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Originally published May 19, 2011 at 2:50 PM | Page modified May 19, 2011 at 5:40 PM

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Flash-sale website Zulily to take over Sodo office building

Zulily moving to Sodo later this year to accommodate growth.

Seattle Times business reporter

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Zulily, a Seattle Internet startup that offers temporary deals on upscale products for babies, children and mothers, has hit a growth spurt and soon will move to bigger offices.

Privately owned Zulily signed a lease this week for about 80,000 square feet of office space at the Cobalt building near Starbucks' headquarters in Sodo.

The move will give Zulily nearly three times more space than it has in Pioneer Square, where it occupies 27,000 square feet.

It needs the extra space to accommodate a growing staff of merchandisers, software developers, photographers and copywriters, said Chief Executive Darrell Cavens.

He would not disclose the exact size of Zulily's workforce, saying only that it's more than 100 but less than 400. Based on a rough calculation that real-estate experts use to estimate an organization's office needs, Zulily's new headquarters could accommodate about 400 employees.

"We certainly will not be filling up all of the space when we move in," Cavens said. "Our photography studio, for instance, takes up more space than an average desk. We're continuing to add folks on a regular basis."

As with other flash-sale websites, Zulily has gained a large following by offering discounted, upscale products for short bursts of time — typically 72 hours. The sales are open to members who complete Zulily's free registration, requiring an email address and password, and are advertised in daily email alerts.

This week's sales include $54 girls sundresses for $32; $34 toddler sandals for $20; and $180 strollers for $105.

Co-founder Mark Vadon, who worked with Cavens at Seattle-based Internet jeweler Blue Nile, said Zulily surpassed a million members in November, 10 months after opening for business.

"It's grown faster than we would have expected," Vadon said.

Last month, Zulily captured nearly a fifth of online traffic to flash-sale websites, according to Experian Hitwise. With an estimated 6.3 million visits, it had more monthly traffic than Woot!, an electronics discounter owned by Amazon.com, or fashion purveyor HauteLook, a recent Nordstrom acquisition.

What's more, Zulily attracted 2.7 million unique visitors in April, a 35 percent increase from March, outpacing both Woot! and HauteLook, according to Compete, a Boston-based Internet research firm.

Zulily takes a cut of each sale and waits until an order is placed before buying the merchandise, so it avoids the risk of excess inventory. Cavens would not provide sales figures or other financial details, citing competitive reasons.

Sucharita Mulpuru, an e-commerce analyst at Forrester Research, said Zulily is up against many competitors, including flash-sale websites that originally focused on women's fashion but diversified into children's products.

"Everyone has to figure out how to increase the size of their email lists," she said. "The challenge is not so much launching the business as it is getting it to scale. Day after day, you have to procure more merchandise and sell more of it. That's why you have sites like Gilt.com deciding to get into different product categories."

Pricey kidswear is an attractive growth area because it appeals to affluent, time-starved moms who enjoy shopping online, Mulpuru said.

"She may not be shopping for herself on Gilt because she's not back to her pre-baby weight, so she figures, let me get something for my child," Mulpuru said. "It's a good self-indulgence."

Zulily began with $4.6 million in financing led by Seattle venture-capital firm Maveron, then added a $6 million round last summer.

Lately, the company has made a couple of hiring moves that sparked speculation it's headed for an initial public offering — a notion Cavens dismissed by saying he's focused only on "building the business."

Zulily hired Michael Vernon, of Seattle's Big Fish Games, as its chief financial officer, and Luke Friang, of Bellevue's Drugstore.com, as chief information officer.

Zulily will take most of the Cobalt building and rename it the Zulily building. Although a date for move-in has not yet been set, it's expected to be within the next few months, Cavens said.

The renovated brick building has been mostly empty since Cobalt, a digital marketing company focused on the automotive sector, moved to Seattle's International District at the end of 2010. Zulily has no plans to remain in Pioneer Square.

"I didn't want to have departments in different buildings," Cavens said. "Having everyone in one place helps drive innovation."

Seattle Times business reporter Eric Pryne contributed to this story.

Amy Martinez: 206-464-2923 or amartinez@seattletimes.com

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