Perhaps no other retailer in the home furnishings business has caused such disruption as Wayfair, the e-commerce operation that is now the largest online seller of home merchandise in the country.
For competing retailers, it is a tough operation to go after because of its free shipping offers. For vendors, it is a growing customer that also causes problems with existing retail accounts. No matter where you sit in the home furnishings and lighting matrix, Wayfair is a company that one needs to pay attention to.
So that’s why the news coming out of Wayfair this summer was headline-worthy. For the financial quarter that included much of the period when physical retailing in the home business was shut down, Wayfair experienced an 85% increase in sales, an extraordinary performance even given the circumstances. Much of the business came from first-time customers, indicating that many shoppers who hadn’t considered making an online purchase had changed their minds.
Note that these first time customers also brought down the average purchase size of products, which would seem to be caused by first-time shoppers trying out Wayfair rather than making major purchases.
All of this increased revenue allowed Wayfair to show a profit for the first time since going public in 2011. Management says the company expects to retain many of these first-time shoppers and continue to show improved results.
However, not everyone agrees. S&P Global Market Intelligence, a division of Standard & Poor’s that looks at credit situations, came out with a report in August that ranked Wayfair as the eighth highest ranked “most vulnerable retailer” with an 18.6% probability of default on its debt over the next 12 months, increasing to 24% over the next two years. Wayfair did not respond to a request for comment on this ranking but S&P could be clearly in the minority: Wayfair’s stock is up ten-fold just since February and 35% in just the month of August.
Whichever side you take, Wayfair remains an increasingly larger presence in the home furnishings business and one that is impacting all aspects of the industry.