Wayfair | Online home design & furniture retailer
Formerly known as CSN Stores, Wayfair is an online retail giant dealing in home products, furniture and accessories. In this article, we will look at 1) what is Wayfair?, 2) business model and key components, and 3) learning from Wayfair’s success.
WHAT IS WAYFAIR?
Wayfair Inc, formerly known as CSN Stores, is a multinational ecommerce website. The US based company has headquarters in Boston, Massachusetts as well as warehouse and corporate offices in various locations in the United States as well as in Australia, Ireland, United Kingdom and Germany.
The company began in 2002 as CSN Stores that sold limited furniture such as stereo racks and stands. Over the next few years, the site grew to become the largest online destination for home items such as furnishing as well as luggage, toys and pet related products. The site expanded from a single website to over 250 individual sites that sell a variety of items.
Nearly ten years after the site was founded, the creators took the step to move all the sites to one destination and renamed it as Wayfair. This was in 2011 and by 2012 the annual revenue crossed $600 million with the site offering millions of products in different categories, styles and prices. As of 2013, the company features more than 7000 suppliers that offer over 7 million products through five distinct brands: Wayfair.com, AllModern, Birch Lane, DwellStudio and Joss & Main.
The initial version of the Wayfair was created by two entrepreneurs, Niraj Shah and Steve Conine in 2002. The operation as a two person enterprise in Conine’s home in Boston. Both founders had degrees from Cornell University and had already had experience running two companies, Simplify Mobile and iXL.
The website was named CSN Stores which was nothing more than a combination of their initials. The initial website was called rackandstands.com selling media stands and furniture for storage. In the following year, other items were added to the portfolio of products including patio and garden supplies. The websites grew from three employees to a dozen. The company continued to grow over the next two years with items such as home décor, office furniture, kitchen and dining furniture, home improvement goods, bed and bath products, luggage and lighting added to the catalogue.
In 2006, the company made its first $1 million in sales. Over the next four years, the pace of growth continued both within the United States and outside. Overseas expansion began with shipping to Canada, selling in the United Kingdom and an office location in London. International expansion continued with Australia and Germany.
In 2008, the company was named the fastest growing ecommerce company in Massachusetts by the Boston Business Journal and the fourth fastest overall. By 2010 the company had grown enough to move to a 10 floor office space and by 2011, over 200 online shops were covered under the CSN Stores umbrella. These shops were predominately niche stores that catered to specific interests or products such as cookware.com, strollers.com etc.
At this point, Shah and Conine realized the need to unify into a single site and create a more focused entity. CSN was rebranded and launched as Wayfair in 2011 after a $165 million fundraising. The investment into the new brand and its expansion efforts came from four investment firms, Battery Ventures, Great Hill Partners, HarbourVest Partners and Spark Capital. All of the CSN Store websites were consolidated except Joss & Main and AllModern. Wayfair acquired Wayfair supply, catering to business, government and institutional customers and DwellStudio, a New York City based design house and retailer.
At present, Wayfair remains the largest online retailer for home products in the United States. Revenue has continued to increase from $380 million in 2010, to over $500 million in 2011 and close to $1 billion in 2013. The founders remain with the company with Niraj Shah as the Chief Executive Officer and Steve Conine as both the Chief Technology Officer and the Chairman.
The company announced its intention to attempt to raise $350 million in an IPO in August 2014. The company also revealed mounting losses in the face of huge expenses. Though revenues have continued to grow, this has been accompanied by a concurrent increase in operating expenses.
The company’s IPO decision has been closely followed and the IPO itself one of the most anticipated ecommerce IPO’s of the year. The excitement was somewhat overshadowed by the Alibaba Group’s IPO announcement around the same time with the expectation that it will bring in close to $20 billion.
At present, the co-founders own 57.8 percent of the shares in the company. After them, the private equity firm GreatHill Partners own 11.4 percent. HarbourVest and Battery Ventures own a little more than 7 percent and 6 percent each. These shareholders will continue to hold B class shares that afford the holder 10 times more power to vote than the A class shares that are in the works to be sold in the IPO.
The company has managed to maintain a startup like culture throughout its growth and expansion. Teams are built for speed with open floor plans in offices. This setup is created with the intention of encouraging a collaborative environment and openness. The co-founders, who hold top management positions also do not have their own offices, instead sitting among other employees.
The dress code is relaxed with a mix of business casual and flip-flops. Work-life balance is strongly encouraged and advocated. The company has remained focused on the long term with sustained growth and expansion. This is supported by the culture in every way with the company backing its focus on culture with concrete actions and steps such as onsite yoga, daily ticket raffles for concerts, theatre and sports. There are also free snacks and games such as ping pong and foosball inside the office.
Glassdoor ranked the company as the 19th best place to work in the United States in 2011 and the 18th best for work-life balance in 2012.
BUSINESS MODEL & KEY COMPONENTS
The company sells home products in different ranges and categories. These are:
- Wayfair.com: The main brand name, this website is the destination for millions of home based furniture, accessories and other products sold by thousands of suppliers.
- AllModern: This is the Wayfair business that sells home items in original modern designs.
- Birch Lane: Opposite to AllModern, Birch Lane is focused on classic and timeless furnishing and home accessories.
- DwellStudio: This online store sells modern furnishings and products that are trendy and fashion forward.
- Joss & Main: This website is based on online flash sales that focus on inspiring home design on a daily basis.
Wayfair’s unique selling proposition has been the sheer volume of items sold through the website. Over 200 separate websites were amalgamated into the Wayfair umbrella. These were niche sites for individual categories of items such as rugs, crockery etc. each website had a multitude of suppliers offering different items in that category. All this adds up to millions of products on sale.
The company operates somewhat differently from other retail giants in how orders are fulfilled. Almost none of the stock is kept in company operated warehouses. Instead, items are shipped directly to the customer through the supplier themselves. Wayfair enables the suppliers to gain shipping discounts by availing its accounts with major shipping companies. What makes this system work is a series of algorithms that fulfill orders with a 98 percent success rate. This technology driven approach is vital given the company’s over 7000 suppliers and a detailed and elaborate supply chain.
The system works through communication between suppliers and Wayfair. Information regarding current stock is either uploaded to the server or emailed to the company. The algorithm mentioned before goes through this data and picks up and potential red flags such a delays etc. it also stores relevant information about the items such as what is in stock and where it is at the moment. The same algorithm calculates shipping time and checks item availability every time a customer browses through a page.
Once the order is placed, a software is in place to send notifications to the supplier. The same system decides the best way to ship the item depending on its nature. When the item is sent, the system updates its progress to the Track My Order page for the customer.
The website gets more than 11 million visitors every month. Most of these visitors are women between the ages of 35 and 65. The company has divided these visitors into two groups. The hunters and the gatherers. Hunters include those people who have come looking for something specific. Search engine optimization is what draws them to the website often as they search for a particular item. Typically, these people are on the lookout for the best price for their chosen product and Wayfair is just one stop in their search. They may spend about five minutes on the website.
Gatherers on the other hand are basically window shopping. These people will spend anywhere from 10 minutes to several hours on the site, going through categories and products. They may be less driven by specific brands.
LEARNING FROM WAYFAIR’S SUCCESS
Key Drivers for Sustainable Retail Success
One of the founders of Wayfair, Niraj Shah, shares his key drivers for sustainable, long term success in the world of online retailing. These are:
- Create a company that welcomes change: Shah emphasizes the importance of recognizing excellence among employees and promoting and rewarding based on merit. He also stresses the importance of bringing people together at work, making work rewarding, fun and interesting and getting people excited about the work. Shah says, “Hire smart people and let them use their brain. Reward a smart risk taking, even when it fails, and encourage experimentation.”
- Make decisions with the end game in mind: According to Shah, “Know when to stick with your guns and when to adapt.” He underscores this statement with the example his company set when 200 plus stores were consolidated within one new name and a new, more memorable brand was created. The company lost traffic initially, which made the decision seem like a bad one in the short run since customer traffic is the force that drives the online business. Eventually though, the customers returned and the risky, yet strategic decision paid off.
- Always have a plan for what comes next: Some part of profits and time should always be invested into generating new ideas and strategic growth plans. An important aspect of this is to listen to the customers and really hear what they are saying. This focus on changing customer needs and trends is the best indicator of where the company needs to focus on next and what areas have opportunities that can be capitalized.
- Spend Efficiently: As the business expands, so do expenses. The key here is to make every attempt to keep these expenses under control while still continuing to drive growth. There should always be quick decisions and quick actions when change is needed, but every one of these decisions and actions should be justified by their return on investment.
- Celebrate Wins: Shah feels that it is necessary to take a minute to celebrate any wins as a company before moving on to the next task or goal. This is vital for employee engagement, morale and overall investment in the company.
- Be Tenacious: One of the Wayfair values is “we are never done.” This is focused on tenacity and that while something may be done well, it can be done even better.
- Build a Strong, Transparent Culture: The co-founders had a clear vision of what the company would look like in terms of culture. They wanted to create a culture based on transparency, access to information and open collaboration. There was a clear understanding that there should be no physical or virtual walls between people which block communication and foster individual thinking.
- Hire Smartly: There needs to be a clear understanding of what is important when hiring a new person. Someone with excellent skills in a specific area may not display many of the core values that would help them fit into the collaborative culture of the company. At Wayfair, the human traits such as team orientation, an innate brightness, and a collaborative and friendly approach are always prioritized over the skills.
The employees that are part of startups have unique insight into what goes on in the company and what drives them to through the journey. Lauren is part of Wayfair’s team and feels that the entrepreneurial spirit remains evident and contagious till this day. As the company values goes, we are never done and with expansions and growth, the company continues to channel innovation and a startup mentality.
Arkema mentions that responsibilities keep evolving over time and she has moved from adding products to microsites and answering customer calls to managing two different teams. She also travels for work and manages trade show booths meant for interior designers, contractors and architects.
She feels that the key to this success has been that despite becoming an established corporate company and a more well recognized household name, the employees still feel the company is a startup where ideas are welcomed and encouraged from everyone and anyone’s suggestion can have an immediate impact.
A Balanced Scorecard (BSC) may be defined as a management strategy that endeavors to complement …