Wayfair lost 5 millions customers last year; cancels plans for new fulfillment center
Wayfair has also canceled plans to open a fulfillment center in Houston.
Wayfair Lost 5 Million Customers and $1.3 Billion Last Year
Wayfair Inc. lost five million customers in 2022, shrinking the online furniture retailer’s shopper count to near its size before the Covid-19 pandemic triggered a consumer-spending surge.
Revenue at the Boston-based company slid 4.6% in the final three months of last year from a year earlier to $3.1 billion, for a net loss of $351 million.
Wayfair is trying to stem significant losses as consumers spend more on food and services and turn away from electronics and household goods.
Executives said the company ended the year with 22.1 million active customers, defined as someone who placed an order within the past 12 months. That was a decline of 19% compared with the prior year and just above the 21.1 million Wayfair customers at the end of March 2020.
Wayfair in January laid off about 1,750 workers, or 10% of its global workforce. The layoffs followed about 870 job cuts in August. Both rounds of layoffs were part of a broader program to find $1.4 billion of annualized cost savings.
The company’s co-founders, Niraj Shah and Steve Conine, said in a letter to investors that they want to “return to our roots as a thrifty organization.”
Wayfair’s sales surged early in the Covid-19 pandemic as people splurged on home furnishings, helping the company achieve profitability in 2020.
Sales slid in 2021 and through 2022. The company’s full-year revenue last year of $12.2 billion was down almost 11% over the prior year for a net loss of $1.3 billion.
Wayfair executives on an earnings call said they saw positive signs for an uptick in orders and a move toward profitability in 2023.
“I think we will see the numbers going in the direction we want to see them grow,” Mr. Shah said.
Wayfair has placed a big emphasis on its in-house logistics operations that provide ocean shipping, customs, warehousing and delivery services to thousands of suppliers. Wayfair executives have compared their logistics offerings, housed under the company’s CastleGate brand, to retail behemoths such as Amazon.com Inc.
The founders said in a letter to investors that they expected CastleGate usage to climb this year after it declined earlier in the pandemic.
Wayfair cancels plans for Houston fulfillment center
Wayfair has canceled plans to open a fulfillment center in Houston.
The online furniture retailer made the decision “due to changes in our business,” Marrah Morles, global head of operations communications, said in an email. Wayfair has been struggling amid falling sales and customer declines, and it announced another round of layoffs in January.
Wayfair planned to invest $63.2 million for the 1.2 million-square-foot fulfillment center’s development, with landowner Prologis chipping in another $70 million, according to a Houston City Council agenda item in December.
Wayfair nixing its plans for a Houston fulfillment center adds further evidence that the company’s industrial real estate growth will be limited in 2023. CFO and Chief Administrative Officer Kate Gulliver said on a November earnings call that Wayfair is taking a moderated and thoughtful approach to investing in new fulfillment centers.
“We’re very focused on building that when we need it, not in advance of when we need it,” Gulliver said.
As far as Wayfair’s existing fulfillment center operations, the company hasn’t indicated that it’s planning to scale back. CEO and Co-Chairman Niraj Shah said on the same earnings call that Wayfair’s U.S. fulfillment footprint is “fairly heavily utilized right now.” He added that Wayfair’s facilities provide the benefit of reduced final-mile delivery expenses, since inventory is located closer to end customers.
“The customer sees a faster speed, but frankly, our shipping cost goes down dramatically because that inbound leg is not very expensive relative to the outbound leg,” Shah said. ”...Without a building in that place to put the goods in, you can’t do what I just said.”
Wayfair already has a presence in Texas, with positions listed for warehouses in Austin, Lancaster and Flower Mound on its careers site. Launching a new fulfillment center in Houston would have created 400 jobs by 2026, according to a July presentation from the city council’s Economic Development Committee.
“We were looking forward to joining the Houston community and thank the city for the incredible partnership and support in this process,” Morles said. “We’re working toward subleasing the space so that it can be used by another employer and contribute to the success of the region. We are no longer pursuing any incentives from the city.”
The facility would have been located in Prologis Presidents Park on a 70-acre site owned by Prologis. The logistics real estate firm says the park provides quick access to highways and Houston’s George Bush Intercontinental Airport.
Wayfair is one of Prologis’ larger customers. Prologis owns and manages nearly 5 million square feet of space for Wayfair, according to the firm’s Q4 earnings presentation.
