The first ‘flash sales’ site to go public is…Zulily

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A focus on moms and kids products has helped Zulily perform better than most 'flash sales' sites.

A focus on moms and kids products has helped Zulily perform better than most ‘flash sales’ sites.

Zulily filed for an initial public offering Tuesday, putting the company on course to be the first so-called flash sales website to list its shares.

Zulily said it plans to raise as much as $100 million in an IPO underwritten by banks including Goldman Sachs, Bank of America Merrill Lynch and Citigroup. The ticker will be ZU and the stock will trade on Nasdaq.

The company reported revenue of $272 million in the first half of 2013, more than double the $127 million it generated in the same period a year earlier. The company also generated a small profit – net income of $2.4 million – in the latest six-month period versus a net loss of over $6 million a year earlier.

“Flash sales” sites typically offer a limited supply of luxury products at big discounts through online sales events that last for a short time each day.

After the 2008 financial crisis a crop of these businesses, including Gilt Groupe, Rue La La and HauteLook, sprouted. For several years these companies looked like future IPO candidates, but they have either struggled to maintain growth and stayed private, or they have been swallowed up by larger retailers.

Zulily, which was started later in 2010 by Blue Nile executives Darrell Cavens and Mark Vadon, is one of the few flash sales operators to be growing fast enough to attract IPO investors.

“There are only a handful of markets that lend themselves to flash sales and one is the moms market for kids items,” said Niraj Shah, chief executive of Wayfair, an online furniture retailer.

Moms with young kids don’t have much time and are often outside running errands. This means they are likely to check out Zulily’s daily flash sales with their smartphones. Their kids are often growing out of clothes and shoes, increasing the chance that they will buy through Zulily more frequently, Shah explained.

Other markets, such as luxury fashion and design, may not be as well suited to flash sales, he added.

Indeed, Fab, which grew fast as a flash sales site for modern design items for the home, recently laid off more than 100 staff as it switches to a more traditional online retail approach.

Gilt is growing solidly, but it is not doing as well as it once did. When the financial crisis hit, luxury fashion brands had a lot of inventory that they were willing to discount through Gilt’s flash sales. But now that the economy has recovered, luxury brands don’t have as much excess inventory, so Gilt has to offer less well-known brands.

“In fashion apparel, consumers know what brands they want so showing them unknown brands is difficult,” Shah said.

Wayfair has its own flash sales site, Joss and Main, which runs seven flash sales events offering furniture and other home goods every day. Shah says the business is growing fast because brands are less important in this part of the retail industry.

“In home, the retailer controls the style, not the brand,” Shah added.

Wayfair is on course to generate more than $900 million in revenue this year, up more than 50% from 2012. The company may follow Zulily to the public market through an IPO of its own.

“It’s not something we’re working on just yet,” Shah said. “But being publicly traded is a path we want to pursue in the future.”

Courtesy of USA Today

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