One of Seattle’s biggest startup success stories is headed for Wall Street.
Zulily, the fast-growing moms-and-kids apparel e-commerce company, has publicly filed for an initial public offering that could be worth up to $100 million.
Founded in 2009 by Blue Nile veterans Mark Vadon and Darrell Cavens, the company specializes in selling merchandise to moms on a “flash sales” model—Zulily members are notified each day of the company’s newest batch of sale items, with a limited quantity of each meant to spur buyers to action.
Zulily has raised venture capital from Maveron, August Capital, Meritech Capital, and Andreessen Horowitz, including an $85 million investment round led by Andreessen Horowitz last November.
At the time, Zulily CEO Cavens said the company had hit a monthly sales rate that would pencil out to a $500 million annual revenue flow. That reportedly led investors to value the company at about $1 billion.
In today’s public filing, we can see exactly how quickly Zulily’s revenue is growing—and how much it’s costing to keep up that pace.
Last year, Zulily lost $10.3 million on annual sales of about $331 million, compared with a loss of $11.3 million on $142.5 million in net sales in 2011.
In the first six months of 2013, Zulily said it actually posted a small profit of $2.4 million on $272 million of net sales, compared with a loss of $6.3 million on $127 million in sales during the same period in 2012.
The company’s marketing expenses have been growing quickly. Zulily spent about $20.2 million on marketing in 2011, and nearly $37.8 million in 2012. Through the end of June 2013, marketing costs were $28 million, dwarfing the $15.6 million spent through the first six months of 2012—but those costs have been slightly lower this year as a percentage of revenue.
The company says that as of mid-year, it had more than 2.2 million customers who had purchased something within the past year. Keeping those customers buying is key for Zulily, as nearly 83 percent of its domestic orders were placed by repeat buyers.
Zulily’s business model means that it has to coordinate a pretty intricate merchandise dance behind the scenes, which has historically resulted in complaints from some users about the time it takes to get their products.
In the second quarter of this year, Zulily said, its average shipping time was nearly 11 days—a big gap compared to some of instant-gratification shipping options offered by giants like Amazon.
Zulily doesn’t hold onto any merchandise itself until a shopper makes the purchase. Instead, it tries to quickly fulfill the orders it has generated by pulling merchandise from suppliers after the sale is complete.
That’s can be a big logisitics headache. Cavens has previously discussed how Zulily was unsatisfied with a previous shipping partner, and had to build its own shipping arm in about eight weeks. In its filing, Zulily says it will probably need to “add additional fulfillment center capacity by late 2014,” which would likely be a significant cost.
Interestingly, Zulily seems committed to the “flash sales” model just as other fast-growing e-commerce companies have moved away from the idea. The most notable recent example is Fab, the heavily financed New York startup that has recently laid off hundreds of employees as it seeks to change its business model to something more profitable.
