Big interview: Wayfair on supply chain, culture and virtual reality

Wayfair is probably the largest online retailer you haven't heard of.

Beginning as CSN Stores in 2002, over the next decade the US eCommerce retailer organically grew its homeware business to around 250 different microsites. In 2011, the e-tailer decided to merge its microsites, which were reaching 450 million consumers, into a single brand – Wayfair.

"The problem with all these microsites was nobody really knew if they were buying lighting they could also buy a sofa and it was impossible to develop brand awareness," describes Maxim Romain, general manager of Europe for Wayfair.

It was only at this point that the e-tailer took any external funding – surviving over the last nine years on the power of organic search and 60-day payment terms to its suppliers. Three years later at the end of 2014, the e-tailer went public on the New York Stock Exchange.

But it is only very recently that Wayfair has begun to ramp up its PR and marketing activity, including social media campaigns. Over the last four years, the retailer has grown to 60% brand awareness in the US and its latest global financial results reported a significant increase in revenue for its second quarter ending 20 June 2016. But now the company is turning its focus and investment to Europe.

Choice and fulfilment

What makes Wayfair stand out in the crowded home-furnishing industry is its range. The e-tailer works with 3,000 suppliers in Europe and a further 7,000 in the US. And in the UK, customers can choose from one million products online – seven million in the US.

"To make a difference online you have to offer the largest selection possible, to differentiate yourself from brick and mortar retailers," explains Romain. "The idea was to not stock and buy any products, but let suppliers stock them, and reference as many items as we want because there is no risk associated."

Romain doesn't think of Wayfair as a marketplace, because the e-tailer owns the relationship with the customer. "It's a hybrid model – the customer doesn't know it comes from a supplier. We take full responsibility to make sure it is delivered on time," he says. "And instead of having one central warehouse, you have 3,000 warehouses which are managed by suppliers, but nevertheless you own the whole supply chain."

Most orders are shipped within 48 hours, but if a customer in the UK chooses a piece of furniture from a Spanish or Italian supplier this could take up to two weeks. And in a world where customers want their online orders to be delivered next-day, same-day or even one-hour, how will Wayfair cope with this demand?

The answer lies in opening fulfilment centres stocking the bestsellers, which are run by Wayfair. "We then directly control the fulfilment of those orders," he explains.

The idea of fulfilment centres began in the US two years ago with one on the East Coast and another on the West, and Wayfair plans to open a number in the UK in the near future to enable the retailer to speed up its delivery options and consider implementing services such as click & collect.

Stores and virtual reality

And while Romain says Wayfair is always thinking about opening stores, right now it is not on the roadmap.

"We have such a large selection of products," he says, but he admits it would not be impossible. And with a physical store combined with future technology, the retailer could look to offer 3D virtual reality headsets to expand its product range and help customers plan their home interiors.

In fact, this 3D technology has already been created as part of the retailer's innovation project, called 'Next. Wayfair's technology is so ahead of the curve, the consumer devices are not even available yet to run the app.

Romain described how the next releases of smartphones – including the Tango-enabled Lenovo PHAB2 Pro, available this September – will offer two cameras at the rear of the device instead of one, which will allow customers to take 3D photos of their environments which understand dimensions.

"You can choose a sofa and see how it would look in your house, change the colour and model, add a coffee table and build most of your room with the app."

Wayfair is also shooting all of its products in 3D so they can feature in the application, and also to save on photostudio costs as 3D images can be edited together to create lifestyle shots.

"This saves a ton of costs and gives flexibility to create whatever environment you want," he says. "And customers can also send us a picture of their house and we can include the product – this started out as a service in the US."

Separate to the virtual reality app, Wayfair also has a transactional mobile app available in each of its four markets – US, Canada, UK and Germany. While in Europe the split is 40% mobile and 60% desktop and tablet, this is continuing to increase in line with the rest of the retail industry. In fact, Wayfair reported in its Q2 results that 38% of orders were placed via the mobile app or its mobile website.

"It's increasing and we find people who use the app actually engage a lot more and are much higher value for us."


And in order to support all this technology investment, the e-tailer has an army of 800 technology engineers, with 50 located in Wayfair's offices in the tech start-up capital, Berlin.

"The aim is to develop a pool of tech engineers in Europe and in the US so we can leverage ideas on both sides," describes Romain, who says being located in Berlin significantly helps when it comes to the hunt for technology talent.

"It's also cheaper than London and the real estate costs five times less. Another thing about Berlin is it is a bit easier for us to recruit young people because the city is a lot cheaper for them and on a relatively modest salary they can still survive and even have their own flat."

One of the things that worries Romain the most about his management role, isn't sales or the latest technology, but people. "People are what make a company and I want to make sure we have the right culture and people are happy, and I tend to think a lot about the team and what I need to do to make sure they are."

Romain looks after Wayfair's 600 European employees, 300 of which are in Berlin, 100 in London and 200 in Ireland, who service the retailer's operations centre in Europe.

"We tend to put offices in the centre of cities like London or Berlin, because of the young talent, they want to live there, you can't put your office in the suburb of London, you won't just be able to hire the same people."

Looking to the future, Romain says Wayfair – and the entire retail industry – is going to have to become more service-orientated, such as installation help or guidance on how to purchase the right product from a designer.

"It's about the switch from selling products to actually selling the whole service that's associated to the home," he explains. "So to give you an example, we also sell taps. And what we want in the future is when a customer buys a tap, we can sell also the installation of the plumbing service. And that is when we really start to compete against trade companies as well."