Zulily Emerges from Stealth Mode
Maveron today announced our investment in Zulily, a new online private-sale shopping site for busy moms. Co-founded by Blue Nile founder Mark Vadon and former Blue Nile technology and marketing head Darrell Cavens (who is CEO), Zulily aims to build a strong children’s retail ecommerce business offering high quality products for babies, kids and moms at discounted prices. We wrote recently about the rise in social shopping and Zulily serves as our first investment in this exciting emerging category.
With a new private-sale site popping up every week and market leaders like Rue La La and Gilt Group already exceeding $100M in annual sales, the right question to ask is why were are so excited about backing the latest market entrant in this space. Our investment thesis can be succinctly summed up in four parts, outlined in more detail below: (i) it is still early days in the domestic online private-sale market; (ii) private-sale sites are more than a liquidation channel; (iii) private-sale sites can succeed by going or mass or focusing on a targeted demographic and (iv) Zulily has a great team we are excited to back.
Consumers love a bargain – Private-sale sites are the online extension of the outlet mall
We view private-sale sites as the online extension of an outlet mall. Some stats from the broader liquidation market provide some insight:
- Private-sale market pioneer Ventee-privee is based in France and forecasts ~$900 million in 2009 revenue. Given the US is roughly five times bigger than France population-wise, you could easily see a scenario where a U.S. market leader could have sales of $5 billion+
- Back in 1997, an estimated 55 million Americans traveled at least 200 miles round trip to shop at outlet malls in 1997, according to Consumer Reports. I couldn’t find more recent numbers but I assume they are much higher today!
- Off-price retailer TJ Maxx has $19.7 billion in annual sales
Private-sales sites are not just a way to liquidation merchandise – but a new sales channel
There is a view by some that private-sale sites have benefited from the recession and the opportunity to access excess inventory at low prices. These folks believe that as the economy turns, private-sale sites will have trouble accessing product. We couldn’t disagree more. As outlet malls grew, manufacturers began to see them less as a way to liquidate excess inventory and more as another channel to sell product. Essentially, outlet malls and now sample sale sites allow manufacturers to price discriminate and increase sales volume by reaching those target customers more focused on value.
A specialty brand can successfully compete and thrive against larger mass merchants
One could ask how Zulily can compete against the marketing muscle of larger competitors like Gilt Groupe, who could easily add children and baby gear to their offerings. We firmly believe that great brands can be built by targeting a specific demographic, understanding their unique preferences and delivering a delightful retail experience. Blue Nile did precisely that in building into a successful publicly traded company while competing head on against Amazon.
The $50 billion market for children’s and mom-related product presents a compelling opportunity. Many neighborhood baby boutiques are closing and there are thousands of product suppliers who have trouble achieving retail distribution for quality product. By focusing on merchandising and curating these products and becoming a trusted voice and advisor to moms, we believe that Zulily can become a premier online retail destination.
Zulily’s Team has the Right DNA Coding to Succeed
CEO Darrell Cavens has quickly assembled a team of e-commerce veterans with experience from Nordstrom, Red Envelope, Eddie Bauer and Newsvine/MSNBC. They are scrappy, focused, have deep understanding of the sample sale channel and know how to build great online brands. It is early days but we are incredibly excited to back the Zulily team and look forward to the site launch early next year.