Improving Repurchase Rate at Zulily
Zulily is a Seattle-based daily deals site that provided to mothers. CEO Darrell Cavens is currently facing major challenge in his business; the more he spent to acquire new customers, the less he retained them in the form of repurchases. Their targeted customers were women ages 25 to 45 with median household incomes of $75,000 who were taking care of young children or were starting a family. Mothers who have their children under the age of 18 has a big impact on retail sector in the U.S. 39 million U.S mothers made purchases for 121 million people including themselves and their families in 2014. They shopped across a range of categories such as children’s apparel, women’s apparel, toys, infant gear, kitchen accessories, home decor and so on. The average age of new mothers in 2014 was 26, which means many of whom were millennial mothers. They enjoyed shopping and were good at hunting something different at a good price due to their pre-purchase research. Millennial mothers are also particular about small, unique brands with authentic stories over the big brand names. Some analysts estimated total addressable market for all U.S mom-centric retail was about $400 billion, and nearly $40 billion of the market came from e-commerce. Millennial mothers are tech savvy and expected to shop easily and seamlessly across multiple channels including store, online and on mobile devices.
The operational issues that Zulily has been facing is that a stagnant growth of repurchase rates. Cause of this new conundrum of Zulily can be analyzed that the company failed to define themselves and target their target segments so that the company spoiled their sustainable competitive advantages by having over assortment and promoting commoditization. As a result, the company got involved in the intense competition in the market with big national competitors such as Amazon, Walmart, and Gilt. This results in that the company failed to satisfy their customers and gain repurchases.
Option 1: Retargeting their customers by adjusting their assortments.
Zulily were renown of offering unique products from small and relatively unknown brands at great prices. This was supposed to be the company’s sustainable competitive advantage that allow them to outperform its competitors like Amazon, Walmart, or Gilt. However, expanding their customer base from moms with children under the age of 18 to broader segments mainly composed of women and having new categories with well- known brands such as TOMS, Crocs, Under Armour seems to disrupt their sustainable competitive advantage by themselves. Furthermore, Twomey, who played a key role in selecting a niche merchandise for Zulily also states that the company need to focus on more disposable products like apparel than toys and gear since infants grow fast.
Due to the expansion caused by mistargeting of the company, Zulily has become to have over assortment and failed to differentiate their business activity. This results in disrupting their sustainable competitive advantage. Furthermore, this causes that the company puts themselves in the market where the company has to compete with other competitors having superior sustainable competitive advantages in terms of assortment, pricing, delivery times and so on. Although the company successfully gained 152,000 new members by investing online advertisement with famous brands, they failed to satisfy new customers with their assortment so that the repurchase rate of the company hasn’t grown positively. Therefore, the company needs to work on satisfying new customers by retargeting their target segment and adjusting their assortment in order to rebuilt their sustainable competitive advantage and to boost the repurchase rate.
In order to rebuild their sustainable competitive advantage, Zulily should go back to their spirit of focusing on unique and small brands, and back out of big brands. The company also should retarget their target segments by shifting back to the customers,who enjoys hunting special and unique clothes with a great deal, which exactly what Millennial mothers prefer. Retargeting their segments by adjusting their assortment would allow Zulily to back to a market where the company can enjoy to take advantage of their sustainable competitive advantage and as a result, the company would be able to differentiate their business. This would result in that Zulily can perform their business activity at right market where the company can deliver their values to right customers by utilizing their sustainable competitive advantage.
Option 2: Improving the delivery
If Zulily wants to enter a competition with the national big retailers such Amazon, Walmart, and Gilt, the company has to improve their business operation to satisfy customers in terms of shipping time. In other words, Zulily has to prioritise to work on shortening delivery times.
The company has been providing unique and special products to customers, which is one of the strengths of the company, and well-known brands with lower prices. The company has been gaining new customers more annually, but they struggle with improving the repurchase rate. Based on this fact, at least customers consume their services once. This means that customers satisfy their service once at the time when they make a purchase. However, as customers evaluate their purchases, customers’ positive attitudes toward their purchases are distorted. It can be said that Zulily’s delivery time affect the consumer’s attitudes so that customers don’t make repurchase at Zulily. According to Appendix A, the delivery time of Zulily is three times longer than the other big retailers. (Zulily takes 14 to 18 days to deliver and the other big retailers takes 3 to 5 days.) Thus, it’s obviously Zulily’s delivery time negatively influence customers’ evaluation of their purchase.
Although Zulily has a policy, “No inventory”, the company should have inventory only for their popular merchandises. This is because the company appreciate for not having any inventory as well. In order to efficiently improve their delivery time, the company should choose some merchandise that are popular for customers so that the company can lower a risk to have inventory and shorten their delivery time. Thus, having inventory for popular merchandise would work well for Zulily in order to improve the purchase rate.
Option 3: Lower the adversiting cost
Zulily could be lower the advertising cost. Most of their advertising are paid method. However, the effect is not remarkable. Form the Appendix B, we can see the activation rate is not high, but the repeat purchase rate is supper good. We can image that the customer experience must be good. That’s the reason make them repeat purchase at Zulily. Based on that, Zulily can lower the spending on paid advertising to decrease the expense. Zulily can use the saved money to develop the customer service and further improve the customer repurchase rate. For example, they can offer small gifts to customers at the holidays and festival. Such as the candies, and some related products. It also can be some small size product. If the customer like it, they might come back buying it. It is benefits to increase the repurchase rate if the customer has the best shopping experience at Zulily.
Although Zulily lowers the spending on paid advertising, they can start the unpaid advertising. Inbound marketing is a new marketing strategy which different as the traditional marketing. It is using the free social media to attractive customers instead using the advertising to bother customers. At the moment, most of Zulily’s customers are millennial moms. They are using the social media often. Zulily can create some funny short videos, pictures, posters and post it on social media to gain their attention. There are many free social media can be used, such as Facebook, YouTube, Snapchat, and Instagram. With this option, Zulily can decrease the cost of advertising, but it has the risk of transformation.