When Wayfair reported on its just-ended third quarter earlier this week, the news was not good: Sales are off 19 percent, with a net loss on the bottom line and customer count growth significantly down from the past few quarters, when the company had been showing huge gains and its first profits ever.
But left unsaid among all the numbers and explanations from Wayfair senior management was one very obvious conclusion: The home furnishings industry’s biggest pure-play e-commerce retailer was going to have to start opening stores to balance its selling strategy.
Wayfair CEO Niraj Shah said the long run remained top of mind for leadership. “Our long-term vision is in sharp focus coming out of the pandemic period. We are, as ever, focused on the long-term, balancing strong growth and profitability over years, not quarters, and solidifying our position as the definitive destination for the home.”
The results did meet analyst forecasts, and the hit on the brand’s shares from investors was relatively modest, off about 10 percent since the earnings announcement on Thursday. But the report showed that Wayfair’s charmed run at the peak of the recent e-commerce and home furnishings boom appears to be over—or at least significantly slowed. Still, Shah was obviously (and no doubt necessarily) optimistic about the company’s prospects. “Demand and interest in home remains resilient, but it will take a few more quarters for our growth—and e-commerce growth in general—to get back to normal.”
The entire home furnishings business has been watching Wayfair as a leading indicator of overall product sales, specifically through online sellers, as pandemic conditions subside and consumers start redirecting their spending toward non-home-related purchases like vacations, out-of-home entertainment and other services. With another big national public retailer, Bed Bath & Beyond, also reporting disappointing results earlier this fall, it appears that process may be well underway. Add the supply chain problems and inflation driving up prices, which might also be slowing sales, and the Wayfair results make sense.
But they also point to the inevitable: Successful retailers, no matter the product or price point, will need to meet their customers wherever they are—in physical stores, online, on social media or some omnichannel combination of all of the above.
Wayfair essentially has no physical stores. It tested one small location near its Boston headquarters, but closed it last year, though it still operates a close-out center adjacent to its distribution center in Ohio. However, unlike other digitally native sellers across the consumer products spectrum that have moved aggressively into physical spaces—from Casper to Warby Parker—Wayfair has resisted this next step. To do so would require a massive investment that would be prohibitive for a company that has only recently started to show a profit. Shah has talked about the need for Wayfair to open stores, but there have been few other details other than the one test store.
Now he may need to do more than just talk given these results this week. Retailers are increasingly learning that a hybrid selling model is ultimately the only way to truly be successful.
It’s a lesson that Wayfair may have to learn the hard way.
Homepage image: Adobe Stock | ©sdx15
Warren Shoulberg is the former editor in chief for several leading B2B publications. He has been a guest lecturer at the Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and been cited by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. His Retail Watch columns offer deep industry insights on major markets and product categories.