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zulily On November 15, 2013. zulily, a Seattle corporation, issued its sit in playgrounds, in cars waiting for kids at soccer practice, or initial stock (.e. went public) at S22 a share. By the end of the anywhere else young mothers have a break long enough to shop day, the stock was trading at S38 and 4 months later it reached on their mobile devices. $62, nearly tripling its initial price. At S62, the holdings of the One of your goals for this class should be to learn to assess. company’s chairman, Mark Vadon. totaled more than $23. evaluate and apply emerging information technology to business. Before dismissing this as just another successful public offer- Seem like an empty platitude? Not to Mr. Vadon who turned that Ing, consider the company. What is its business model? A high- exact principle into $28…so far. tech company offering the latest geo-whiz technology? A new tablet? A new Facebook competitor? Another way of sharing The zulily Business Model pictures? No, no, no, and no, zulily sells to mothers: primarily children’s clothes and toys, but also women’s clothes, accessories zulily conducts flash sales of children’s and women’s cloth- and decor items. The oldest and most traditional forms of retail ing and other items of interest to women. Sales open at 6 AM So what is the excitement? Cofounders Mark Vadon and Darrell Pacific time each day and last 72 hours. Customers find brand- Cavens found a way to harness information technology to provide name merchandise intermingled with hard-to-find boutique an entertaining shopping experience to mothers, one that offers products, zulily uses the term curated sale to mean the sale of name-brand goods as well as unique and difficult to find of items specifically selected and grouped by its shopping experts brands and often sells them at substantial discounts. According to be exciting to women. Because these curated sales provide to the xulily prospectus, 45 percent of its sales occur over mobile interesting variety, women enjoy the thrill of discovery while devices, as mothers churn through the day’s specials while they shopping, zulily thus provides entertainment as well as a A UNIQUE SHOPPING DESTINATION hp ter Figure 1-11 zulily Merchandise Variety Courtesy of Zully Inc. Used by BOUTIQUE, DISCOVERY, VALUE. you never know what you’ll find permission 68 CHAPTER 1 The Importance of MS 2010 2011 2013 2012 1.580 2014 4.300 157 791 3.200 Number of active customers thousands) Revelion Salesperactive customer 518 510 $1.200 5331 $210 5696 5218 $117 5180 $245 Figure 1-12 zulily Performance rewarding shopping experience. And those low prices, some as devices. Further. xully buyers use the Internet to find vendors low as 70 percent of retail, are available for only 72 hours. So, and items to sell. But what else? shop and buy now.ladies! In the prospectus for its initial public offering zulily Does it work? Apparently so. As shown in Figure 1-12, in stated. “Continual innovation through investment in technol- 4 years zulily increased the number of its active customers by ogy is core to our business. It states that it developed a pro- 3.121 percent while increasing revenue per active customer prietary technology platform to manage the enormous spikes by 209 percent. That combination resulted in revenue growth in Web processing demand that occur due to the nature of from $18M to 51.2B: that’s a 185 percent annual growth rate! flash sales. Reflect on the challenges of such development: In 2010, zulily’s platform supported S18M in sales: 4 years later. How zulily Did It it supported $1.2B in sales, a 66-fold increase in demand. You will learn some of the ways that such enormous growth can be The sales process begins when zulily buyers identify goods to accommodated in Chapter 6. For now, understand that such be sold. Buyers negotiate with vendors to establish both whole growth would be impossible in a world without information sale and retail prices, terms and maximum quantities by ste systems. zulily then obtains sample merchandise and, if necessary, pho- But there’s more. In that same prospectus, zulily stated that tographs it in-house. It also writes ad copy to be displayed along It has developed extensive data collection and analyties capabil- with the photos during the sale. By taking photos when needed ities that enable it to anticipate its customers’ shopping prefer and writing its own ad copy, zulily ensures a consistent quality ences and to tailor the customers’ shopping experiences accord- of presentation on its site zulily also adds considerable value to ingly. So, as with any good salesperson, what you see and how it smaller vendors who do not otherwise have access to such high- is shown to you depend on what you’ve purchased in the past. quality expertise That same data can also be analysed to help buyers determine Items are then grouped together into 3-day sales events. the items customers are most likely to purchase. You will learn zulily accepts orders for items up to the maximum quantity about data analytics in Chapter 9. negotiated with the vendor. At that point, the item (or a par- ticular size of an item) is marked as no longer available, thus Growth-Management Problems increasing pressure to buy remaining items now. After the event closes, zully orders the items from the vendor, receives Such spectacular growth does not come without problems. them, packages them, and then ships the items to customers. According to its 2014 annual report (SEC Form 10- Kally zulily thus maintains almost no inventory. Customers receive increased its headcount from 329 at the end of 2011 to 2.907 their items in zulily packaging. thus reinforcing the rulily at the end of 2014. That’s an 884 percent increase in zulily’s brand, workforce in 3 years. That rate of growth is exceedingly difficult zulily is subject to errors and mistakes from vendors. I. for to manage a fact the company recognised: example, the vendor promises to ship 1.000 pairs of shoes of a particular size and xulily sells all 1.000 pairs, but later the ven- To support continued growth, we most effectively integrate develop dor delivers only, say. 900 pairs in that size, some customers will and motivate a large number of new employees, while maintain ing or corporate culture. In particular, we intend to continue to be disappointed. And those customers will hold zulily, not the make substantial investments to expand our merchandising and vendor, responsible for their disappointment, technology personnel Use of Technology Unfortunately, zulily is located just down the street from Amazon and Nordstrom and just across a lake from Microsoft. zulily’s business model would be infeasible without information Finding and retaining those merchandising and technology systems. For one, it needs the Internet to reach customers, and personnel in Seattle will be difficult. In its annual report, zulily it needs mobile technology to do so on phones and other mobile mentioned particularly the need to hire mid-level managers Learning from zulily zulily is remarkable for its spectacular growth, but it’s even more remarkable because that growth occurred in a very traditional market. What’s more busic than selling clothes to women? Who would think that the founder of a company in that market could turn his holdings into $1.7B in 5 years? Or that the company could increase its workforce by 884 percent in 3 years? In the final analysis, zulily succeeded because its founders developed an innovative application of information systems technology. As you will learn the technology zulily uses is not groundbreaking. All that technology was described in the fourth edition of this textbook in 2009 when zulily was founded. The creative genius was finding a way to apply that technology to a business opportunity and then to have the managerial skill to develop that idea into a thriving business. Without doubt, dor- ens of such opportunities lie in front of you. You just need to ree ognize and build on them QUESTIONS MyMISLab 69 that at Nordstrom Briefly describe the advantages and disadvantages of each type of experience. 1-11. If you were a buyer for zulily, what data would you like to have about customer purchase habits 1-12. If you were a buyer for zulily, what data would you like to have about past vendor performance? 1-13. In the general course of life, 2-year-old boys become 3-year-old boys. 4-year-old girls become 5-year-old girls. and so on. How can zulily use this not-so-remarkable phenomenon to customize a customer’s shopping expe- rience? What data would you need to do this? 1-14. As a business professional. it is likely information sys. tems professionals will ask you data questions like those in questions 1-11 to 1-13 above. What is the best way for you to respond? Verbally in a meeting with a writ- ten document? With a sketch or diagram? How will you know if you have been understood 1-15. At the April 2015 stock price of $14.59. the market values zulily at $1.868. This is a big drop from the February 2014 high of $68.39 a share price. Describe zulily’s principle assets. Does a $1.86B valuation seem appropriate, given your description of the company’s assets?