Seattle private-sale site Zulily jumps on new trend in online commerce

When it comes to jewelry, soon-to-be mom Cheryl Gennaios has been known to treat herself to a few purchases from the Seattle Web site Blue Nile. So when Gennaios heard last week that two Blue Nile veterans had created Zulily, a members-only Web site with products for babies and children, she decided to check it out.

"I thought, I've always done well with Blue Nile, so let's see," she recalled.

Gennaios, who's due to give birth to a girl in June, was pleased to see that Zulily featured limited-time deals on the upscale children's clothing brand Baby Nay. The Seattle resident completed Zulily's free registration, requiring a name and e-mail address, then bought two Baby Nay dresses for half off their original prices totaling $112.50.

"It's nice, especially in this economy, to have a Web site that sells high-quality products at a discounted price," Gennaios said.

Private-sale sites such as Gilt and Rue La La have attracted more than 1 million members in the past two years with temporary deals on designer apparel and accessories. Now, the same "while supplies last" approach is spreading to home furnishings, travel packages and children's products.

Last fall, as Zulily co-founders Mark Vadon and Darrell Cavens prepared to announce their venture, two private-sale sites based in New York, bTrendie and Totsy, got under way with a similar focus on parents of young children.

Cavens, a former senior VP of marketing and technology at Blue Nile, said Zulily was borne from personal experience: he has two children, ages 3 and 2; Vadon, a 10-month-old daughter.

"We talked about how much we hated going into the big-box children's stores. There's an awful lot of choices, and not necessarily a lot of guidance," said Cavens, the site's CEO. "At the same time, the private-sale space was really starting to take off."

"I just look at how much stuff we're buying for our daughter," added Vadon, executive chairman at Blue Nile who also chairs Zulily's three-member board. "We bought our baby furniture online from a company in Brooklyn because the stuff at Babies 'R Us, we did not love."

Here's how Zulily works: Online shoppers sign up for the chance to buy discounted, upscale children's products during three- to five-day sales. The site, which launched Jan. 27, takes a cut of each sale. It does not actually buy the products until they sell, so it's not stuck with leftovers.

Members receive daily e-mail alerts on new deals, which currently include a $1,190 Italian crib marked down to $600; a $55 Chinese cookbook kit with apron and placemat for $25; and a $64 seersucker sundress by actress Tori Spelling's Little Maven line for $28.49.

Brands see Zulily as an outlet for excess inventory or a place to introduce new products, Cavens said. And because the sales are open to members only, they don't show up on Internet search engines. That means traditional distribution channels don't have to match the lower prices, Cavens said, keeping the brands in good stead.

Jane Hedreen, owner of Flora and Henri, an upscale children's clothier with stores in Seattle and New York, plans to offer overstock items on Zulily this month. Eventually, she said, Flora and Henri might produce clothes with the goal of selling them on Zulily.

"They could offer us volume and exposure that, as a small company with virtually no marketing budget, we cannot otherwise access," she said.

Zulily began with $4.6 million in financing led by Maveron, a Seattle venture-capital firm co-founded by Starbucks CEO Howard Schultz. (Vadon, co-founder and former CEO of Internet jeweler Blue Nile, invested about $1 million, and Maveron put up the rest.) Maveron's total investments in any given year can range from $30 million to $75 million.

Maveron co-founder Dan Levitan said he regrets turning away Vadon when he sought early financing in Blue Nile a decade ago, confessing: "I didn't think enough people would buy such an expensive product over the Web."

Along with Cavens, "Mark is an e-commerce pioneer," Levitan said, "and we're excited to work with him." Levitan said he also is eager to test consumer demand for a private-sale site focused on children's products — one that "enables a mom to discover very relevant products to her."

Zulily has set up shop at Maveron's offices in the Chinatown International District but soon will move to the Seattle Quilt Building in Pioneer Square. The site employs 10 people and expects to have an additional five employees by the end of next month, Cavens said.

Member Esther Teodoro, who has two small children and runs BigGigs, a Seattle event-planning company, said she feels overwhelmed by large, mass-market e-commerce sites. She likes that Zulily targets busy moms, and the discounts don't hurt.

"There is a part of me that loves to see how much of a deal I'm getting," she said. "It just kind of makes me feel I cheated the system."

— Amy Martinez

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Retail Report appears Fridays. Amy Martinez covers goods, services and online retail. She can be reached at 206-464-2923 or amartinez@seattletimes.com. Melissa Allison covers the food and beverage industry. She can be reached at 206-464-3312 or mallison@seattletimes.com.