Business

Zulily $253M IPO is a ‘watershed moment’ for e-commerce

On Zulily, parents can buy stylish apparel and accessories for kids

Above: On Zulily, parents can buy stylish apparel and accessories for kids

E-commerce startup Zulily smashed analyst estimates with its initial public offering, with shares soaring 88 percent in its debut.

Zulily’s shares opened this morning at $39, above the IPO price of $22. The Seattle-based company raised $253 million at a valuation of $2.6 billion and has almost doubled to just over $5 billion.

“The team has exceeded expectations; it’s a watershed moment for e-commerce,” said Dave Spector, a former e-commerce investor at Sequoia Capital, and the cofounder of MeCommerce.

This is the first successful initial public offering from a company that sells products online to consumers in years. Fab has been struggling to meet its revenue targets, and Groupon is still trying to find its formula for growth.

Zulily has made ample revenues in the past few years, recently turning a small profit. A filing revealed that Zulily brought in $331 million in 2012, up from $143 million in 2011. It lost $10.3 million last year, but it had a $2.3 million profit in the first half of 2013.

One investor, who asked to remain anonymous, noted that Zulily just experienced the strongest exit since Zappos was acquired by Amazon.

Zulily has remained loyal to its core audience: children and parents. It offers discounts and flash sales on clothing, toys, infant gear, and home decor. Since launching in January 2010, Zulily has worked with over 10,000 brands, featured 1.6 million product styles, and sold over 42 million items to a total of 2.9 million customers.

“The company was passionate about selecting the right brand partners,” said Cheryl Yeoh, the founder of personalized shopping list app Reclipit, which Walmart Labs acquired. “Zulily stands out as its team of serial entrepreneurs knows what their audience wants,” she added.

Indeed, moms are a highly lucrative market. According to the U.S. Census Bureau, 39 million U.S. households have children under the age of 18.

Zulily is proving that there is still money to be made with the flash sales model, although the company may struggle in the long-term.

Small businesses realized that a one-off coupon or discount would not build customer loyalty and retention. They began to snub daily deals giants, like LivingSocial and Groupon. Zulily’s has succeeded with its target market, but the company will need to expand its suite of profits to continue to grow.

“This outcome proves that e-commerce is alive — many investors wrote off the space for many years,” said Spector, who believes we’ll see a surge in venture investment in the space. “This is very positive from a trend perspective.”

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