Alibaba has purchased a stake in Seattle-based e-commerce site Zulily, a move that could hint at bigger plans for the U.S. market.
Valued at more than $150 million, Alibaba’s 9.3 percent stake in the company was purchased after Zulily released disappointing earnings and the stock plunged, according to The Wall Street Journal. A securities filing revealed that Alibaba spent $56 million on Zulily stock last week.
Zulily sells clothing, home decor, toys, gifts, and other merchandise that is aimed primarily at moms through flash sales, which offer deep-discounts for a very limited amount of time.
Alibaba has no intention of fully acquiring Zulily. Instead, this investment seems to be a way for Alibaba to learn more about the U.S. market and form relationships with U.S. vendors.
“The key issue is whether we are going to have something in the U.S. market that will really target U.S. consumers,” Alibaba Executive Vice Chairman Joe Tsai said in November. “We think in the long run that’s an interesting market to us. But today, our focus is very much on cross-border activities.”
In 2013, Alibaba purchased a 39 percent stake, at a price of $202 million, in ShopRunner, a site that offers 2-day shipping from many U.S. retailers. Last year, Alibaba opened its own U.S. e-commerce site, 11 Main, and also invested $15 million in New York-based luxury e-commerce website 1stdibs. Alibaba has also invested $200 million into Snapchat Inc. and $215 million into another messaging app company, TangoMe Inc.
Sucharita Mulpuru, an e-commerce analyst at Forrester Research said that Alibaba is “buying shares in companies that could ultimately help them get a foothold in the U.S.” She added that Alibaba’s investment in Zulily is mutually beneficial for the companies, as Zulily has relationships with thousands of vendors, and Alibaba has deep pockets, which will be welcome after Zulily fell short of Wall Street estimates.
Zulily was founded five years ago and became one of the fastest retailers to reach sales of $1 billion. The company’s stock peaked at above $70 in early 2014 after the company went public in 2013 at $22 per share.
The company’s recent troubles can be attributed to difficulties in retaining customers. Many are not returning after making their first purchases.
Zulily’s business model may be responsible for this issue. The company sells products on the website before placing the orders with vendors, which results shipping times of two to three weeks to reach customers.
Initially, the company sold children’s clothing, toys, and accessories before branching out into women’s apparel, footwear, and home furnishings, along with some men’s clothing.
image credit: zulily