Daily Daze

Layoffs at Lot18: 15 Percent of Employees Were Just Let Go From Fast-Growing Luxury Discount Site

Trouble in wine country?

lot18 Layoffs at Lot18: 15 Percent of Employees Were Just Let Go From Fast Growing Luxury Discount SiteLot18, the membership-based luxury item site that raised a whopping $45 million over the last year, just laid off 14 people, or 15 percent of the staff.

“A lot of this is a natural part of the way a business grows and evolves,” Lot18 founder Philip James told Betabeat. “Some positions aren’t needed. At the same time, we’re hiring heavily in areas that do make sense for us. This puts us back to October’s level, so just a couple months ago.”

The company was planning to slash a significant part of its workforce tomorrow morning, followed by a company-wide meeting. After Betabeat began inquiring, the company confirmed the layoffs and pushed them up to this afternoon.

Lot18 specializes in wine and gourmet food, as well as cultural activities and amusements, similar to Gilt Taste. The site was growing explosively, most recently with its $30 million series C in November, with backing from big names like Accel Partners, FirstMark Capital and the founders of Diapers.com. Lot18 also recently acquired Paris based-Vinobest and made some high-profile hires, including venture vet Mark Pinney as CFO and Gilt VP of marketing Andrew Koch as VP of product.

Back in December, Betabeat wrote this on the announcement of Lot18’s expansion into Europe:

The company’s co-founder and president, Philip James, is already talking about profitability, telling Xconomy that is has plenty of capital on hand and will not look to jump into many different verticals…

In the year since its launch lot 18 has grown from 6 to 90 employees and seen 13 straight months of growth.

Color us boosterish! Despite the layoffs, Mr. James said sales were great. “Our 2011 performance was way higher than we’d projected originally,” he said. But Lot18 still had to shed some bloat, which apparently included its vice president of operations, director of operations, and compliance manager.

A Lot18 spokesman echoed Mr. James, saying the layoffs bring the company back down to 72, the same headcount as it had in October. “2011 was a very robust year for us, and the actions of today just put us on a clearer path toward profitability,” the spokesman said.

Mr. James said he expects Lot18 will be back up to 96 employees in a few months. (Déjà vu: Gilt Groupe CEO just said the same thing after layoffs at the luxury discounter.) Lot18 is still hiring in the U.S. and Europe, just for a different mix of positions, he said.

Lot18 analogues Gilt and RueLaLa both recently announced mass layoffs; even American Apparel got hit by a Groupon coupon. Meanwhile, design-centric flash sales site Fab.com still seems to be on the rise. Is the flash sale business model a flash of brilliance, or a flash in the pan?

Mr. James said even though Lot18 took a lot of money, he’s still got his eye on the prize: profitability. “We raised a lot of money both recently in pretty rapid succession in less than 12 months,” he said. “We have a really healthy balance sheet. We’re certainly not looking for money for a long time and potentially not looking for money ever again.”

Follow Adrianne Jeffries on Twitter or via RSS. ajeffries@observer.com

Comments

  1. Samiam says:

    The beginning of the end for a flawed concept that will never see profitability.
    The days of spend big up-front and hope to flip are over.

  2. Samiam says:

    Raising ( or borrowing) money is not the same as making money. All the hype surrounding a capital raise is just that. Lots of OPM thrown at an Excel spreadsheet assuming infinite growth.

    It’s fascinating how supposedly sophisticated investors (Accel) can  sometimes get taken in by a seriously flawed business plan.

    1. Karma says:

      They are hiring too many expensive development and engineering staff as if they do not have enough already. They are waisting money on Pour events where employees get to drink all the booze they can until they reach 3K tab. Very efficient! They give away wine, break walls to make more room for their employees……too much space now for no reason…..Who is in charge of their budgeting? 

  3. Anonymous says:

    I survived the bloodletting but I am looking elsewhere for work.TERRIBLE leadership that gives us half truths and bogus excuses for the lack of resources and presence. Philip is never here. Kevin is a ghost. No one has a clue what shoe is next to drop but I can tell you that the way yesterday and today were handled, many of us that drank the Lot 18 kool-aid have spit it out.
    Snuggs

    1. mmm cool aid... says:

      No Lot18 employee would put a space in the name.  Bogus.  nice try.

      1. Anonymous says:

        lol. right. im bogus. good luck getting “profitable” when everyone who makes less than 100k realizes they are only one more bad month away from the alt conference room and the manila HR envelope.

      2. sad says:

        Who cares about a space? Lot18 or Lot 18. Big deal! This person is 100% right. The company wastes its resources on a kindergarden staff, out of which half calls themselves anything begging with SVP and ending with Director or Head Manager. They literally just wiped milk off their lips and suddenly were given the opportunity to be in charge of more than they can handle. Then all these worthless meetings that each one of them run around to find a room for…..gosh, waste of time just hearing them all talk and never getting to anything substantial. 
        They let the wrong people go, they should have snapped off some of those know it all, but really know nothing children. 

  4. Samiam says:

    VC is all about drinking the Kool -Aid

  5. Koolaidkid says:

    With $40m raised why a lack of resources? Where’s all the cash?

    1. Karma says:

      Stolen…..stuffed in the pockets of the higher-ups

  6. winelover says:

    Investors should really think twice before investing in this company any further. Clearly, people that were laid off are not the staff that should have gotten fired. Customer retention is the key and cannot be done without good customer services and speedy shipping to back it up. 

    The review below should be of concern to Lot18. This should be the priority, because there are many reviews that sound alike!

    “No real excuse for that, if they really do have 80 some-odd people working for them as I’ve read, then they ought to pop a couple of more into the import orders department.  Or spend a little less time with fluffy bios about their “curators” and maybe put that energy into getting shipments rolling faster.  The best marketing in the world is fast and efficient delivery.  I did email their customer service box twice, and got polite responses that were a bit vague and just said that my order would be going very soon.  Lots of daily wine deal choices out there, so I guess I expected quite a bit more from these guys.  At least from this experience, I certainly can’t recommend them”- Keith J

    http://www.yelp.com/biz/lot18-manhattan#hrid:Vh_iR3BaOgigiRJp6eheJQ

  7. Shibby says:

    Interesting but not entirely surprising. Speaking as a veteran from the dot.com trenches, it’s not unusual for companies of this size (and funding round) to make serious adjustments to their management and team in order to press ahead (as unfortunate as it may be for some folks). Having said that, I actually interviewed at Lot18 but withdrew my candidacy after meeting the “team”. Something not quite right going on over there.. employees were unenthusiastic, defensive and generally coarse in their demeanor. It was as if they were saying “run away” under their breath. They have a gorgeous online product and an interesting model.. hope they can pull it together and overcome the obvious growing pains they’re experiencing.

  8. Koolaidkid@aol.com says:

    More people won’t make up for a flawed business model. If you don’t own the product you are selling “fast and efficient delivery” is out of your control. A Marketing Platform can never become a Major Player if what your selling is not a service. Amazon was never just a marketer of books. They buy those books, take delivery at their Distribution Centers and ship the product to the consumer. That is a real internet retail model. The capital Amazon invested in inventory and systems long ago did not pay off instantly, however their retention of control over product insured that they could provide superior customer service and made them what they are today.

    Every clone of the Lot18 model will fail, sucking millions of foolish dollars out of the VC community.

  9. samaiam@aol.com says:

    RE: Sad
    You mean who wrote the imaginary business plan?