January 05, 2024

After rounds of layoffs and a CEO departure, online retailer Zulily says ‘financial instability’ has forced it to shut down

The online retailer Zulily is closing down, surprising customers and laying off hundreds of workers after efforts to salvage the business failed.

The Seattle-based company said in a notice on its website that it had tried to fill all pending orders and expected to manage that within the coming two weeks. Zulily said it was trying to ensure that orders that could not be filled were cancelled and refunded and offered a contact for customers who did not get their orders or refunds.

“This decision was not easy nor was it entered into lightly. However, given the challenging business environment in which Zulily operated, and the corresponding financial instability, Zulily decided to take immediate and swift action,” said the notice, signed by Ryan C. Baker, vice president at management consultant Douglas Wilson Companies, which is handling the receivership for the company.

Founded in 2010 by Darrell Cavens and Mark Vadon, Zulily made a splash with products catering to families with young children and staged a successful IPO on the Nasdaq in 2013. But it was taken private after it was acquired in 2015 for $2.4 billion by QVC parent company Qurate, formerly known as Liberty Interactive. Zulily’s CEO Terry Boyle left the company at the end of October as financial troubles mounted following its acquisition by private equity firm Regent from Qurate in May.

The company’s liquidation followed several rounds of layoffs as Zulily struggled to compete with Amazon.

Instead of declaring bankruptcy, Zulily is using an alternative for winding down the business known as an Assignment for the Benefit of Creditors, or ABC. The company has transferred all its assets and business in trust to Zulily ABC, LLC, to pay creditors out of proceeds from selling them.

What was Zulily?

Zulily was an online retailer providing daily deals on various products.

The site offered heavily discounted invite only flash sales to its customers and gained huge popularity and rave reviews in its first operational months.

Most products were initially from little-known brands and included prenatal care products, baby gear, travel accessories, bedding and bath, children's clothing, toys, DVDs, and educational materials.

Why did Zulily fail and shut down?

The main culprit for the downfall of the popularity of Zulily is poor marketing and user-attention strategies, compounded by significant financial issues that ultimately led to its liquidation to satisfy creditors.

Most notably, in order to access the search engine and databases of Zulily’s shopping items, the platform required new visitors to give their email addresses prior to even seeing what the online store had to offer.

This marketing trick met with a lot of criticism because it violated some basic marketing principles. Zulily initially achieved record success with the number of new subscribers who registered on the site, but the Zulily team soon noticed that sales began rapidly to decline.

People gave their mail only to peek at the site and registered users couldn’t necessarily be considered loyal or even willing customers.

Zulily's inadequate marketing strategy and front-page email requests discouraged thousands of potential new customers to sign up, while their existing users often bought only once or anyway not enough to sustain the financial stability of the company.

Users also stated that they felt overwhelmed by the number of merchandise and flash sales invitations the e-shop offered so the company complied by diminishing them, and a decrease in revenue also followed.

Moreover, although Zulily sometimes offered brand names for ridiculously small prices, there would often be longer than expected delivery times to customers which also earned them poor reviews.

In addition to these factors, Zulily's ultimate closure was precipitated by financial issues. The company began liquidating its assets to satisfy creditors, indicating a critical need to address its debts. This led to the shutting down of several facilities and the loss of hundreds of jobs across multiple states. The financial distress became too overwhelming to continue operations, resulting in the shutdown of the business.

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