critical to maintain a sustainable business model that is relevant and competitive.
At its inception, Zulily’s e-commerce offerings were very competitive and well-positioned against Gilt and other competitors. Their opportunistic merchandising strategies, led by their flash sales caught plenty of attention. However, with the emergence of fast fashion giants Shein, Temu, and Zara and the omnipresence of Amazon, Zulily struggled to differentiate itself in a highly competitive market.
Additionally, when QVC acquired Zulily, they seemed to have lost their focus and the foundation that made them so successful early on. Consumers had plenty of other options to choose from, and unfortunately, Zulily’s once revolutionary business model that led to their $9B valuation became irrelevant quickly.
I was speaking recently at my alma mata and I told the students “If you are building a business your evaluation and abilility to raise funds is NOT a measurement of success”. In this case Zulily built a strong business initially but failed to build sustainable competitive advantages against newcomers and established players like Amazon. The change in ownerships definitely didn’t help it stay agile to keep up.
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Zulily was once a mainstay of the e-commerce market but over recent years it completely lost its luster and, alongside that, it lost customers and market share. Its prices, which were once a point of differentiation via various flash sales and one-off deals, became very weak compared to new platforms like Shein and Temu which offer everyday low prices. Zulily also had a much weaker range and worse delivery than Amazon, which successfully pulled customers away. Zulily also made numerous marketing missteps by not communicating points of difference effectively and by failing to drive new customer acquisition. Ultimately, Zulily was just not strong enough to compete and survive.
This is an important lesson that success in the beginning doesn’t equal maintained success. You have to keep a constant pulse on the market and keep relevant. Slashing prices without being able to continually drive volume is unsustainable for obvious reasons.
Let’s be honest here: the “real” story here isn’t that a start-up business failed –
manymost do – it’s how, or really why, it was ever given a $9B valuation.Amazon apparently forced Zulily to raise prices artificially and to pull its “Best Price Promise” with price comparisons from its website after it forced third-party suppliers to maintain “price parity” for both companies.
Zulily’s suppliers had no choice but to comply with Amazon’s price-fixing terms, as they could not afford to lose Amazon sales.
Deliveries didn’t match Zulily’s flash sales. It often took up to two weeks for Zulily to sort and deliver products after orders were placed, delaying customers’ instant gratification. -Db
SHEIN and Temu siphoned an enormous amount of $$$ out of the market in recent years. Those $$$ had to come from some where, and any brand or retailer that was operating on the edge of viability was at risk of being pushed over the edge. Cutthroat competition can be wickedly cruel to any brand or retailer in the midst of making their own missteps. There’s very little room for error these days.
In the simplest terms, they got lost in the shuffle.
When start-ups go through three different ownerships in ten years, let’s recognize that there was something seriously wrong with the original business model from the beginning. It was apparently unfixable.
Execution and competitive pressures aside – is it just possible than an online only apparel business (high returns, delivery costs etc) with “normal margin ranges” just isn’t a feasible business even within a range of execution competence.
I remember when QVC bought Zuilily. I spoke to them about it. Their theory was that their core customer (QVC) was very sticky, but aging out. Zuilily, on the flip side, was not so sticky but had a younger audience.their theory was that they’d get the best of both worlds, and find younger customers that they could make sticky.
Obviously, the product wasn’t compelling enough to really give QVC a shot. I could say Zuililiy’s fate was sealed when QVC gave up on them. At that point, a company will roll through the holidays and declare when inventory is low and cash is high.
overall, I would say its product offerings just weren’t compelling enough.
I think it was more than one single mistake that brought them down. They blew up during the flash sale fad, and managed to exit before its collapse. After that it became a brand without a value proposition pretty quickly, and shifting to everyday low price from the flash sale / treasure hunt offering probably lost it a lot of customers. I’m not sure that these shoppers all flocked to Shein or Temu – especially for kids clothing, etc., I think moms are a bit more wary of products that don’t come from name brand sources, which was part of the Zulily appeal. But once a PE acquired it, its days were already numbered.
Online-only retailers cannot compete with omnichannel retailers who can ship from stores. I question the viability of any pure-play.
There is a cautionary tale to be told with Zulily’s shutting down their operations. Considering the accelerating rate of change and disruption, Zulily never truly adapted its business model in an industry that necessitates flexibility, agility, and scalability to meet evolving consumer behaviors. This is critical to maintain a sustainable business model that is relevant and competitive.
At its inception, Zulily’s e-commerce offerings were very competitive and well-positioned against Gilt and other competitors. Their opportunistic merchandising strategies, led by their flash sales caught plenty of attention. However, with the emergence of fast fashion giants Shein, Temu, and Zara and the omnipresence of Amazon, Zulily struggled to differentiate itself in a highly competitive market.
Additionally, when QVC acquired Zulily, they seemed to have lost their focus and the foundation that made them so successful early on. Consumers had plenty of other options to choose from, and unfortunately, Zulily’s once revolutionary business model that led to their $9B valuation became irrelevant quickly.
I was speaking recently at my alma mata and I told the students “If you are building a business your evaluation and abilility to raise funds is NOT a measurement of success”. In this case Zulily built a strong business initially but failed to build sustainable competitive advantages against newcomers and established players like Amazon. The change in ownerships definitely didn’t help it stay agile to keep up.