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From E-Commerce to Web 3.0: Wayfair Impressive Even Under Public Scrutiny

Posted on Tuesday, Dec 8th 2015

According to an IBIS World report, the US online home furnishings market has grown 20% annually over the period 2010 through 2015 to be worth $8 billion. Over the same period, the US online house furniture market grew 16% to $16 billion. Wayfair (NYSE: W) is the largest pure-play online retailer of home goods in the country. Last year, it went public and even under public scrutiny, its performance remains impressive.

Wayfair’s Financials

Last month, Wayfair reported rather impressive third quarter results. Q3 revenue grew 77% over the year to $594 million, ahead of the Street’s forecast of $523 million. Net loss per share improved from $0.59 a year ago to $0.13. The market was looking for a loss of $0.24 for the quarter.

Revenues from the direct retail segment which include their five brands – Joss & Main, All+ Modern, Dwell Studio, Birch Lane, and wayfair.com – grew 91% to $545 million driven by a 61% increase in the total active customers. Wayfair ended the quarter with 4.6 million total active customer compared with 4 million reported a quarter ago.

Among other important metrics, net revenue per active customer over the past 12 months increased 9% to $371. The average number of annual orders per customer grew from 1.65 last year to 1.69. Total orders grew 77% to 2.3 million, with average order value growing 8% to $235. Mobile continued to grow and mobile devices accounted for 35% of orders placed compared with 29% a year ago.

Wayfair expects to end the current quarter with revenues of $575 million-$610 million.

Wayfair’s Expansion Plan
Wayfair has been focusing on driving repeat orders from its customers. Last quarter, repeat customers accounted for 55% of total orders compared with 50% reported a year ago. Wayfair is driving this number upwards through an improved loyalty program. Earlier, its loyalty program was based on rewards dollars that customers could apply to future purchases. This quarter, it stepped up the ante to customize this rewards program. Wayfair released a private label credit card that provides benefits such as rewards dollars and financing on large purchases. It plans to continue to add more specific benefits and personalized offerings to the card holders. The card has been released in partnership with Alliance Data so that Alliance qualifies the customers and takes all risk on payments. Most brick-and-mortar stores already offer financing options to their customers for bigger purchases and now Wayfaiir has made it possible for its customers to finance assets as well.

Wayfair is also focusing on delivering a strong holiday season after a highly successful Labor Day weekend event as was evident from its recent results. For the holiday season, Wayfair has released its holiday events in early October, a few weeks earlier than last year. Its sites will showcase a broader assortment of holiday offerings including decorative accents, seasonal décor, and an extensive collection of house wares. It is also stepping up the marketing campaign that will combine television, display, personalized email, and direct mail.

The company has done well on the exchange. It had listed last fall at a price of $29 a share. The stock is currently trading at $37.02 with a market capitalization of $3.1 billion. It touched a high of $56.84 in August this year.

Wayfair’s stock has been in recent news as hedge fund manager Whitney Tilson proclaimed his bet against the company. Tilson is best known for his expose on the high levels of formaldehyde in Lumber Liquidators’s products. Recently, Tilson got five of Wayfair’s products tested for formaldehyde levels. He received results on three of them and out of those, two products had higher formaldehyde levels. Tilson claims that not only is Wayfair’s product quality questionable, but its unprofitable position also makes it among the worst stocks to hold. The market is divided on the issue as is evident from Wayfair’s stock price which appears to be holding up. Wayfair claims that the questionable products were being sold by a vendor, who has since been removed from their portfolio.

You can learn about the journeys of many other successful e-commerce entrepreneurs in my book From E-Commerce To Web 3.0 and here on my blog.

This segment is a part in the series : From E-Commerce to Web 3.0

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