Flash-sale sites are merchants that offer items for a deeply discounted price, for a limited time and in limited quantities. (Woot is an example that most of our readers might be familiar with.) They became very popular during the most recent recession when high-end retailers had piles of merchandise that nobody wanted, but most of these sites have faded…except for Zulily. Why is that?
“Daily deals for moms, babies, and kids” is the site’s tagline: they offer clothes and accessories for children and for women, and have recently expanded into decorative items, home goods, and even some food items. What’s distinctive about the company is its fulfillment model. They don’t have items on hand when they sell them, but instead wait until an item has sold out. Then the vendor ships it over.
Some online sellers (Groupon Goods early on is one example) use drop shipping, where the supplier ships items directly to the customer, without merchandise ever entering the retailer’s possession. Zulily doesn’t use this model: they ship items out of their own warehouses once it shows up from suppliers.
Customers have to wait several weeks to receive their purchases, and they’re okay with that. Even when they experienced a massive backlog earlier this year that required hiring extra staff, we didn’t receive any complaints about it here at Consumerist.
The company announced its quarterly results today, and they showed that this model may not be working so well. The Wall Street Journal called the company’s shipping practices a “weakness” in their business model. The shipping clog hasn’t hurt loyalty: most purchases are by repeat customers. “[W]e’re seeing no problem getting new customers, or existing customers to spend more money,” noted the company’s CEO.
Zulily Shares Fall Amid Order Backlogs, Deeper First-Quarter Loss [Wall Street Journal]