Furniture retailer Wayfair hasn’t suffered from the ‘Amazon effect’

Key Points
  • Furniture retailer Wayfair reported strong earnings, avoiding the "Amazon effect" that most other retailers face today.
  • Wayfair CEO Niraj Shah attributes the company's success to the uniqueness of the home furnishing category.
  • The company is also tied less to the housing market than most would think because the company targets the mass consumer.
Niraj Shah, Wayfair CEO
Ashlee Espinal | CNBC

Retailers across the country have suffered from the "Amazon effect" as the online behemoth disrupts their space and steals their customers. However, online home furnishing retailer Wayfair has avoided it so far.

Wayfair reported a narrower-than-expected second-quarter loss of 26 cents per share Tuesday morning. Analysts had expected a loss-per-share of 46 cents. Additionally, revenue was up 43 percent from the year ago period, and the retailer reached 9.5 million active users, up 43 percent year over year.

Niraj Shah, Wayfair's CEO, doesn't deny that Amazon is a competitor, yet he notes that home furnishing is a distinct category, unlike some of the other spaces Amazon has grown into.

"Home is a pretty unique category that I think consumers think about differently than grocery or consumables and paper towels and their TV, where they all want to buy the same items and mainly replenish those items," Shah said in an interview on CNBC's "Closing Bell" on Tuesday. "At home you want unique items."

The home category must have a service specifically tailored to it, Shah added, unlike Amazon, which is built to sell multiple categories of products. For home furnishing, the logistics are different, the products are big and bulky, and the retailer has to do all the merchandising and product discovery work, he said.

The customer experience Wayfair built has increased the amount of repeat customers, and is driving the company's growth, Shah said. A large warehouse network, its own delivery operation and dozens of its own private brands help create the experience.

Shah said he doesn't think his company has to worry much about the housing market, either.

"We're less tied to the housing market than you would first guess, and the reason is our average order value is a little over $200," Shah said.

Wayfair doesn't target the high-end furniture market, where customers seek to redo their whole house all at once. Instead, it serves the mass consumers who are "buying items as they go to freshen up their home," Shah said.

Shares of Wayfair initially soared after the earnings beat Tuesday morning, but ultimately closed down more than 6 percent. A Piper Jaffray report attributed the stock drop to conservative margin guidance for the third quarter, as well as increased advertisement spending and employee hiring.