QVC hopes the deal will help it reach zulily’s highly desirable customer base of millennial moms. Zulily, the publicly traded flash-sale merchant that has grown sales to more than $1.2 billion in five years, will continue to operate as a separate entity run by CEO Darrell Cavens.

Liberty Interactive Corp., the parent company of television and online retail giant QVC, plans to acquire zulily Inc., the fast-growing flash-sale retailer of women’s and children’s products, for $2.4 billion, the companies announced this morning.

QVC says the proposed transaction will bring together two strong businesses built on providing consumers with “experiential, discovery-driven shopping” experiences. The deal will strengthen both companies, as zulily will be able to leverage QVC’s global assets, vendor relationships and video commerce experience, while QVC will benefit from zulily’s younger customer demographic, personalization expertise and e-commerce capabilities, the companies say.

The two merchants determined that only about 6% of zulily’s customers have purchased from QVC in the past. That provides QVC with an opportunity to market to a “highly attractive new customer acquisition funnel,” Liberty Interactive CEO Greg McFay told investors on a conference call this morning.

“In zulily, we see a like-minded brand that shares our passion for discovering great products, for delivering honest value, and for building long-term relationships with customers,” says QVC president and CEO Mike George. “Our teams are committed to learning from and inspiring each other and leveraging our platforms in new ways to accelerate growth, serve our customers better, and realize the full potential of both of these extraordinary brands.”

QVC and zulily will continue to operate as stand-alone companies, and zulily will remain headquartered in Seattle and run by president and CEO Darrell Cavens. Cavens will report to George, and zulily co-founder Mark Vadon will join the Liberty Interactive board of directors. See the Fortune article where Cavens talks about the sale.


“QVC has built an amazing business with a great culture and incredibly similar understanding for bringing entertainment, discovery and value into the daily customer experience,” Cavens says. “This combination under Liberty is about investing in our future and providing a tremendous opportunity to accelerate our platform for growth of the zulily brand through the partnership with QVC.”

The boards of both companies have approved the transaction, and the deal is expected to close during the fourth quarter of 2015.

With $3.53 billion in online sales in 2014, QVC is ranked No. 15 in the Internet Retailer 2015 Top 500 Guide. Zulily is No. 39, and brought in $1.20 billion in web sales in 2014.

Zulily was founded in 2010 as a flash-sale retailer of children’s apparel and gear. The merchant has grown rapidly over the past five years, building out a fulfillment network that enables the merchant to run hundreds of limited-time sales per day, and expanding into new categories like women’s apparel, men’s apparel and home décor products.

Zulily’s business model is one that has limited up-front inventory risk, as it doesn’t purchase products and house inventory until consumers purchase items on its website. This makes for a complicated and time-consuming fulfillment process, as truckloads of products are pouring into and out of its warehouses on a daily basis. It also leads zulily to have one of the longest delivery times among large online retailers, as most of its items arrive on consumer doorsteps in about two weeks, on average.


Many of zulily’s customers, however, appear willing to wait. The company has continued to rapidly grow its customer base and built a following that comes back to the site and buys multiple times throughout the year. For the 12 months ended June 28, zulily reported that 88% of orders were placed by customers who had previously purchases from zulily.

E-commerce represents a growing portion of QVC’s total business, as it accounted for 47% during Q2 versus 43% in Q2 of last year, QVC said in its most recent quarterly earnings. QVC gets 49% of its orders from mobile devices, while zulily gets 56%.

Since its founding in 2010, zulily has raised $138.6 million in venture capital funding, according to Crunchbase, before it went public in November 2013. The e-retailer raised more than $250 million in its initial public offering of stock.

At its peak in February 2014, zulily stock was trading at more than $68 per share, but the stock has since dropped as growth has slowed and investors and analysts express concerns over the sustainability of the flash sale business model that doesn’t allow for returns, and where customers endure long delivery times. This morning, the stock was trading around $18.50 per share.

In May, China-based e-commerce giant Alibaba Group Holding Ltd. bought $56.2 million worth of zulily stock, which upped its stake in the e-retailer to 9.3%. Alibaba chairman Jack Ma has set a goal of getting 50% of sales from outside China. Online commerce from China accounted for 80% of revenue in the March quarter, while Alibaba’s international e-commerce sales were just 9% of the company’s total, Alibaba said.


One analyst says the deal will benefit both companies, but especially zulily, as the merchant will be able to sell inventory already housed in QVC warehouses. “Having the QVC product in inventory may substantially shorten the length of time between order and when it reaches the consumer doorstep,” says Abe Garver, managing director of BC Strategic Advisors. “Zulily needed help, and this could be a huge win for the combined company.”

Garver, who advises e-commerce companies on mergers and acquisitions, also suggests that Alibaba likely had a big hand in the deal. “I credit Alibaba with helping to make this transaction possible,” he says. “The circles that they are in would help to facilitate this transaction. I think they were undoubtedly a major player in making it happen.”