New York's Most Tragic Startup Story Continues As Lot18 Lays Off 11 More People

Lot18, a wine e-commerce site that once dominated the New York startup scene, is undergoing more layoffs.

This morning, eleven people were let go, dwindling the staff down to 36. Last year, Lot18 had nearly 100 employees.

The cuts were made across all of Lot18’s departments.

Lot18 last laid off workers in January, when 25 positions were cut. Over the past year, Lot18 has lost multiple executives, shut down verticals and offices abroad, and pivoted the business from flash sales to a direct response company.

The company says the layoffs are the result of that shift, and Lot18’s acquisition of Tasting Room earlier this year. 

“The flash business of Lot18, now a retail business, can operate – and flourish – with a much smaller staff, while all remaining resources are being dedicated to Tasting Room,” a company spokesperson tells Business Insider. Tasting Room has been beta tested and redesigned; it will be launching in a few weeks.

Lot18 gained a new CEO, Jay Sung, a few months ago. Sung was hired in December following the departure of Lot18’s co-founder, Kevin Fortuna. There were a number of months between Fortuna’s departure and Sung’s hiring where the company operated without a chief operator. Fortuna’s co-founder, Philip James, is still at Lot18 in an operation role.

“The people who are leaving the company worked extremely hard, and their focus and dedication have ensured that the company will grow and thrive,” says Sung of the layoffs. “I attribute much of the company’s successes, to this point, to their efforts, and it’s difficult to see them go. I wish them the very best.”

The story of Lot18 is one of the more tragic startup tales. When Lot18 launched in 2010, it gained users and generated revenue quickly. Investors were impressed and gave it $44.5 million

Unfortunately, the early traction was the result of aggressive, unsustainable user acquisition marketing campaigns. Ecomom, a eco-friendly ecommerce site for mums, used a similar tactic and failed under its now-deceased founder, Jody Sherman. Both companies spent extraordinary amounts attracting users with unbelievable discounts which were costly to the companies’ bottom lines. Neither could convert the one-time users into repeat customers who were willing to pay full price.

In addition, wine is a difficult product to ship and sell online. It needs to be packaged carefully and shipped promptly in temperature-conscious environments. Each order must also meet every state and country’s legal requirements, making it an inefficient business to scale.

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