Wall Street didn’t like that Zulily reported a wider loss than expected, so they probably won’t like hearing this: The Seattle retailer plans to increase its marketing spend beyond what it originally budgeted in 2014.
Zulily’s CEO Darrell Cavens and CFO Marc Stolzman made the case during the company’s conference call yesterday as to why this was a good idea.
The main argument was this: As it expands beyond kids apparel, it can advertise to a much wider audience. Moms, who used to come to buy clothes for their children, stick around to buy something for themselves or the home. For example, in the first quarter, more than 60 percent of items ordered came from categories other than kids apparel.
“As we’ve added those categories we can deploy more marketing dollars because there is more households that are relevant to our offering,” Stolzman said.
Cavens said they became more aggressive with marketing as the quarter progressed, and that they will continue to be more aggressive as the year goes on. Despite advertising not generating immediate bottom-line growth, he said Zulily has a history of showing that subscribers ultimately become customers and then repeat buyers.
“We continue to see the ability to invest marketing dollars at higher levels with a payback period that I believe are among the best in the industry,” he said.
Zulily did not disclose how much it was spending on marketing, but the mix includes TV, online and mobile placements. Zulily released two new TV commercials recently, targeting moms and all the different hats they wear (a gardener, baker, employee). In other words, “Zulily gets mom.” The company first began advertising nationally on TV more than a year ago.
“I think what we have found is that the brand resonates incredibly well with customers and any which way we put the brand out there we’re finding great ways to economically acquire customers,” he said.
The company said it was hiring across multiple areas, including marketing. It ended the quarter with 1,380 employees, up from 1,110 at the end of 2013. Separately, it employs 1,000 associates in each of its two fulfillment centers.
Even if investors are uneasy about the company’s aggressive marketing efforts, Cavens says he’s fine with that.
Here’s the 60-second version of the new “I’m a Mom” commercial:
