Breaking down zulily: What's the secret to a big loss to a profit?

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Since Bi Sheng sharply pointed out that the vertical purchase and sale class is a scam, the controversy over vertical consumer has not ended, and the recent visitors have been more to let vertical clients cast a shadow. In the United States, there are also electric dealers, and profits, Zulily is one example. IPO information shows that Zulily last year also lost 10.3 million of dollars in Zulily, the first half of this year has achieved 2.3 million U.S. dollars of profit. This article is adapted from the snowball, from the financial angle decomposition of the zulily model, to see how the electricity dealers profit.

First, Zulily is a family what company?

It is said that earning women and children's money is the best business, Zulily is a special for the mother and children within 10 years of age to provide clothing, toys and family equipment flash to buy electricity. "Flash purchase" that is, the product online time is short, discount strength, the daily update of the new electric business model, known as the Electricity Quotient 2.0. Zulily as a mother and child supplies flash buyers, daily 6 o'clock in the morning more new products, the average online 3 days, there are more than 50% discount, for mothers and children to provide a daily surprise shopping experience.

Currently, Zulily, established in 2009, has submitted an IPO document to the Securities and Exchange Commission to raise $100 million. The company, with its strong internet background, zulily $85 million trillion in financing for the D round in July 2012 and is valued at $1 billion. Meanwhile, Zulily, who lost 10.3 million dollars last year, has made 2.3 million dollars in the first half of the year.

It is well known that the vertical electric business is not easy to profit, then the appliance companies in the end is unique where?

Ii. Pattern Analysis

1, flash purchase mode to meet the essence of apparel demand

Zulily as a mother and child supplies flash purchase electricity, every day at the same time online more than 4,000 products, 72 hours limited to buy, to ensure that every day there is a novelty, catering to the female apparel consumption "innovation and Change" the essence. Its active users grew by as much as 100% a year.

There are three essential requirements for clothing: protection, decoration and identity. Protection is the function of sporting goods, showing identity is the meaning of brand name, and decoration is the core of fashion and most accessories. The psychological characteristic of decoration demand is "novelty" and "change".

Common sense tells us that "decoration" demand is the most large-scale apparel market, who can seize the "new and changing" nature, who will be more easily become the industry boss. Hundred-Li to Multi-Brand strategy, occupy the mall women's half of the area, wandering in the mall is difficult to slip through the woman, and Zara to create a fast fashion, using its flexible design, production and logistics system, each year shelves about 12,000 different styles of clothing, also became the preferred place for women's fashion.

Zulily adopts the mode of flash purchase to meet the "novelty and change" psychological needs. It through more than 300 buyers, from more than 10,000 maternal and child brand procurement of goods, 6 daily updates every day, on average, at the same time every day more than 4,000 products online, limited to a limited amount of money to buy, created a fast fashion network of mother and infant clothing. For those who love to go shopping, love to look, but also because of the care of children and have no way to withdraw from the mother, providing a good choice of network shopping. At the same time, zulily also used discounts as a weapon, with an average discount rate of more than 50% being another big temptation for women. The result is that since 2010, the establishment of its users and income has been more than 100% of the high growth, currently more than 2 million active users, back to the purchase rate reached 82.9%.

Notably, 42% of these orders were generated by the mobile end, which was only 31% in the 4 quarter last year. Zulily's flash-shopping model, in fact, more suitable for mobile phone on the use of fragmented time to browse, because customers do is not purposeful shopping exploration, like a brush Weibo is full of randomness.

2. Zero Inventory Management

Zulily adopts the zero inventory management method, and refreshes the profit margin, asset turnover rate and capital return record of the electric business industry. If the horizontal comparison of the electricity quotient, its current 30% gross margin, 3% net interest rate and 3.5 times times the turnover of assets is higher than the Amazon, only goods will and Dangdang.

The cost of inventory and logistics system is the largest cost, equivalent to the traditional department store rental. But Zulily's flash-buying model, is in the confirmation of customer orders and then carry out merchandise procurement, testing, packaging, distribution, logistics and other procedures, thus shortening the average of the goods in the library time, saving the inventory processing costs (inventory tail discount treatment will drag down the gross margin), improve the product's gross margin, It also reduces the amount of capital occupied by warehouses and inventories, increasing asset turnover and return on capital.

From the table below can be seen, zulily inventory turnaround days only a short period of 9 days, far less than peers, its gross margin and net interest rate is the highest in the industry. Zulily was established in 2010 and has a break-even ratio in the 4 quarter of 2012, which is higher than several electric dealers in the industry. At the same time, Zulily's total assets turnover rate is as high as 3.5 times times, light assets run and capital utilization efficiency, ROE according to the current 1.7 times times the financial lever is 18%. From the asset distribution of four companies, it can be seen that zulily is a relatively light asset company.

But zero inventory management is the sacrifice of time! Zulily received orders, the need to complete the procurement, testing, packaging, distribution, logistics, such as a series of actions, take 10 days. For several other electric dealers, it is 1 days to be able to handle the kungfu, because procurement, testing and packaging are completed in advance. This is also the Internet shopping comment on Zulily's biggest opinion! At the same time, a large number of procurement, the quality of each purchase to control the difficulty as well as the cost of logistics significantly increased, but also the drawbacks of its business model.

3, operating leverage to reduce the proportion of cost and cost

The cost of Zulily mainly includes the purchase cost, the Logistics express cost, the warehouse processing cost, the expense including the advertisement expense, as well as the management personnel, the procurement personnel, the photograph personnel salary and the place depreciation and so on management expense.

The relative fixing of the cost cost makes the zulily cost and expense rate decrease continuously, and the operating lever makes the profit increase faster than the sales.

4, Zulily occupied the baby Flash purchase market segment, its supply chain system is its advantage

The traditional American market is largely accounted for by two of Amazon and ebay, with a range of products covering all aspects of the lives of residents. In recent years, the development of the Flash-purchase mode of the electricity quotient is more, mainly concentrated in apparel products, including Amazon's Myhabit, Gilt, Zulily, Zuelala, Hautelook and so on.

Electricity market competition has always been fierce, and the entry threshold is not high, especially for the lower capital requirements of the Flash purchase model. In the face of competition, Zulily chose to focus on the mother and child market, only to earn women and children's money, not with other flash-purchase dealers compete for brand-name clothing discount market. Because of focus, Zulily has more than 10,000 maternal and child supplier Network has become its competitive advantage, but also to make it more eye-catching, the following table is sitejabber on the number of electric dealers in the commentary, Zulily's attention second only to Amazon.

At the same time, Zulily relies on the real-time inventory management of his brother's Blue Nile and the huge network of brand suppliers. The Blue Nile overturned the diamond industry's guild rules, creating a "naked diamond plus custom" sales model. Therefore, in the supply chain, Zulily has a certain advantage.

5, the breakdown industry has the ceiling, but has the growth space

According to the 2012 U.S. Census, there are about 20 million households in the United States with children under the age of 9, involving a population of nearly 50 million people, compared with about more than 2 million of Zulily's current active users. Although this market has a lower ceiling, but for the zulily still has a certain development space, at the same time Zulily product category, customer unit price and so on obviously also has the promotion space.

Iii. Conclusion

Zulily in matching the psychological characteristics of women's clothing to do a good job, relying on the Blue Nile's real-time inventory management and a large network of brand suppliers, but the shortcomings are also reflected in the resulting low speed and high logistics costs. and the overall market segments have a certain ceiling, faced with other electric operators and offline Baby shop competition.

Overall, the Zulily business model does exist, and if there is a big improvement in logistics and quality control in the future, it will be a great business.