How Wayfair is becoming the Amazon of the home goods market
With people spending more time at home than ever before, furnishing home offices and upgrading living rooms has become a top priority for shelter-in-place shoppers.
And that has been great news for Wayfair.
Wayfair is a relatively young home decor and online furniture store. It's like the Amazon of furniture and home accessories, connecting shoppers to over 18 million products. Since Covid-19 struck, shares at the company have skyrocketed.
"I think Wayfair may be benefiting more from Covid-19 than almost any single other company except for like an Instacart," said Dan McCarthy, assistant professor of marketing at Emory University.
Quarantine was a great time to be in the online furniture game if you had your digital marketplace in order. While the doors of Ikea and Raymour & Flanigan were shut because of stay-at-home orders, Wayfair remained open for business.
Williams-Sonoma — which operates Pottery Barn and West Elm — has a strong online business, too. The company, which claims to be one of the biggest e-commerce retailers in the U.S., said 56% of its revenue in 2019 was derived from online sales.
That online business helped Williams-Sonoma weather the storm but it's putting Wayfair on the map and helping it to win new customers.
In May, Wayfair announced first-quarter sales grew almost 20% from a year earlier, and shares soared. The stock has been trending higher ever since. On Monday, Wayfair shares hit a 52-week high of $200.28. Shares are up 112% since January, as of Tuesday's close.
But Wayfair also has its problems and detractors.
"A business model of nightstands, credenzas, beds, sofas, sending them free shipping, guaranteeing the fact that the customer is going to like the product and it's going to come not damaged is a high risk business," said Andrew Left of Citron Research.
In 2019, Wayfair generated more than $9 billion in annual sales. But the company also lost almost $1 billion that year.
Wayfair is burning through profits to speed up growth. In 2019, the company spent over $1 billion on advertising alone. Some investors remain skeptical of Wayfair's path to profitability.
So as the country slowly reemerges from lockdown, Wayfair will have questions to answer: Will it finally report a profit, and can it thrive after shelter-in-place orders are lifted and its rivals' doors are open again.
Watch this video to find out more about Wayfair.
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