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Summary:

In today’s crowded world of e-commerce, it’s not easy to make a name for yourself. That’s why it’s so impressive that Wayfair, a relatively little known website dealing in home furnishings and decor, is set to make more than $500 million in top-line sales for 2011.

wayfair

In today’s crowded world of e-commerce, it’s not easy to make a name for yourself. New niche sites pop up constantly, while big players such as Amazon are work to undercut the growing competition by spreading into new territories and offering low prices and lots of perks. Meanwhile, the brick-and-mortar retail giants game such as Walmart are getting savvy to e-commerce and investing more and more in building strong online operations.

That’s why it’s particularly impressive that Wayfair, a relatively little known e-commerce company that deals in home furnishings and decor, is set to make more than $500 million in top-line sales for 2011. I talked recently with Wayfair’s CEO Niraj Shah to get details on how the company quietly built a half-billion-dollar-per-year business, and where it plans to go from here.

Start small and widespread, consolidate later

Wayfair as it stands today was founded by Shah and his business partner Steve Conine nine years ago as CSN Stores. At its inception in August 2002, CSN operated a single website, racksandstands.com, which sold storage and home entertainment furniture. Gradually CSN expanded its holdings to include number of individual sites that sold other kinds of home and lifestyle goods, with domain names such as strollers.com and cookware.com. By 2010, CSN had slowly but surely grown to more than 600 employees, and its family of more than 200 websites was bringing in $380 million in annual sales. All this time, CSN had not taken a dime of institutional capital.

It wasn’t until 2011 that Shah and Conine decided to consolidate CSN’s operations under one brand name of Wayfair and take the business to the next level by raising outside funding. In June 2011 Spark Capital, Battery Ventures, Great Hill Partners and HarbourVest Partners pitched into a $165 million funding round. Wayfair now operates under three brands: Wayfair.com, which sells a variety of mid-range home goods; AllModern, which sells higher-end brands such as Alessi and Herman Miller; and Joss & Main, a flash sales site for designer home goods.

Beating out brick and mortar

The consolidation and rebranding is serving Wayfair well. The company now has nearly 1000 staff and a catalog of more than 4.5 million items from 5000 brands. Now it’s closing out its best year ever, with 2011 holiday season sales 30 percent higher than they were in 2010. Cyber Monday 2011 was the best single day of sales in the history of CSN/Wayfair, with an average order size of $143 per customer.

So what’s next? According to Shah, the company is looking at some pretty big players as its competition. And the most pressing competitors are more traditional physical retailers, not other online companies. “We were really focused on online competitors when we started, but over time as we’ve grown we’ve found that our competitors really include Walmart, Target, and folks like that,” Shah said. “We tend to win if someone is looking at our site along with another site. But if people just go directly to a brand they already recognize, like Target, then we may not get the chance to win that business.” That’s exactly why Wayfair has decided to focus on building up its own brand recognition right now, Shah says:

“Right now the home market is a little over half a trillion dollars in the United States, but only about 5 to 6 percent of that is online, and it’s a highly fragmented market within that. That’s all starting to really come online, so we want Wayfair to emerge as a household name. We want to seize the opportunity to be the go-to brand for home decor online.”

The road to an IPO

Ultimately, Shah says that Wayfair plans to return its shareholders’ $165 million investment with an eventual initial public offering. But he also noted that Wayfair’s investors are quite patient, especially seeing that the company was operating with comfortable profits well before outside money was brought in.

“In general for tech companies it seems to be a good time in the market to go public. But part of why we never took investment capital early on is that we didn’t want any time pressure regarding an exit,” Shah said. “If your business is going well you still try to time an IPO well, but it’s not like you’re going to miss a ‘window.’ We could see being publicly traded in five years’ time, but it’s not a big priority now.” In the near-term, he says, Wayfair’s focus is on international expansion and boosting its brand worldwide.

To me, it seems likely that Wayfair could become an attractive acquisition target for Amazon as it proceeds toward an IPO — Amazon has been known to snap up niche competitors with big price tags before, such as its $540 million acquisition of Diapers.com owner Quidsi. Whatever happens, Wayfair will certainly be a company to watch in the months ahead.

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  1. Someone should look into their business practices and how employees are treated. Amazon doesn’t need Wayfair on any level. I love it how a few months ago they came out saying that while the job market wasn’t growing they continued to hire – fact is look into how much they pay their employees, more specifically their managers. Unless you started at the gates open, you make pennies for what they demand of you. Most “managers” at the company have no managerial experience on any level. FACT. I don’t say this other than the fact that it is true

    1. People have looked into their business practices and how employees are treated. Wayfair is #19 in Glassdoor’s Top 50 Best Places to Work – Employees Choice Awards:

      http://www.glassdoor.com/Best-Places-to-Work-LST_KQ0,19.htm

  2. Yes, this company likes to tout how “employee-friendly” they are (free beer parties: woohoo!), but it’s more about keeping the straight-out-of-college newbies thinking that this is a top-notch employer, when they really have nothing else to compare it to. Yes, all the employees like to say “look at glassdoor! we’re number 19!”, but that score only takes into account the new-employee reviews from 2010 rather than the overall scores that includes _numerous_ negative reviews. There’s no way this company really compares to any of the other top companies on the reputable “best company” lists.

  3. It’s not a bad thing to move into a management role without prior managerial experience (especially if you work your tail off within the company to get there). I’d venture to guess that being presented with those opportunities to grow is a big reason Wayfair is one of the Top 50 Best Places to Work.

    As a current manager at Wayfair who has previous managerial experience at a much larger company, I’d like to say that I truly enjoy going to work each day.

  4. Matthew Lamberson Thursday, December 29, 2011

    Who proofed this before it was posted???

    “New niche sites pop up constantly, while big players such as Amazon are work to undercut the growing competition by spreading into new territories and offering low prices and lots of perks.”

  5. I’m super impressed. Its not easy bootstrapping a company to $380M in annual sales.

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  7. It’s very impressive how Wayfair grew. I run a wholesale clothing website http://www.cleocat-fashion.com and made the mistake of concentrating on local market until it became saturated. On hindsight, I should have done what Wayfair has done — building worldwide markets thru the website.

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