Good morning. I'm Ray Aligresa, editor emeritus of Furniture Today, and you are tuning in to the latest edition of Game Changers, a podcast where we talk to people like the name suggests. So, I'm with somebody that really needs no introduction. It's a guy that I've known for a long time and respected forever, Niraj Shah of Wayfair. Niraj, thank you for being with me today.
Ray, excited to be here with you.
When I first met you, I'm going to take you back. We talked on the phone. I first met you in person in 2008 at the leadership conference. Do you remember? And I asked you to speak.
And you got up there and you were very humble and you told these guys, 'Hey, you know, I may not be a household name to you, but I am going to be a competitor.' You already had, I think, $200 million in sales. And during the break, some of the old guards said like, 'Who is this guy? Why is he here?' So, even though you were already established, one of your objectives was gaining credibility in a very traditional industry, home furnishings. What did you do early on to make it work? I mean, when I first met you we were talking about sales of 200 plus million, 200 stores, CSN. Your Q3 for '25, net revenue 3.1 billion, US revenue 2.7 billion. What happened?
You know, we got started in 2002 and by that point it was pretty clear that e-commerce had potential, but it was right after the dot-com crash and I think a lot of folks were scarred by that. And our view was that there were certain categories that had just the potential was still all in front of us. You know, it was early days. So, and you know, home goods is clearly one of those at the time in our mind. So, we got started and the idea was, you know, if we can bring a great selection of goods. So, our goal was to work with all the great suppliers in the industry, bring that offering to customers with the convenience of them being able to browse and shop, you know, at home whenever they got a chance and to have the delivery come right to them and provide great service. So that all the concerns you'd have about these big items getting delivered and, you know, is there going to be a hassle and, you know, what happens if something goes wrong. And so we wrapped it with incredibly good customer service and we focused on making the operations work well and basically customers reacted really positively. And so we kind of, you know, would grow through the years by getting more customers, them coming back and then spending a lot of money marketing and telling folks who we were and improving the offering. And so we kind of did that for 10 years from 2002 to 2011 by having these independent websites covering each category, subcategory, you know, if you will of the category. And we got to 500 million in sales. But then we thought the big opportunity would be if folks knew who we were as a household brand. So that the idea of repeat customers and drawing customers in could just be easier than it could be just finding people through search, which was an increasingly inexpensive way to do it. And so we launched Wayfair in 2011 with 500 million in revenue and we went public in 2014 with a billion in revenue and, you know, today we're over 12 billion in revenue and that's just that potential is there because the category is so large and because online is definitely a way people like to shop. We're now opening brick-and-mortar stores. We're trying to meet people wherever they want to be. But the idea is that if you provide great service and a great offering and take great care of folks, you know, old classic retail recipe, they're going to value you.
Well, you know, you talk about this sector being so large and in my opinion, you grew in part by mastering, you know, assortment, logistics, digital discovery, consumer expectation. At your current scale, what's the hardest part of the business that outsiders may tend to underestimate?
Yeah. So, I think when they think about, you know, Wayfair as a website or an app, there's a couple, you know, I think there's a lot of things they may kind of not expect. So, one is, you know, the depth and breadth we have of our supplier relationships and the efforts we put into building tight relationships and working with our suppliers. So, that's a very large team and that's, you know, we're working with, you know, we have over 20,000 suppliers and we work with a couple thousand of them incredibly closely. The second thing they wouldn't understand is that from a technology standpoint to provide leading technology, use technology differentiator, our technology organization of software developers, data scientists, product managers, that's over 2,500 people. So that's a very large technology organization. And then the third thing I think they wouldn't necessarily expect is to do a good job in the category you really need to participate and operate a lot of your own logistics. So the fact that we have a 20 million square foot network of 75 buildings where we operate fulfillment centers that are a million square feet, home delivery and business delivery operations where we have, you know, over 50 delivery terminals where we're running, you know, thousand plus trucks on the road every day delivering the kind of the large bulky things that, you know, FedEx or the parcel carriers are not going to be a fit for, who we use as well for the smaller things. And that extends all the way back to being an ocean forwarder. And so we have a large ocean forwarding operation. And so the idea that we have that expansiveness in logistics, in technology, and in working with suppliers, and without that, we couldn't deliver this offering to customers, I don't think that's well understood at first.
Yeah, I agree. You know, you operate in this huge ecosystem to your point. You know, you're juggling brands, factories, logistics, and customers. Where do you think Wayfair has the most leverage over the long term? Is it in the data, the supply chain, the customer relationships, or something else that I don't know about?
Well, I think those things get interrelated because basically by focusing heavily on the supply chain, we can offer the customers a better experience. By investing in the technology, we offer the customers a better experience. By partnering with suppliers, we offer the customers a better experience. If you offer customers a better experience, they come back more and you get more new customers. With that you get volume that helps the suppliers grow their business and enables them to do more and enables us then to do more and so it's a little bit of a flywheel and it's, you know, basically making sure that you stay customer focused but you're always driving that flywheel. I think that's what lets you succeed. And I think if you just kind of stay still and take for granted that, you know, what you have is working and you're all set, I think those things don't tend to last. I think you have to be constantly working on making it better, assuming your competitors are working on making it better and so actually average is actually rising. It's not staying the same. And if you want to be great, you know, you need to raise your game, not stay the same.
Perfect. You know, for years since I've been in the business, the big discussion has been growth versus profitability. It's been the big debate. How do you define success now? And how is that different from maybe a decade ago?
Well, you know, we've had a few phases of our company. We had a phase the first 10 years that I mentioned and there we grew profitably for a decade. We funded the business out of cash flow and then we had effectively a decade where we did use capital to invest in the business ahead of the scale it was at. And that was particularly to build out the logistics that I described and build out the technology organization to the size I described. And so then we lost money for a period of time but based on those investments we then grew. And so now we're at a size where we can not only grow and keep taking share and as I mentioned we're $12 billion but we're growing at a nice rate and that rate of growth is accelerating. We started last year at just zero year-over-year while the market was in like negative 10 but by the third quarter we were up 8% year-over-year while the market was still down, you know, high single digits. And so, you know, that momentum where we're making the experience better and getting customers and growing the business, we're doing that while profitability is growing even faster. And so we're now at a scale where we can do both. And for example, we're opening brick-and-mortar stores and that's something we can fund out of our own operations. And so we can actually make investments for the future and still be profitable while growing.
Good. Talking about future investments, I recently did a podcast with Todd Wanik and he described AI as, you know, saying it's going to become the primary curation vehicle for consumers. You've stated publicly you're investing heavily in AI to enhance the customer experience. Do you need to play directly in Agentic AI or is there a means of leveraging existing platforms to connect with current and potential Wayfair shoppers?
Yeah. So, we use AI three ways. We use it internally to make our operations more efficient, higher quality. We use it by giving suppliers tools that allow them to do more on our platform. And then what you're asking, we use it with customers to make the experience better and better. And so there's both what we do on our site and in our apps to give customers new experiences that they value, but then there's also what you're asking about with Agentic AI that often is referring to partnering with folks like OpenAI or with Perplexity, with Google Gemini. And I liken it to the same way that over the years we partnered with Meta and we partnered with Google. We partnered with Pinterest to basically be not just an advertiser there, but someone who helped build experiences there, who was an early development partner on new ad experiences. And we wanted to make sure we showed up well. We wanted to make sure that we were also, you know, being effective in finding customers and telling them our stories so that we could get traffic economically. You know, we spend over a billion dollars in advertising, but we want to make sure we get a return on that. And we spend that billion dollars, you know, each year on advertising. Well, when we think about Agentic AI, it's the same thing. Well, how do we make sure that we're showing up well as the best offering and that the product offering we have can surface in these platforms and how can we, you know, in the event that they have advertising, which I think they will end up having on most of those platforms, how can we make sure we participate in a way that's high ROI. So, we want to be wherever the customer is. We want them to understand what we have to offer. We find when they understand that they tend to be excited to visit us and to purchase from us. And so that's the way we think about it. And so we're going to use the technology strength we have to make sure we're a leader there.
Good. Why is it, I want to give not a plug but I mean the follow-up question is what is it about the experience that excites the Wayfair customer in your opinion or what does your research show?
Yeah. So it really is that combination of, you know, the breadth of selection with competitive retail prices with the fact that we can deliver very quickly with the customer service high quality reputation we have and then that what we also try to do because the selection is so expansive we try to make it easy for them to find items they're excited about. So there's a lot of investment in technology and into customer experiences which allow them to navigate the catalog in a way that is convenient and easy and enjoyable versus feeling burdensome because one thing you could do is you could narrow the selection and then it wouldn't feel burdensome. But you may or may not be showing people what they want or you could have a ton of things but at first blush that would feel burdensome if you don't make it easy. And so the question is how can you make it easy and enjoyable? It's a category that should be enjoyable for a customer to shop but unfortunately it isn't always. And so, hey, if you can make it enjoyable, well, the customer is going to reward you for that because fashion, home, these are categories that that customer has a lot of passion for and they get excited by the category. And so, if you can keep it enjoyable and engaging for them, you know, they're going to spend time because this is what they enjoy.
You know, you said passion and emotion, and this is so true in home furnishings. When it comes to customer experience, do you think shoppers actually want more automation or is there a risk of losing some of that emotional side of buying for the home? And how do you balance it? I mean, I think you've done a good job, but how do you see it as being balanced?
Well, I really think if you don't focus on the emotional aspects that what a customer is trying to achieve, you're not going to be successful in helping the customer find what they want. It's not going to be the right place for the customer. It's going to be unlikely that they're going to want to spend a lot of time with that particular retailer. I think they're typically going to be focused on places where they can feel like they're understanding what's out there. They can find the right thing. You know, they have some ideas in their mind. You know, what are they trying to achieve aesthetically? What type of comfort do they want? You know, what are the goals they have? Is there feature function needs? But also, there's just sort of how do they want it to feel? How do they want their space to feel? Some customers can envision exactly what that means. Some customers need some design guidance and help because they can describe what they want. They can tell you what they like when they see something, but they don't know how to put it together with what they already have. So, I think what you really want to do is solve those things sometimes with people who provide services, sometimes with technology that provides experiences. And I think that has always been critical in this category. I don't see that changing.
Good. Moving right along. It's May 24 and you opened your first retail store. What have you learned so far from your first four years into store retail? And how might that shape your strategy going forward?
Yeah. Well, going back not quite 10 years, but close to 10 years now, we first had a small retail store, 5,000 foot one, in the Natick Mall here outside of Boston. We realized that was too small for us to really present ourselves. Before that, for years, we tried pop-ups in various mall locations. That was our first foray. Well, this all led us to regroup and basically in 2021, 2022, we launched an effort to really bring the brand to life in a retail setting. And so our first Wayfair large format retail store opened in Wilmette north of Chicago in May of 2024. It's a 150,000 foot store. It explores all the categories we're in. It provides those service experiences I described. And the feedback from customers who visited has been uniformly, you know, quite positive and the sales reflect that. And so we're pretty excited with how that went. That's led to this year we're launching three more. We're launching one in Atlanta early in the year, one midyear in Columbus, Ohio, and one later in the year, Denver, Colorado. We'll launch more next year. And so we're starting to kind of build up, but we're doing this for our other brands, too. We have All Modern, Birch Lane, Joss & Main. We have nine stores across those brands that they've been open longer. They're doing well. We'll start scaling those in the future. And then for Perigold, our luxury platform, we launched two last year. One in Houston in Highland Village and one in West Palm Beach in CityPlace. And those are newer but we're pretty excited with how those are starting off. So, I think there's a real opportunity for us to take our brands, which are very strong online, have very loyal customers, and have a great offering and allow the customer to engage with us, whether they want to do it online or in a store setting or go back and forth, to make it easy for them to do that. And that's what we're working on.
Good. You kind of anticipated my next question. I was going to ask you, is Perigold a better fit for store-based experimental retail than more price or volume driven assortments? What's your experience been with that so far?
I actually think retail works across all our brands because it's really the product category that makes a retail store make a lot of sense and so, you know, the category has a lot of services associated with it. There's a lot of aspects to finding the right item. There's a bunch of products where a lot of customers may, you know, whether it's tactile, the feel of a product, these things matter. And then there's a lot of customers where visualization is easier in person. So I think the category lends itself to stores. The fact that we have a nationwide distribution logistics network and we have such a large reach and brand awareness and customer file helps us with the store. So I think it's a natural fit for us. And so we're excited by the potential, but we're going to approach it one step at a time to make sure we do a good job.
Good. You know, I mean, we've seen hybrid retailing, right? I mean, we've seen brick and mortar take on the characteristics of online and online taking the characteristics of brick and mortar. Is this a next step or is this the future of retail? Are we going to see, is hybrid the way to go?
