As one of the largest online retailers of home furnishings and housewares in the US, Wayfair’s expansion into Germany, Australia and the UK has significant ramifications for our native retailers and suppliers. However, for once, reports Paul Farley, it’s not all bad news for the bricks-and-mortar establishment …
Until last year, Joel Stevenson worked at Wayfair’s state-of-the-art headquarters in Boston, Massachusetts, heading up its $100m Home Improvement division. He was then assigned MD of the company’s relatively young UK operation. “We are a little bit smaller over here, but we’ve got a big opportunity,” he says.
Established back in 2008, Wayfair UK has developed into one of the country’s strongest online home furnishings players – unsurprising, given the amount of funding and know-how behind it. Ranked the second largest online housewares and furnishing retailer in the US by Internet Retailer magazine, Wayfair is now a $600m-plus business, with a customer base of 6.4 million, its European business growing faster than that of any other American online trader.
Its CEO, Niraj Shah, has been quoted as expecting the company’s international sales – principally those from Europe – to eventually account for half of Wayfair’s total annual revenue.
So far, so impressive – or daunting, depending on your outlook. In some ways, it’s reassuring that this is not where the story ends, and that Wayfair UK actually faces many of the same challenges any other retailer or e-tailer does. Central to these obstacles is perception. Online sellers must work tirelessly to cultivate credibility, as although the British public are increasingly comfortable with shopping online, there’s still a huge disconnect when buying from websites rather than physical premises.
“More and more, what’s important to Google is that the people linking to you are of high value, and we think that favours somebody like us”
Having rolled a host of smaller websites into one recognisable hub, Wayfair’s principals are now striving to posit the site as a shopping destination with personality, kudos and longevity – in short, a brand.
Targeting a predominantly female customer base between the ages of 30 and 55, Wayfair.co.uk sets out to be a friendly, accessible buying platform, suitable for your average first-time homebuyer. “We have a strong brand identity that we’ve built over time,” says Joel, “and we’ll be working hard later this year to build Wayfair as a consumer brand. Our plans are to advertise the brand more aggressively, through television and other channels.”
It’s currently competing against big boys such as World Stores (“the challenge for them will be moving from a bunch of individual websites into a brand”) and Amazon (“Amazon Direct’s prices are pretty sharp, but they’re just not sustainable”) – while operating through others such as eBay.
Joel knows that it’ll be some time before Wayfair becomes a household name in the UK, but he’s confident of that outcome. “We have over 100 software developers in the US writing code,” he says, “and our UK business benefits – it gets better and better over time.
“However, we have to watch Google very closely. Some of our competitors have taken hits from the recently-updated Penguin algorithm, which singles out websites that use tricks to get people to their sites, and reduces their positions in the search rankings accordingly. More and more, what’s important to Google is that the people linking to you are of high value, and we think that favours somebody like us.”
Again, perception – in this case, that of a coded program – is of utmost importance. In today’s retail climate, an e-tailer like Wayfair will rise or fall based on the strength of its partnerships as much as its product and service, and this is where bricks-and-mortar retailers enter the frame.
“Long ago, we recognised that not everyone wants to buy online,” says Joel. Online sales of furniture still lag behind goods such as books or music for many reasons, and Wayfair’s answer to reluctant consumers was to flirt with multi-channel selling.
“In the US, we launched Get It Near Me – in which we track the IP address of visitors to the site so we can refer them to bricks-and-mortar retailers local to them,” says Joel. Get It Near Me is described as “hyper-relevant advertising” that sees retailers place banner advertisements on relevant, geographically-targeted Wayfair web pages.
It’s seen as a win-win scenario – as an online-only furniture retailer, Wayfair cannot fulfil the demands of consumers that wish to make traditional ‘physical’ purchases. With Get It Near Me, Wayfair can at least divert such traffic towards its bricks-and-mortar advertisers.
“More and more, people are going to sites like ours that are seen as legitimate, then buying product somewhere else,” says Joel. “Lots of people research products online, and then buy them physically – rather than ‘showrooming’, we’re seeing a definite trend towards ‘webrooming’. Of course, it’s very unlikely that a retailer will find out if a customer has carried out prior research online.”
In short, physical retailers in the US have the chance to benefit from the huge Wayfair site footfall, and it’s a model Joel hopes to roll out in the UK once the traffic, bolstered by the imminent branding drive, is of a sufficient scale.
He’s under no illusion that the process will be easy. “Reaching out to many of those retailers in the US and persuading them that we weren’t the devil was actually quite difficult,” he says. “The traditional view of online furniture retailers is that we are continually trashing prices, because we have no overheads – if you took a look at the size of our Boston office, you’d see that this is definitely not the case!”
Since Niraj Shah and Steve Conine launched the embryonic Wayfair, RacksandStands.com – “furniture was the sector with the most searches and the least representation at the time” – in 2002, the industry’s perspective on online retail has shifted a great deal, and continues to do so.
“Over time, the bigger guys in the US worked out that competing on the lowest price online is not a good approach, and can kill bricks-and-mortar sales very easily,” says Joel. “We are seeing the big players getting more savvy online now.”
“One supply chain is hard enough to maintain, but a thousand?”
Price integrity is paramount to the successful synergy of retail outlet and website, and Joel is keen to stress its importance in Wayfair’s own dealings with large retailers. In the US, Wayfair works closely with Walmart, which pays huge dividends. Over here, Wayfair acts as Tesco’s main provider of home goods – “a very meaningful part of our business”, according to Joel.
It’s clear that partnerships with traditional retailers – particularly brand heavyweights – lend sites such as Wayfair invaluable credibility, and will be an essential part of the company’s ongoing battle for hearts and minds.
Of no less importance are the manufacturers Wayfair chooses to work with. Enter Simon Cliffe, Wayfair UK’s senior merchandising manager, who maintains many of the company’s supplier partnerships while seeking suitable products to add to the online portfolio. Having worked with Wayfair UK for four years – with a previous stint at MyDeco.com – Simon paints a similar picture of changing mindsets towards online retailers, this time from the manufacturers’ angle.
“I think that 2009 was pretty much the nadir of online furniture retail in the UK,” says Simon. “Some had gone bust, others were trashing prices. Suppliers really weren’t keen to talk to us back then. The feeling now is that online business is here to stay – that there’s value in the channel.
“Broadly, we now work with most of the major players in every product category. Our model is all about selection, and we are always looking for new ranges. A key characteristic of online selling is that there’s lots of niches, so we are constantly looking to improve our catalogue.”
Wayfair works with around 1200 European suppliers in Germany and the UK, finding that its best relationships are with those pan-European manufacturers supplying multiple markets and flexible lines. Simon cites Actona and Tvilum as strong examples. “That said, we like to work with British manufacturers where possible – there’s a definite perception of value, but unfortunately they’re such a small part of the market these days,” says Simon.
“There’s definitely been an evolution from when I started four years ago,” he summarises. “A lot of suppliers were dealing to anyone and everyone back then, but they are selecting and building more meaningful relationships now. Furniture manufacturers want to reach as many people as they can online, but the reality is that the furniture market is starting to compress into fewer, stronger retail players – we want to be with those key players, to maintain our product diversity.”
Managing this diversity requires an extensive team of negotiators and software engineers, logistical experts and administrators, overseeing a direct despatch system from a huge number of suppliers. Joel says: “One supply chain is hard enough to maintain, but a thousand?”
It’s also important that these suppliers provide enough information to ensure their products stand out from the crowd. Wayfair’s goal is to offer more choice in one place than any of its competitors, which demands a high level of input from manufacturers.
“To stand out on the web, our suppliers must provide sophisticated business and product information,” says Joel. “Coupled with this is strong EDI communication – our best-in-class suppliers send out stock reports several times a day. On top of that, I’ll repeat that price integrity is crucial.
“Internet businesses tend to basically be feedback loops – we’re just trying to get enough positive loops. The notion is that we try to make Wayfair.co.uk the place to buy home goods,” concludes Joel. “It’s a very big market, that we currently have a very small part of.”
