Why Selling To Everyone Could Potential Hurt A Company
Wayfair, a workforce of 14,500 people is an online destination for home furniture, home décor and home improvement products, in 2019 their revenue was $9.127 Billion, many back then believe that the company was not profitable. However 2020 seems different, the company that was founded by two friends, reportedly with a net worth of $3.3 billion each, Steve Conine and Niraj Shah, had its first profit in 2020. In today’s episode, we will discuss Wayfair.
Conine & Shah met when they were on a summer program at Cornell University. Both went on to study engineering at Cornell where their friendship got stronger. They both shared a room at the university and eventually started several e-commerce companies before striking at Wayfair.
After graduation, Shah was heading to graduate school and Conine was about to join the family business, but after writing a business plan for one of their courses they decided to start their own business. The duo had worked for other companies separately. But after forming their first company, Conine and Shah discovered they had skills in technology and sales. Initially, Shah thought he would be the tech guy, and Conine would be in sales and marketing, but they soon found that the opposite was true.
In the early 2000s, they started to notice a trend; people were visiting online to browse for furniture. Within a few years, Conine & Shah launched approximately 250 websites, selling everything from barstools to birdhouses. One of their websites was an untapped market, looking closely they saw that places like Best Buy sold TVs but did not have many options for a TV stand, and furniture stores tend to focus solely on bedroom and dining room furniture. So they launched racksandstands.com, selling television stands and entertainment centers. Slowly they started combining all the websites in one, and that ONE, became Wayfair. This was the launch of the world’s largest home retail website.
Wayfair was experiencing a dramatic sales growth, from 2012 to 2014 the company was seeing an annual revenue of 600 million to 1.3 billion. 3.2 million active customers were using the platform. And then in 2014 Wayfair went public with a share price of $29, and the total value of its shares at $3 billion. Wayfair’s revenue and users were growing day by day, however, the company was not profitable since going public in October 2014, which is common for an online-based business, especially when it comes to furniture. As customers like to touch and feel furniture before their purchase. But a major reason for not profiting was Wayfair’s advertising spending, they reportedly spend $191.3 million in advertising just in 2014, and gradually increased the advertising budget. By 2019 they were spending close to $1 billion in ads. Spending on ads finally did pay off, as people were home in 2020, Wayfair announced they have profited in the second quarter of 2020. What the future holds for Wayfair, is yet to be seen.
As tough of a time as this was on Wayfair, the company had to face another challenge in 2019. After accepting an order of roughly $200,000 from BCFS, a nonprofit government contractor. The furniture bought was to be used at the new detention center in Texas intended to detained migrant children.
More than 500 employees walked out in protest and demanded the company to stop doing business with BCFS. They asked Wayfair to donate the profits from the sale to RAICES — Refugee and Immigrant Center for Education and Legal Services. Wayfair in response donated $100,000 to the Red Cross.
Wayfair introduced a new idea to the market, selling furniture online using supplier’s warehouses, the competition is fierce for Wayfair. But the hard work of two friends has brought the company from a basement to annual revenue of $9.127 Billion.
