The flash sales wine site has had numerous strategic stumbles under founder Philip James. In December 2011, the site expanded into European markets, but pulled out of the U.K. in July, after just seven months. There was also the acquisition of the French competitor Vinobest and attempts to get into experiences. But last January, 15 percent of employees were handed a pink slip, followed by 11 layoffs in June and six more in July.

A spokesperson for the company confirmed to Betabeat that the layoffs were related to a strategic pivot toward direct response under CEO Jay Sung, who replaced former CEO Kevin Fortuna this past December. The spokesperson said Mr. James is still with Lot18; he will be charge of what a source close to the company called Lot18's "hail mary" pass: selling wines through a subscription model.

Mr. Sung (Photo: LinkedIn)

"The point being from the beginning they were trying to build an interesting high-end brand and now it’s like, 'We just need to get users, we don't care who the fuck they are,'" said the source, who added, "Jay Sung, a direct marketing guy, is now running the company, which tells you exactly what you need to know. Any pretense of higher-end lifestyle stuff is going by the wayside."

The spokesperson also confirmed that the layoffs were related to the existing flash sales business, which will continue on. "Everyone built [flash sales] up to the place where it can run with lower burn," he said, noting that Mr. Sung chose the remaining staffers "because he believes in their ability to fit in with the new subscription model and support flash sales." Mr. Sung also told ATD that Lot18 needs "to resource according to our new business model and operate the existing business more efficiently with considerably less burn."

Lot18 is going after the market currently dominated by industry veterans like Global Wine Company and Direct Wines, which run The New York Times Wine Club and a wine club for The Wall Street Journal, respectively. "If you look at the $30 billion to $40 billion wine market, the vast majority are not at that high end," said the Lot18 spokesperson. The company needs to look for customers "who can't afford $50 for a Cabernet, but can afford a $15 Cabernet."

Our source said it wasn't yet "game over," for the startup. "If Lot18 can put better wines in front of people on a club basis, they can justify an exit or acquisition, that would end up making their investors happy." Bottoms up?

Mr. James (Photo: Lot 18)

Yesterday, Lot18--the members-only site for flash sales of wine--announced in a statement distributed to wine industry publications that it will permanently shutter its U.K. operations, effective at the end of the week. That includes laying off six full-time employees.

Apparently, British oenophiles are hard customers to come by these days.

The statement explains the closing: "The supermarkets’ stranglehold on the UK market proved too powerful for us to compete with and we have not experienced the anticipated growth rate."

For those keeping score at home, this is not the first time Lot18 has dropped the axe on a significant number of employees. Back in January, the luxe startup let go of 15 percent of its staff--its first stumble following an explosive expansion. At the time, Lot18 CEO Philip James told Betabeat, "A lot of this is a natural part of the way a business grows and evolves." Think he's currently eating--or perhaps swigging--his words?

Then, in May, Mr. James (in what a source called "a show of bravado") began straight-up paying unhappy employees to leave, following the shuttering of its gourmet and lifestyle brands. Seven employees were reportedly so dissatisfied that they took the money and ran. “Lot18 seems to be imploding and the only non-disgruntled employees there are the new ones," one source told us at the time. "Again, from what I hear you can cut the tension with a knife over there right now.”

Finally, just last month, came another blow to the epicurean e-commerce company. Lot18 once again announced sweeping layoffs, firing 11 of its employees and cutting its food and travel verticals. Mr. James chalked the move up to the fact that the company, which has raised a total of $44.5 million according to Crunchbase, got a little trigger-happy with their cash: "One of the perils of having a lot of money is it's easy to launch a lot of things," he told Betabeat.

The closing of the 4-month-old U.K. operation may be another attempt for the company to return to its "core offering...changing the wine business," as Mr. James told Betabeat back in June. And perhaps Lot18's platform--with its built-in compliance with local liquor laws--wasn't as disruptive in the U.K, which lacks America's patchwork 50-state market.

Lot18 will still continue to operate in the U.S. as well as France, where it acquired Paris-based Vinobest in December. We can imagine it's a little easier to build upon an already-established business than start from scratch.

Does this signal the end of Lot18's scaling back, or can we expect more layoffs at its U.S. operations? We'll keep an ear to the ground.

Lot 18 declined to comment.

If you have any more information, drop us a line: tips [at] betabeat [dot] com.

Additional reporting by Kelly Faircloth.

Mr. James. (Photo: Lot18)

New York-based Lot18 may have gotten ahead of itself there for a bit. The members-only flash sales site for wine, which raised a total of $44.5 million from investors, is down to 70 employees after a reorganization that was finalized internally today. The company is cutting 11 employees and eliminating the food and travel verticals that were launched in June and October, respectively.

While customers buying wine were also often interested in cheese and chocolate, Lot18 realized that the verticals didn't overlap much on the back end, and "just the distraction involved in building five things at once," was taxing for the company, founder and president Philip James told Betabeat.

"A startup has limited resources. We almost raised $50 million, but reinventing a multi-billion dollar industry and hopefully having an impact on the industry for the next 50 or 100 years takes a lot of focus," he said. "The business lines that we are shutting down in themselves are probably really good businesses. But as a startup, it's better to do one thing well, be a laser, do one thing better than anybody else."

He added, "One of the perils of having a lot of money is, it's easy to launch a lot of things."

Lot18 launched in November 2010 with the goal of providing members with highly-coveted wines at daily deal prices. The company scaled fast in the 18 months since it launched, poaching employees from competitor Gilt Groupe, moving into an idyllic office in Midtown (think "wine Fridays") and expanding into full-price oenophilic and epicurean offerings. "Lot18 is arguably one of the most powerful branding platforms," Eater wrote in August in a post that positioned Lot18 as the only serious wine sales competitor to Gilt. In December, Lot18 acquired Paris-based Vinobest and launched in Europe. At its largest, the company had more than 90 employees worldwide.

Lot18 gradually realized it may have swigged more than it could swallow. The company announced a 15 percent staff reduction in January and recently exhorted unhappy employees to quit. Today's cuts were distributed across the company and included a vice president of strategy, but no one at the executive level, we're told.

The market for wine is worth $40 billion in the U.S. and $150 billion worldwide, Mr. James said, which means Lot18 has plenty of room to grow without jumping into tangent categories. "The aim is just so that we can focus on our core offering, what we set out to do originally," he said. "The business was started to change the wine industry... we want to go back to doing just that."

Lot18 will continue to offer wine accessories like glassware, but its focus will be on curating and shipping wine. The company will "run the calendar" on its non-wine offerings, Mr. James said. He expects the secondary businesses will be phased out entirely in about a month.

Lot18 is about to hit a million registered members and now sources wines from 500 different wineries. The company did "several tens of millions of dollars of transactions" last year, Mr. James said, and subscriptions for the first quarter of 2012 are outperforming the same quarter last year.

By refocusing on just wine, Lot18 can become more efficient and make its product better for its core customers, Mr. James said. "We're learning things about our main category," Mr. James said. "We have to build a lot of stuff that's custom to this vertical."

By coincidence, Mr. James and his cofounder Kevin Fortuna received accolades today for a previous venture: music site Popdust, which just raised $4.5 million. Mr. James is no longer involved with Popdust, but Mr. Fortuna sits on the boards of both companies.

Lot18's headcount is changing again. (Photo: Foursquare)

On Thursday night, Philip James, the oenophilic founder and CEO of the well-funded wine and artisanal sales startup Lot18, was confident, bordering on blustery. The wine market is bigger than the entertainment market, Mr. James told an audience that had gathered at the Seamless office for an Internet Week panel, adding that Lot18 rejects 93 percent of vendors who apply to sell there.

Some of that braggadocio came through last week  in a company-wide meeting, where Mr. James announced an offer to buy out some of his own employees.

If you're unhappy at Lot18, he told employees, I will pay you a month's salary to leave now.

So far, six seven people have accepted the buyout.

The announcement was prompted by an internal, anonymous employee survey three months ago, Lot18's editorial director Eric Arnold told Betabeat. "Management thought it was appropriate to address negative and positive feedback," he said. "Some people expressed unhappiness."

But, he assured us, "absolutely nobody is being ushered out the door."

The move is in the spirit of a tactic made famous by Zappos, Mr. Arnold told Betabeat. Zappos offers new employees money to leave, to ensure that only the truly dedicated will stay.

Lot18 has 10 open job listings on its website, suggesting the company is trying to add headcount. However, Mr. Arnold said he was unsure if the employees who take buyouts will be replaced.

Mr. James also told three employees yesterday that they would be let go, prompting fears of another round of layoffs like the 15 percent staff cut that hit the members-only wine and epicurean site back in January.

Those three layoffs were due to the decision to shutter Lot18's gourmet and experiences offerings, Mr. Arnold said.

The buyout offer was also accompanied by an incentive to stay, he said. Employees who hit the two-year mark at Lot18 will be allowed a month of paid vacation, or two weeks fully paid along with two roundtrip tickets anywhere in the world.

"[Seven] people decided to take one month's salary and leave the company, each deciding on their departure dates with their managers," Mr. Arnold elaborated in an email. "Every discussion's been amicable, and no one who decided to move on is leaving the company today. All are staying for a couple weeks or longer to help with transitions."

However, the layoffs and buyout offer sparked suspicion that layoffs are imminent, said one source close to the company. The company had visitors filtering through its Manhattan office today for a scavenger hunt as part of another Internet Week event, WalkaboutNYC. As the guests wandered by, some employees were "blatantly" job searching, the source said. "Lot18 seems to be imploding and the only non-disgruntled employees there are the new ones. Again, from what I hear you can cut the tension with a knife over there right now."

Lot18 has raised $44.5 million, according to Crunchbase, and gobbled up a European startup late in 2011. In the first year of existence, Lot18 grew from six employees to 90 and got up to 99 before whittling back down to 85 in January. As of today, Lot18 has 81 full-time employees globally.

"By and large, wine sales are strong for the first quarter of the year, so far," Mr. Arnold said.

Lot18

"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."

Members only.

Lot18, the New York-based, members-only deal site for oenophiles and foodies, announced a $30 million round of funding this morning, about double what was raised in its seed, A, B and B-angel rounds. Accel Partners lead the round, which included existing investors New Enterprise Associates and FirstMark Capital. "The funds will support continued growth, as well as further technological and product development, particularly the expansion of Lot18 Gourmet and Experiences, the company’s food and travel verticals, respectively," according to a news release.

Lot18 got some attention not too long ago with some similarly good news when a few angels, including the cofounders of Diapers.com, gave Lot18 a million bucks in an "interim round" in order to get a piece of the company. "The company has seen 12 consecutive months of growth in gross merchandise volume, and facilitated the sales of more than 500,000 bottles of wine," a release said. The company says it's grown from six employees to 80 and more than 500,000 members in less than a year.

Lot18 looks to be killing it, based on the investor interest (and assuming the numbers are honest). The company has coped ably with challenges such as state-by-state alcohol regulations and sports a number of ecommerce gurus on its board (you got Bonobos cred, Diapers.com cred and Quidsi cred all in there. And we have it on authority that founder-CEO Philip James is a "nice guy").

With its newfound fortune, Lot18 is adding fancy travel packages (ski trips, VIP dinners at Michelin-starred restaurants, etc.) to its offerings of fancy wine, gourmet food, and free shipping based on the number of Kevin Bacon's Twitter followers.