Nov 21, 2012 · 1 minute

If you're like me, the news that Zulily was raising $85 million at a presumed $1 billion valuation was a stunner. Sure, its revenues are on pace to do some $500 million a year. But we've heard gaudy growth numbers out of ecommerce before.

Gilt was the granddaddy of flash sales sites, and as its struggles continue -- lagging growth, profitability concerns, shuttering or selling off non-performing units -- that whole category looks awfully gimmicky. The Wall Street Journal reports that it's bad enough that Gilt CEO Kevin Ryan may soon be out of a job. Survivors like One Kings Lane and Fab have slowly backed away from strict adherence to the flash sales model. Meanwhile, the things-in-a-box and daily deals models aren't looking too good either.

Add to that real laws of gravity associated with selling and shipping goods, and the continuing curse of Tony Hsieh effect: That customers expect you to give it all away for free.

Entrepreneurs in LA and New York are starting to see why Valley entrepreneurs -- perhaps scarred from the Web 1.0 days -- have largely sat eCommerce 2.0 out. Typically consumers' tiring on a concept is a lagging indicator, not a leading one.

So what is up with that valuation? It's too simple (and not particularly true) to just say Andreessen Horowitz always over pays, which is what much of the industry likes to say. This graph below makes more sense. Just like in the offline world, it's all about foot traffic.

Check out comScore's figures on unique weekly visitors for both Fab and Zulily.

And now, check them out in comparison to the industry.

According to this chart, only three are above the industry average: Amazon, Fab, and Zulily. The latter two may be still priced aggressively, but it helps explain why investors see them as the outliers.