Zulily and its History
Zulily is an American company which is headquartered in Seattle, Washington. As a publicly traded company in the United States, Zulily markets home products as well as clothing and toys. The target market of Zulily are those young mothers that are technology savvy and are consistently looking for new as well as innovative products for their children. Founded in 2009, Zulily has been operating in online retail industry of the United States. Zulily tends to serve the United Kingdom, Canada, Australia, North America and Ireland. Despite the fact that Zulily’s website reflects that the management holds no inventory, yet the company started to hold some merchandise since 2015 for shortening or accelerating the delivery time.
Current Problems of Zulily having Financial Consequences
Before making an important discussion about the ongoing issues that Zulily is going through, it is imperative that its past should be highlighted. All those problems having financial consequences for Zulily are highlighted in this section. Since the business model of Zulily is based on “flash sales” or limited-time sales, the online retail company grew enormously within a period of four years. This is so because online purchasers became excited to discover and shop for newly launch products.
The problems of Zulily started to appear when the company was targeting millions of consumers in an industry already dominated by e-commerce giant, Amazon Incorporated. When Zulily started to market products already sold by Amazon and eBay, the differentiation strategy of Zulily came to an end. In other words, while attracting more customers in the online retail industry, Zulily lost its competitive advantage .
The financial problems of Zulily intensified when the company witnessed delays in delivery time. Normally, Zulily would deliver its products to the existing consumer base on an average of more than ten business days. Because of this, Zulily started to lose its sales revenue as well as valuable customer base in Canada, United Kingdom, Ireland, and Australia etc. The financial challenges also intensified for Zulily when the company rejected to accept purchase returns from customers in case they received defective or different consumer products.
Apart from these issues, Zulily is also going through email delivery failures and inability to gain access to more consumers. Because of this, Zulily witnesses declines in revenue generation capacity as well as price per share since November 2014. Due to email delivery failures, Zulily is unable to send order confirmation as well as promotional email messages to customers. Because of this, majority of Zulily’s consumer base has become disappointed and there is a risk that customers may shift to competitors’ products.
Additionally, due to decline in revenue, the management of Zulily has been reducing its investment in social media marketing and promotional campaigns. It is argued that because of losing consumer confidence in light of above mentioned problems, it has become difficult for Zulily to get more customers. Previously, when Zulily made heavy investments in social media marketing, it was able to attract more customer attention and repeated purchases. Unfortunately, this trend is declining since 2014 as the cost of gaining customer attention has increased.
Zulily is also experiencing challenges concerning its logistics. As Zulily is losing customers and its merchandise supplied by vendors is piling up in warehouses, Zulily finds it difficult to manage its warehouses. It is forced to hire more workers and pay overtime wages that certainly puts a burden over Zulily’s profitability. Furthermore, the shipment or delivery time for Zulily has also increased in 2014. The company used to deliver products to its consumers within eleven days in 2013. This logistical position worsened when the company is now delivering products in thirteen days, thereby, becoming short of two business days. In case of customer complaints, Zulily does not accept purchase returns that certainly results in customer dissatisfaction and emotional burnout.
There is another problem for Zulily that has enormous risk and financial consequences could be large. Zulily follows a business model that it never orders merchandise from vendors until Zulily’s own customers apply for and confirm any particular order. This means that Zulily sells products which it does not possess physically, thus, following “inventory-lite model”. There is a risk that if suppliers of Zulily delay product delivery, it is obvious that Zulily will default on commitments with its own clients. In other words, Zulily is at mercy of its own suppliers where the latter possess more bargaining power .
Issues with Shares and Power / Control and Decision Makers
Because of email delivery failure and loss of customers, Zulily disappointed investors since its price per share declined losing two-third of worth in 2013 after hitting the level of $73 per share in 2013. The company’s stock posted a share price of $22.61 which is the lowest price in 52-weeks since 2013 . Investors expected that Zulily will earn sales revenue of $314 million by 2015 but the company, in light of previously mentioned problems, generated sales of up to $306.6 million. It is also argued that since Zulily grew enormously within a period of four years, its management was unable to control or handle such growth .
Are the Issues Faced by Zulily Fixable, How?
After carefully analyzing the major issues or problems Zulily is going through, it is observed that all of them could be easily resolved. As Zulily faces logistical problems and its service delivery is at the mercy of suppliers, it is imperative that, like its competitors, Zulily must order products and store them in warehouses. Now, the company needs to get these items sold for which it is important that Zulily attract more customers. If Zulily could reduce the shipment time and accept returns from customers, this online retailer could retain consumer confidence as before.
Recommendations and their Likely Outcome
If Zulily could work on the above mentioned recommendation, it is more likely that its customers would need to return the product. This is because there will be a less possibility that defective or different product is delivered to customers. The above recommendation would also result in fewer product-related complaints and purchase returns. Overall, the outcome of this recommendation is increase customer satisfaction. Once the website and email delivery system gets restored, Zulily may continue with online services.
This single recommendation would also help Zulily to attract more customers. Zulily would never need to incur more costs pertaining to social media campaigns. Efficiencies in service delivery and reduction in shipment time would result in less customer dissatisfaction. Zulily would never need to pay more in advertising because satisfied customers will themselves refer Zulily to their contacts.
It is further recommended that Zulily should pay less in social media marketing. Instead, its management can create pages on social networking websites (such as Twitter, Facebook, MySpace and LinkedIn etc) for free. Doing so, Zulily would never need to pay for digital marketing and can attract more market attention at the same time. If Zulily launches a discussion forum and blog, it would be a great opportunity to share customer experiences and their complaints. These blogs and forums could also be used to resolve customer complaints and learn more about their preferences.
Works Cited
Divine, John. ZU Stock: Is Zulily Growing Itself to Death? 6 May 2015. 29 April 2016 <http://investorplace.com/2015/05/zu-stock-price-zulily-stock/>.
Duprey, Rich. After Zulily Stock Tanked 66%, Is Now the Time to Buy? 29 December 2014. 29 April 2016 <http://www.fool.com/investing/general/2014/12/29/after-zulily-stock-tanked-66-is-now-the-time-to-bu.aspx>.
Ng, Serena. Zulily Customers Play the Waiting Game. 4 May 2014. 29 April 2016 <http://www.wsj.com/articles/SB10001424052702303626804579509402577847362>.
Rey, Jason Del. Why the Largest E-Commerce Acquisition Ever Is Actually a Disappointment. 22 August 2015. 29 April 2016 <http://recode.net/2015/08/22/why-the-largest-e-commerce-acquisition-ever-is-actually-a-disappointment/>.
