Shares of the Seattle-based retailer, which went public in 2013, have been falling since February of 2014 as the company struggles to convince investors and analysts that its business has long-term staying power.
The stock has dropped 44% since the beginning of the year, falling below its initial public offering of $22. Shares were down 1.2% on Tuesday to $13.07.
Much of Zulily's troubles can be attributed to delivery times that are slower than those of competitors like Seattle neighbor Amazon (AMZN - Get Report). That problem was attributable to Zulily's policy to hold no inventory.
The company would take orders, then request products from merchant. Only when the product arrived at Zulily warehouses would it be shipped to consumers.
In the fourth quarter of 2014, it took an average of 13.7 days for an order to leave Zulily's warehouses, an increase from 11.5 days in 2013. That's not even including the shipping time from the warehouse to the consumer, which could bring delivery times to more than two weeks.
Until now Zulily had shrugged these times off, saying that its customers were fine with waiting for products to arrive from merchants. Chairman Mark Vadon told investors earlier this month at Morgan Stanley's Technology, Media & Telecom Conference that Zulily would "avoid holding inventory."
"For most of what we're launching we haven't sold it before," Vadon said. "It's hard to project exactly what we'd sell. If we held inventory we'd have to sell fewer products. [Consumers are] coming back every day because it's different, there's new things everyday."
Apparently the company has changed its mind.
"We need improved processes that can be scaled," Zulily Chief Executive Darrell Cavens told The Wall Street Journal. "We don't want to grow ahead of our capacity."
Over the past year, Zulily has been testing a program where it holds inventory for a few vendors, and it will be expanding that program to other vendors. The vendors will have to pay a fee to participate in the program. At the Morgan Stanley conference, Zulily's Vadon admitted that the long delivery times the company has been operating with are not a satisfactory experience for customers.
"If you're an old-time customer, if we ship an order to you with a long time you'll be more forgiving, but if you're a first time customer I think it'll lead to higher churn," he said.
Zulily may finally have realized it needs to alter its business model if it wants to retain and attract customers.