Wayfair’s direct-to-consumer sales nearly double in Q4

February 26, 2016 03:30 PM

Driven by new customers, higher repeat orders and a strong holiday season, sales jumped for online retailer Wayfair LLC in the fourth quarter and full-year 2015.

Direct-to-consumer sales, which are orders placed on, Joss & Main, AllModern, Birch Lane and Dwell Studio, increased 97.8% in the fourth quarter to $685.6 million from $346.7 million in the same period a year earlier. For 2015, sales on Wayfair’s websites increased 85.5% to $2.04 billion, up from $1.10 billion in 2014.

Web sales accounted for 92.7% of total revenue in Q4 and 91.1% for the full year. Wayfair also earns revenue from selling ad space on Wayfair-owned sites and via sales through other retail sites that sell Wayfair products.

Wayfair, No. 33 in the Internet Retailer 2015 Top 500 Guide, reported revenue of $2.25 billion during 2015, up 70.5% from $1.32 billion in 2014. For the fourth quarter that ended Dec. 31, the web-only retailer’s revenue increased 81.1% to $739.8 million from $408.6 million a year ago

The holiday season produced record growth for Wayfair, CEO Niraj Shah said in an earnings call with investors, according to a transcript from Seeking Alpha. For the five-day period from Thanksgiving to Cyber Monday, gross revenue from online orders increased 130% year over year, he said on the call.

More orders from repeat customers also helped drive a successful year, Shah said. Orders placed by repeat customers jumped 96% in Q4 compared with the same period in 2014. Orders from repeat customers accounted for 54.3% of total orders in Q4, up from 50.3% in Q4 2014. For the full year, repeat customers placed 5.0 million orders, up 92.3% from 2014.

“Wayfair’s favorable repeat customer dynamic is due, in part, to a proprietary data analytics platform that creates a personalized customer shopping experience,” Colin Sebastian, analyst at Robert W. Baird & Co., wrote in a note to investors. “For instance, outbound email content and prioritization of products are varied based on a user’s prior engagement, purchase history and demographic information. Wayfair  sends more than 1 million different permutations of outbound emails on a daily basis, with improving personalization resulting in a 15% increase in email open rates,” he adds.

Wayfair earned the No. 1 spot in Internet Retailer’s recently released Best Digital Marketers in E-Commerce, which scores retailers on their performance on search, social and email marketing metrics. 

Wayfair says it had nearly 5.4 million active customers as of Dec. 31, up from about 3.2 million a year earlier. The online furniture retailer added 769,000 active customers in Q4, which is 200,000 more than the number Wayfair added in Q3, making it the largest customer-acquisition quarter to date, Shah said.

For the fourth quarter ended Dec. 31, Wayfair reported:

  • Revenue of $739.8 million, up 81.1% from $408.6 million a year ago.
  • Direct-to-consumer order revenue of $685.6 million, up 97.8% from $346.7 million.
  • Average order value up 8.8% to $222 from $204.
  • Net loss of $15.5 million, compared with a $58.1 million loss.

For the year ended Dec. 31, Wayfair reports:

  • Revenue increased to $2.25 billion, up 70.5% from $1.32 billion in 2014.
  • Direct-to-consumer revenue of $2.04 billion, up 85.5% from $1.10 billion.
  • Net loss of $77.4 million, compared with a loss of $148.1 million.

On the earnings call, Shah announced plans to expand internationally this year, moving into Canada, the United Kingdom and Germany. The company plans to ramp up advertising and its staff in Europe, he said.

While Wayfair executives are optimistic about the company’s global expansion, Matt Nemer, senior analyst of equity research at Wells Fargo Securities, says replicating Wayfair’s success in the United States may prove to be challenging. 

“Retailers have not found success with expansions into Europe, although Wayfair is a unique capital-light model in our view and the company believes the U.K., Germany and Canadian markets are very similar to the U.S. in terms of competitive landscape, customer economics, including advertising payback and gross margin,” Nemer wrote in a note to investors.

Wayfair’s business model is capital-efficient because, unlike most retailers, Wayfair doesn’t buy merchandise and store it in warehouses. Instead, it buys inventory only after a customer makes a purchase. 

“More importantly, we are encouraged by the multitude of initiatives that should continue to drive outsized U.S. growth: deepening expertise in relatively new categories like flooring and plumbing, leveraging other key holidays and promotional opportunities throughout the year, building a stronger loyalty program and gift registry, to name a few,” Nemer adds. 




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