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zulily-mo_111513_hires-1Zulily is attempting to quickly allay the fears of its 3,000 employees, whose futures are now a little less certain thanks to a surprise $2.4 billion sale to QVC, the home shopping network.

“This acquisition is not about cost savings,” said Zulily CEO Darrell Cavens, in a message sent to employees today. “This is an opportunity for growth. As we have talked to the QVC team, they love what we have built and they are doing this to grow and continue to build something unique and special.”

Zulily CEO Darrell Cavens
Zulily CEO Darrell Cavens

Later in the letter, which was filed with the SEC, Cavens again mentions growth as the primary reason for the deal: “I strongly believe that growth is our biggest initiative right now. As we look to continue building on the incredibly loyal and passionate customer base that made us one of the fastest growing retailers of our time, our partnership with QVC allows us to realize that opportunity even faster.”

As part of the deal, which is set to officially close in the fourth quarter, Zulily is expected to operate independently, with its management team remaining in place. Together, the combined company will have annual revenues of more than $10 billion, with half coming from online.

While growth may be the driving force behind the deal, it is also likely one of the reasons why Zulily is selling. During its rise, the Seattle retailer became one of a few retailers to achieve sales of $1 billion in only five years, but more recently, it has struggled to add new customers and retain old ones.

The companies believe one reason that they will be better together is because their audiences have very little overlap, with Zulily focused on selling discounted products to young moms and QVC selling a much wider variety of products to an older audience.

Still, the companies will likely continue to face questions about the deal in the coming days from employees and investors alike. Some of those concerns were addressed in a Q&A filed with the SEC by Zulily. Among the dozens of employee-related questions, one dealt with the likelihood of layoffs and another asked why the deal was done at such a low price.

Zulily's former HQ in Seattle's Sodo neighborhood.
Zulily’s former HQ in Seattle’s Sodo neighborhood.

In answering the question about layoffs, Zulily did not rule out the possibility entirely.

“Right now, it is business as usual, and there is no change to your day-to-day roles and responsibilities,” Zulily said. “This transaction is about growing our business in new and exciting ways, and our team is critical to our ongoing success. As always, Zulily will evaluate our businesses on an ongoing basis to ensure that our operations and resources align with current business demand.”

Another question dealt with the issue of selling the company’s shares at $18.75 apiece, which is below the company’s IPO price two years ago of $22 a share.

“The valuation from the IPO was representative of market values at that time which are subject to change. The Board as well as Darrell and Mark believe this transaction is in the best interests of our company and our stockholders,” the Q&A answered.

In addition to Cavens’ letter, Mike George, the president and CEO of QVC, who was in Seattle today meeting with Zulily’s employees, also sent a note to his employees.

In his letter, George was very flattering, recalling the many times he’s talked about Zulily in the last couple years. “I’ve used Zulily as an example of an innovative retailer bringing the same brand values to the digital world that we first brought to the TV world — inspiration, discovery, and a commitment to building lifetime relationships,” he said.

Additionally, both Cavens and George wrote about meeting each other five years before Zulily was founded.

In Cavens’ detailing of the event, he said: “it was really our first introduction to the idea of discovery based shopping and what it could be. For years, as we have told the story of Zulily, Mark and I have compared the consumer experience of shopping on Zulily with how customers engage with QVC and television shopping.”

QVC’s George also recounted the now-historical meeting: “What you may not know is that back in 2005, a couple of e-commerce entrepreneurs who had founded a highly successful custom order jewelry website called Blue Nile visited QVC. Those entrepreneurs, Darrell Cavens and Mark Vadon, told me, in the first of many discussions we’ve had over the last several months, that this QVC visit was one of the sparks that inspired Zulily. And so it seems fitting, and perhaps inevitable, that we should come together.”

 

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