QVC adding smartphone shoppers with Zulily purchase

Even as Michael George, CEO of West Chester-based TV and online shopping giant QVC Inc., prepares to start a new channel in France this month, he is planning to spend time in Seattle, home to Zulily Inc., which QVC owner Liberty Interactive Corp. said Monday it had agreed to buy for $2.4 billion in cash and stock.

Zulily supplies boutique sippy cups, small lots of maternity pants, and thousands more products to smartphone-using mothers in their 20s and 30s.

QVC wants to add Zulily's "millennium moms" to its own base of "35- to 65-year-old women, which Zulily perfectly complements," George said in a Monday afternoon interview, after fielding questions from Zulily software developers and managers.

"We have no plans at this point for any meaningful consolidation," said George, who has been promoted to Liberty's top management board, alongside Liberty founder John Malone and chief executive Gregory B. Maffei as part of the deal. "We'll be in a growth and hiring mode here and in Seattle. We will let the two companies operate as they do today."

Both companies' mobile-apps developer groups, for example, will continue to connect iPhones and Android phones to shoppers for their respective businesses.

For Zulily investors, led by China-based Alibaba Group, the sale price works out to a disappointing $18.75 a share, above Zulily's recent trading price but below the $22 a share Zulily collected when it went public amid soaring expectations in 2013, and just a quarter of its peak stock price last year.

Zulily annual sales topped $1 billion just four years after it was started in 2010, but did not rise fast enough to justify tech investors' superheated hopes that it could become an Amazon-like shopping leader for smartphone users.

As shares fell to more affordable levels, Liberty CEO Maffei called Zulily cofounder Mark Vadon earlier this year, "and we began the dialogue," Maffei told investors in a conference call Monday.

While QVC buyers typically caught the habit as viewers of its home-shopping channels and moved online as desktop computers became ubiquitous, Zulily reaches its typical younger customer tapping her iPhone "when she's in line at Starbucks waiting for her drink," or in the line of cars to pick up her children after school, said Zulily cofounder Darrell Cavens in the conference call.

Only 6 percent of Zulily's customers also shop on QVC, a percentage that QVC wants to boost.

"A large number of our products don't have a [Uniform Product Code bar code] symbol" and can't be purchased in retail store chains, but are boutique products sold mostly online, Cavens told investors. He said Zulily can be a "farm system" for helping QVC users "discover" new products and makers.

Maffei called Zulily "the Internet, younger version of QVC."

"It does feel there's a broader push toward a younger customer" at QVC, retail analyst Matt Nemer at Wells Fargo Securities said during the conference call.

The companies said they will speed sales growth by swapping vendor and customer lists and applying the best practices from each firm. Maffei said higher sales and cost-cutting would enable Liberty to keep buying back shares, propping up its stock price.

A combined QVC and Zulily will deliver more than 230 million merchandise units, worth more than $10 billion, to nearly 20 million customers in 85 countries this year.

QVC and other Liberty Interactive businesses employ about 20,000, including around 2,800 at the company's QVC Studio Park headquarters and other sites near West Chester, and 1,200 warehouse workers in Lancaster County; area employment has been flat for the last decade. Zulily employs about 2,900.