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Wayfair Idea Proposal (W)

Wayfair Idea Proposal (W)

Will Wayfair’s bulls or bears be proven right when it comes to the company’s revenue, customer acquisition, inventory, payment risk, and competition?


Report Available: July 13, 2017


Blueshift’s initial research found W a controversial company with strong supporters and a healthy number of detractors, too. W reported a strong Q1 marked by big gains in revenue, active customers, and orders delivered. The company remains focused on its core business, but is also emphasizing growth in its higher-end lifestyle brands with forecasts for Q2 that exceeded analyst expectations. On the other hand, W remains unprofitable, advertising costs outpace revenue gains, competitors are spending less and bringing in more, accounts payable is growing, and competition from big names like AMZN, WMT, and TGT is ramping up.



  1. W’s Q1 earnings delivered a positive surprise with a 28% jump in revenue, far ahead of analyst expectations. Net revenue from direct retail sales through W’s websites was up 32%. W ended Q1 with 8.9 million active customers, a 46% jump from a year ago. Average orders per customer reached 1.73 and orders delivered climbed 41% year to year, while repeat customers made up 60% of all orders, up from 55% a year ago. W also posted better-than-expected Q2 guidance. The company, however, remains unprofitable, reporting a net loss of $41 million, though analysts anticipated an even bigger loss.
  2. pulls in the majority of the company’s business with millions of SKUs aimed at the mass market. W’s house brands category, formerly referred to as private label, grew to about 45% of revenue for because of its large selection of products at various price points and styles. The company is seeing progress in its home improvement category, gearing finished products in plumbing, lighting, flooring, and hardware toward its predominantly female customers instead of what has traditionally been marketed to men. W is placing greater emphasis on its higher-end lifestyle brands from labels Joss & Main, AllModern, Birch, and Dwell. It also just introduced luxury home furnishings brand Perigold with price points higher than anything W currently offers.
  3. One of the primary knocks against W is that it is still losing money with questions of whether it has a plan for achieving profitability. The company is heavily criticized for how much it spends to generate sales, recently taken to task by competitor OSTK. W spends $68 for a customer and 88 cents per visitor to its website while OSTK said it spends $38 to acquire a customer and 38 cents per visitor. W’s marketing spending grew 47% in 2016 to nearly three times the amount OSTK spent, with OSTK reporting a higher percentage of purchases from returning customers than W.
  4. Because of its lack of profitability, high customer acquisition costs, and questions about climbing accounts payable, W is a popular company to short, as the company’s short interest is 14.1 million, or 39% of its float. While short sellers got burned by W’s strong Q1, some are using it as an opportunity to double down on their bet. At the same time, W insiders including the CEO are selling their shares as the stock climbs to new highs.
  5. Further trouble for W comes in the form of competition from AMZN, which is building four large warehouses to handle bulky items as it makes a further commitment to furniture delivery. WMT’s Hayneedle just launched its first national ad campaign. IKEA is expanding its ecommerce efforts to include third party websites, with AMZN and BABA as possibilities. And TGT unveiled a 360-degree virtual shopping experience on its website, allowing customers to visualize sofas, tables, and rugs in their living room.
  6. In our most recent study on furniture retailers, Blueshift’s 1, 2016, report said RH’s turnaround effort remains a work in progress. Some initiatives already have resonated with customers while others will need more work and time to help the company right itself. RH Modern was gaining traction among designers and customers. The RH membership program, once known as the Grey Card, also was a hit with customers, but sources questioned its ability to drive sales. Designer sources reported improvements in previously problem areas of customer service. Yet to be completely resolved are supply chain issues in terms of product quality, deliveries, and goods arriving damaged. One source said supply chain problems take time to resolve. Sources expected furniture and home goods market conditions to be stable or to grow in 2017, thanks to the improving economy and housing market.


How are suppliers feeling about W? How much time does it take suppliers to get paid by W? Would suppliers switch to a different company if they could? What are sales trends for W suppliers? What does AMZN’s commitment to furniture sales mean for W and its suppliers? If this is lining up to be another turf war between AMZN and WMT, how will it affect W? What are consignment companies seeing in the way of W returns and excess inventory? What is W doing to improve its return from advertising spending? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Furniture suppliers, Furniture consignment companies, Digital advertising agencies, and Industry specialists.


Companies: Wayfair (W), Amazon (AMZN), Bed Bath & Beyond (BBBY), (OSTK), Restoration Hardware (RH), Target (TGT), Walmart (WMT), Williams Sonoma (WSM)


Research Begins: June 26, 2017