E-Commerce Home Goods Store Wayfair Files for IPO

According to Euromonitor International, the US home goods market is expected to grow 2.5% annually over the period 2013 to 2023 to be worth $297 billion in 2023. Researchers also estimate that the current US home market has very limited online penetration with a mere 7% of the sales being made through this channel. Boston-based Wayfair is trying to make a difference in this online market.

Wayfair’s Financials
Founded in 2002 by Niraj Shah and Steve Conine as CSN, Wayfair was launched with the site racksandstands.com to sell home storage furniture online. Wayfair now claims to be the largest pure-play online retailer of home goods in the US. Wayfair’s success lies in their ability to offer to their customers a large selection of products while holding minimal inventory. They are able to do that through their custom-built, seamlessly integrated technology and operational platform that helps them ship products directly from their suppliers to the customers. The platform also boasts of strong supplier integrations and a proprietary transportation delivery network to help build these capabilities.

Wayfair has seen rapid adoption since inception. So far, they have delivered more than 11.8 million orders with 3.3 million of them being fulfilled last year. As of 2013, they had over 2.1 million active customers. Their inventory includes more than 7 million products from 7,000 suppliers across five distinct brands – Joss & Main, All+ Modern, Dwell Studio, Birch Lane and wayfair.com.

Wayfair’s Financials
Wayfair has seen strong revenue growth over the past few years. Net revenues for 2013 grew 52% over the year to $915.8 million. For the six months ended June 2014, revenues improved 50% to $574.1 million. The company is operating at more than $1 billion in revenue run rate for the year. Sales from Direct Retail, which includes revenues from the sites of their five brands, accounted for $673.4 million in 2013 and $469.5 million for the six-month period ending June 2014. The remaining revenue was contributed from third party sales through their websites.

Continuing investments in advertising and marketing efforts have resulted in increasing losses during the years. In 2013, they suffered a net loss of $15.5 million with an adjusted EBITDA loss of $2.9 million. For the six months ended June 2014, net loss increased significantly to $51.4 million and adjusted EBITDA loss of $37.0 million.

Among other metrics, the last twelve month net revenue per active customer has increased 7.3% over the year in 2013 to $322. For the six-month period ending June this year, that metric improved to $332. Mobile is also improving and for the first six months this year, Wayfair saw 28% of all Direct Retail orders delivered as placed from a mobile device compared with 21% a year ago.

Wayfair has been largely venture funded with funding of $358 million raised so far from investors including T. Rowe Price, Battery Ventures, Spark Capital, HarbourVest Partners, and Great Hill Partners. Their latest round of funding of $157 million was held in March this year when they added T. Rowe Price to their investor listing. The funding valued them at more than $2 billion. Last month, Wayfair filed their S-1 confirming plans to raise $350 million through the IPO.