bluefly, inc

May, 2007

what is bluefly?
the online source for the latest in fashion from best known european and american designers at a value product assortment:
womens apparel 48% of business1 womens accessories 28% of business mens fashion and accessories 21% home 3%

accessible luxury to the broad market

over 10,000 styles from great designers usually from 40%-75% off retail

new merchandise added to the site daily

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2006 percent of total company net sales

merchandise strategy/ value proposition

the original premise of bluefly is a winning one: we survived the dot com hysteria but in order to grow, we needed to differentiate and have a competitive edge the first phase was to develop a new merchandising strategy that shaped the future of the company once we saw it could be executed successfully over 3 seasons, we were able to build from our new positioning
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new merchandising strategy led to stronger gross margins

focus on pricing/initial margin
Gross Margin %

We constantly evaluate the merchandise mix We buy direct from brands early in the season We keep site fresh daily new arrivals

50% 45% 40% 35% 30% 25% 20%

21.3% Q3 Q4 38.0% 37.4% 34.2% 38.6% 41.8% 40.3% 40.3% 2003 2004 2005 2006

the new bluefly

in-season and on-trend fashion when the customer wants it nimble and dynamic: we are responsive to customers needs and are able to update the site daily positioning: fashion first then the value an authoritative/credible fashion source
brands from contemporary to high end designer upscale messaging/presentation featuring the seasons key trends

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bluefly positioning value vs. high quality clothing

90 80 70 High Quality Clothing 60 50 40 30 20 10 0 0 10 20 30 40 50 Value
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Amazon.com Barneys.com NeimanMarcus.com SaksFifthAvenue.com Nordstrom.com eLuxury.com Bloomingdales.com JCrew.com Shopbop.com Yoox.com Macys.com

Bluefly.com

Barneys.com Bloomingdales.com Bluefly.com eLuxury.com JCrew.com Loehmanns.com

Zappos.com

Macys.com NeimanMarcus.com Nordstrom.com Overstock.com SaksFifthAvenue.com Shopbop.com SmartBargains.com VictoriaSecret.com Yoox.com Zappos.com

VictoriaSecret.com Amazon.com SmartBargains.com Overstock.com

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70

80

90

100

Source: synovate

bluefly positioning value vs. high quality clothing

90 80 70 60 High Quality 50 40 30 20 10 0 0 10 20 30 40 50 Value
Source: synovate
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Bluefly.com
Neiman Marcus Nordstrom Barney's Saks Fifth Avenue Barney's Bloomingdale's Bluefly.com Bloomingdale's Filene's Basement JCrew Loehmanns JCrew Macy's Macy's Neiman Marcus Nordstrom Loehmanns Filene's Basement TJ Maxx Saks Fifth Avenue TJ Maxx

60

70

80

90

100

our customer
demographics- the facts
75%+ women mean age 35 61% single hh income $100,000+

psychographics- the attitude

she loves fashion, shops often and spends a lot shes pop-culture savvy shopping is an essential not just an incidental part of her life shopping is an emotional more than a rational experience

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our relationship
in a word: loyalty. loves not likes. weve created a following; a fan base, perhaps even addicts we put our new merchandising strategy out there and they played it right back to us: we stand alone with a unique position in the marketplace

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marketing bluefly: television

launched first campaign october 2005 embodied the core ethos of bluefly:
a universally relevant experience among women with the shopping gene projected the image of the target customer: strong, confident and of course, emotional.

Awareness of bluefly is increasing

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marketing bluefly-television
second campaign fall 2006 extremely targeted media allowed us to move the dial
Ran spots Sunday through Wednesday night only Programs with strong fashion content: Sex & the City, Project runway, gilmore girls, americas top model

tremendous results:
60% increase in traffic during times our spots ran opt-in customer file increased to 1,300,000 new email addresses acquired in Fall 06 increased 50%

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A winning combination
Marketing that creates new customers
fall 2006 marketing spend 50% online & 50% offline

Added to our loyal and active customer file

average season (6 months) sales per existing customer is $600 the most active customers visit website 6+ times per month 57% of sales from existing customers

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financial highlights

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2006 financial highlights

net revenue grew by 31% gross margin $ grew by 35% gross margin % was strong at 40.1% (up 100 basis pts vs. 2005) Investment in marketing was $12.6 million the first full year of the national ad campaign strong balance sheet re-capitalization june 2006
raised $50 million 61million shares at $.82 soros converted all of their preferred stock
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2007 q1 financial highlights

net revenue grew by 31% gross margin $ grew by 22.4%
GM$ per order grew to $62.91

gross margin % was 37.9% vs 40.5% in q1 2006

Merchandising mix designer accessories and shoes Weakness of the $ against the Euro Shipping expense (1% pt)

Operating profit excluding 123r expenses improved by $941,000 Customers grew by over 49,000 or 27% Growth in inventory slowed vs last year (8% vs 26%)
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order economics year ended 2006

$ average order size returns bad debt/other net revenue gross margin fulfillment/cc fees variable contribution before customer acquisition and overhead $ 53.75 34.5% $257.64 (101.25) (0.52) 155.87 62.50 8.76 % 39.3% 0.2% 60.5% 40.1% 5.6%

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increasing average order size

average order value (full year)

$300 $250 $200 $150 $100 2000 2001 2002 2003 2004 2005 2006

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strong revenue growth

($Ms)

$80 $70 $60 $50 $40 $30 $20 $10

FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006

.0 % 28 r ca g

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operating losses
(Ms)

$(2.0) $(7.0) $(12.0) $(17.0) $(22.0) 2000 2001 2002 2003 2004 2005 2006
Operating (Loss) Marketing $

note: excludes effect of fas 123r

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the bluefly opportunity

We have clear and well differentiated position that delivers real value to our customers In a growing market (on-line apparel and luxury market) We have among the best gross margins in the industry powerful order economics An expanding and loyal customer base (in the U.S.) A clear opportunity to grow internationally

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