Is Wayfair Amazon-proof?
Wayfair, the online furniture retailer, reported strong sales during the second quarter with U.S. revenues up 39 percent and international jumping 136 percent year-over-year. The site’s active user base grew 43 percent to 9.5 million.
Speaking on Wayfair’s quarterly earnings call, co-founder, co-chairman and CEO Niraj Shah said there was room for additional growth as only about 10 percent of home goods are currently bought online.
“The wind is at our backs if consumers increasingly embrace the selection and convenience of shopping online instead of in physical brick and mortar stores,” said Mr. Shah (via Seeking Alpha). “The customer experience that we offer and the consumer brand that we’ve created are resonating, allowing us to continue to acquire new customers within our payback targets and stimulate more repeat purchases from our existing base of customers.”
In the past, Wayfair executives have pointed to visual merchandising as being key to driving sales.
“Our search with photo feature is still in its early days but the machine learning algorithm will continue to improve from the scale of both our active customer base and the large library of product images we can offer to satisfy shopper searches,” said Steven Conine, Wayfair co-founder and co-chairman, on the earnings call.
“Customers are already benefitting from our investment,” he said. “For example, the machine learning platform that visual search uses is improving the relevance of product recommendations and the customers also viewed sections of our product pages.”
In an interview on CNBC’s “Closing Bell” yesterday, Mr. Shah said he thinks Wayfair will be able to hold its own against Amazon.com since consumers are looking for products that are unique and not commodities to be reordered.
He also said he also thinks Wayfair has a hedge in case of a downturn in the housing market. Instead of targeting the high-end of the category where consumers look to furnish their entire home, Wayfair has focused on consumers buying individual items “to freshen up their home.” The average order for Wayfair was $258 in the second quarter.
- Wayfair Announces Second Quarter 2017 Results – Wayfair Inc.
- Wayfair’s CEO Niraj Shah on Q2 2017 Results (Earnings Call Transcript) – Seeking Alpha
- Will Amazon dominate the online furniture market? – RetailWire
- Furniture retailer Wayfair hasn’t suffered from the ‘Amazon effect’ – CNBC
DISCUSSION QUESTIONS: Do you see online becoming a significantly bigger competitive factor in the retail furniture and home goods markets? Will Wayfair’s approach help to insulate it against Amazon’s push in the category? How much of a factor will visual search and machine learning be in Wayfair’s sales success (or not) going forward?