Wayfair takes a bigger step into brick and mortar retailing

Discussion
Photo: Wayfair
Mar 27, 2019
George Anderson

Just a couple of years ago, Wayfair CEO Niraj Shah spoke about how Americans were becoming increasingly open to online furniture shopping. The basic advantages, he asserted, were selection and convenience. While Mr. Shah may have been correct, it also seems clear that Wayfair, similarly to other e-tailers and consumer direct brands, has concluded that there are advantages to opening physical stores, as well.

The furniture retailer has announced plans to open its first full-service store at the Natick Mall in Natick, MA in the fall. The store will offer a seamless shopping experience with Wayfair’s site, according to the company. It will also provide customer service and home design experts to consult with shoppers. Customers can make immediate purchases of furniture and accessories in the store or place orders for home delivery.

“With the opening of our new retail store, we are offering our customers a new way to enjoy Wayfair’s exceptional shopping experience as we continue to transform the way people shop for their homes,” said Mr. Shah in a statement.

Wayfair opened a pop-up shop in the Natick Mall this past holiday season as well as another at the Westfield Garden State Plaza in Paramus, NJ. The retailer plans to open four pop-ups for the holiday season later this year.

Wayfair also opened an outlet inside the company’s distribution center in Florence, KY last year. The 20,000-square-foot space for the outlet is used to sell excess inventory, including products returned to Wayfair. An article on Forbes last August asserted that Wayfair was being hurt by high return rates and customer acquisition costs.  

DISCUSSION QUESTIONS: Do you see Wayfair’s full-service furniture store in the Natick Mall as the first of many for the retailer? What do you see as the challenges and opportunities for Wayfair as it adds physical retailing into its distribution mix?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"I think there’s a fair amount of proof that it is VERY hard to make money as a pure play once you pass a certain size."
"If Wayfair had gotten its start in brick-and-mortar it would be difficult for it to compete with West Elm, having very similar offerings."
"What Wayfair did wrong from the get-go was to train shoppers to expect free shipping both ways. Now it has to reap what it sowed."

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18 Comments on "Wayfair takes a bigger step into brick and mortar retailing"


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Mark Ryski
BrainTrust

It’s interesting to see once pure-play online retailers finding their way to brick-and-mortar stores. The furniture category is especially tricky because of shoppers’ desire to touch and feel goods and the high cost of shipping and returns. The challenge for Wayfair is coverage. Opening one store in Natick Mall is fine, but what about the rest of the U.S.? I think this is a first but important step for Wayfair as it finds its way to use physical stores to augment its online presence.

Dick Seesel
BrainTrust

There are still plenty of customers who wouldn’t buy upholstered furniture in particular without giving it the “sit” test. (I’m among them.) So this trial run by Wayfair makes sense to a degree. My question: How does the company balance the limited assortment available to show in a brick-and-mortar store alongside its online calling card of huge selection? Wayfair’s brand is built on choice, not just on free shipping.

Paula Rosenblum
BrainTrust

I think there’s a fair amount of proof that it is VERY hard to make money as a pure play once you pass a certain size. Furniture is even more complicated. “Big things ship free” but they are bought sight unseen and so pressure for returns (or even breakage en route) is high. Wayfair has not been profitable ever, as far as I know.

So, it turns out bricks and mortar are a good thing. Natick Mall is a great start. The challenge will be paring the assortment (it won’t all fit in a store) and creating a BOPIS environment.

Frank Riso
BrainTrust

I see Wayfair’s full service furniture store as the first of not so many stores. Wayfair will need to select its locations very carefully in order to maximize its sales and keep it’s brand consistent. Online is the real opportunity for Wayfair. The major challenge in opening up stores would be the lack of inventory and selection compared to the website. This may disappoint shoppers. Sales staff at stores will need to be able to go online for greater selection for the in-store shopper. The stores will bring greater name recognition for Wayfair but online will continue to be the chain’s sweet spot.

Neil Saunders
BrainTrust

The biggest problem for Wayfair is that it is not profitable and has not been for a long time. Its losses are eyewatering. Part of this is down to the fact that selling furniture online is far from cheap. Along with the high distribution costs, there is a massive expense to maintain relevance and stay on the radar of consumers who only buy furnishings infrequently. The company has not found a way to resolve this and will no doubt be hoping that a push into physical retail will provide a resolution.

I am less optimistic. To work, Wayfair will need more stores and will need to make them an integral part of their business rather than just showrooms. I am not sure that the business model, as it is currently configured, will support this. The range is enormous and the distribution cannot be easily blended between stores and physical. Moreover, one store isn’t going to reduce marketing and customer acquisition costs.

I remain skeptical about Wayfair’s longevity.

Charles Dimov
Guest

Definitely, I think this is going to the be first of many. We have seen this time and again in the fashion space. An online-only retailer opening a brick-and-mortar store, then starting a rollout of more of them. A recent ICSC study pointed out that physical and online retail are complementary and both help each other. For Wayfair, the big opportunity is to leverage omnichannel retailing to reduce returns, and give customers a great experience with their furniture. That makes it easier for them to buy (lowers the risk), and gets them to come back for more.

Adding physical stores is a challenge for many online retailers. It is a whole new world of logistics. It is a learning curve that Wayfair will go through. But it is also an excellent step in the right direction for Wayfair. Welcome to the world of omnichannel retailing!

Lauren Goldberg
BrainTrust

I think an interesting angle would be to make these stores BOPIS test labs as well as traditional stores. Meaning: I pick it out online, test it in the store and then if I like it, I either take it home or it gets delivered. From a customer experience standpoint, it could really help alleviate some of the stress that goes into buying furniture or large items online — the customer would not have to handle the return process and eliminate some of the damaged products in the process. At that point, Wayfair might be able to sell it to someone else in that store. Might be a logistical challenge, but would be an interesting angle to take.

David Weinand
BrainTrust

My home furnishing friends have claimed Wayfair has been a house of cards for years. It’s incredibly complex to manage home furnishings online (see all other comments as to why) and it’s why they have never made money. For the store environment, they could see some success if they can create a true “endless aisle” environment where they can merge the physical inventory with their broader online selection.

Richard J. George, Ph.D.
BrainTrust

Yes, I do. As noted in a previous posting, the option of either online or brick-and-mortar is no longer viable. The customer wants a seamless experience. In addition, the nature of Wayfair’s business, namely, home furnishings, lends itself nicely to a physical in-store presence, not to mention the local shopping economies.

Peter Fader
BrainTrust

The e-commerce fantasy world of finding glory by losing lots of money does not work in the real (brick-and-mortar) world. Several of the comments (especially the one from Neil Saunders) focus on this key point. Wayfair is hemorrhaging cash and their outlook is getting worse every quarter (shrinking margins, increasing acquisition costs).

It won’t be long before Wayfair is the subject of jokes and scorn, similar to its idealistic (and fiscally irresponsible) dot-com predecessors such as Pets.com.

Ken Morris
BrainTrust
Ken Morris
Retail industry thought leader
9 months 22 days ago

Wayfair has been phenomenally successful with their single-channel approach. That being said, they are perfectly positioned to begin to take a page from the RH Gallery playbook and create a true multi-channel juggernaut. They have the opportunity to create an in-store experience that understands who is shopping, what’s in their home, and what their preferences are, without the legacy baggage that everyone else has — Wayfair has a tabula rasa.

The decision in my mind is whether to take a showroom approach coupled with catalog and their existing web presence as opposed to a traditional retail cash and carry approach. A real-time retail approach seamlessly harmonizing all their channels will enable Wayfair to offer customers a truly personalized experience that helps them make better product selection decisions.

The in-store experience will, as others noted, help reduce the notoriously high return rates and also attract more customers – those people that won’t buy furniture sight unseen. This is a very smart move for Wayfair.

Jasmine Glasheen
BrainTrust

If Wayfair had gotten its start in brick-and-mortar it would be difficult for it to compete with West Elm, having very similar offerings.

By rustling up a strong fan base online as an e-commerce retailer, Wayfair has the opportunity to physically pop-up in areas where there is already a demand for the line. However, what remains to be seen is whether Wayfair can remain competitive long-term in brick-and-mortar.

Anne Howe
Guest

Wayfair is losing the battle. The furniture industry has enough stores already for shoppers to sit-test their purchases. What Wayfair did wrong from the get-go was to train shoppers to expect free shipping both ways. Now it has to reap what it sowed.

Ricardo Belmar
BrainTrust

We will see more of these stores simply because Wayfair has to do this to support long-term success. Lacking profitability, an online pure play is not going to get them there in the furniture business. My understanding is that their average customer age is much higher than most expect (it’s not Millennials). I strongly suspect they are reaching a saturation point in their customer base — there are only so many full room remodels that sufficiently high-income households are going to buy from them in a short timeframe. Repeat customers are therefore difficult for them, and there are simply too many buyers that need to sit on the sofa they are about to buy before buying.

Wayfair needs to really focus on the in-store experience to make this work. It won’t just be about price and selection.

Patricia Vekich Waldron
Staff

Pure plays, like made.com, have opened showroom/stores because their customers want the physical experience as a step in their patch to purchase. Finding the right balance of physical and digital touchpoint will be the key for companies like Wayfair.

Kai Clarke
BrainTrust

Wayfair is exploring and discovering its traditional limits. This is expected as they grow and test the category boundaries. One store will not redefine Wayfair as they test out their category limits. This is simply a test….

Christopher P. Ramey
BrainTrust

Wayfair has to find a way to become profitable. Their acquisition costs are absurdly high.

The store in Natick will be a laboratory; but not the road map. One store or even 50 stores won’t solve the problems of a retailer who’s margins don’t cover their advertising costs.

Steve Dennis
BrainTrust

Two things we know for sure about Wayfair. The first is that their current business model is a mess and requires dramatic improvements to be sustainable at its current trajectory. The second is (like just about every “disruptive” brand has discovered) a physical presence is required to fully penetrate the addressable market and, often, to reduce customer acquisition costs and the debilitating cost of returns. Opening stores are necessary, but hardly sufficient, to assure Wayfair’s long term success. Here’s more on my thoughts at Forbes.

wpDiscuz
Braintrust
"I think there’s a fair amount of proof that it is VERY hard to make money as a pure play once you pass a certain size."
"If Wayfair had gotten its start in brick-and-mortar it would be difficult for it to compete with West Elm, having very similar offerings."
"What Wayfair did wrong from the get-go was to train shoppers to expect free shipping both ways. Now it has to reap what it sowed."

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