Wayfair and the Future of E-Retail: CEO Niraj Shah Talks Transition Strategy

1/8/13Follow @gthuang

When you’ve raised $200 million in venture funding, that qualifies you as the top VC-backed technology bet in Boston. When you’ve been profitable for the better part of a decade, and all the outside investment has come in the past year and a half, there’s probably a deeper story there. And when you say no one knows who you are yet…well, then you have really piqued my interest.

It wasn’t always this way. Until June of 2011, Wayfair hadn’t raised a penny of outside capital. The company was then known as CSN Stores—or not, as people hadn’t heard of that, either—but that didn’t matter because it ran a successful network of 200-some websites selling furniture, cookware, pet and baby products, and other home goods. Its revenues grew from $250 million in 2009 to $380 million in 2010, followed by $500 million-plus in 2011, and over $600 million last year.

Wayfair is one of the great bootstrapped business stories to come out of Boston. That it is a consumer-facing Internet company adds to its mystique in these parts. Now it is on the next stage of its journey. A big part of the reason the 10-year-old firm took outside money—an effort that is still unfolding—is that in the rebranding from CSN Stores to Wayfair, it began consolidating all those 200-odd individual sites under one massive e-commerce roof.

How many people know we have an “Amazon for the home” right here in the Back Bay? Where is the company—and e-retail more generally—headed, now that it has one brand name and a huge wad of cash behind it? When is it going public? And what are its challenges?

I recently sat down with Niraj Shah, Wayfair’s co-founder and CEO, to get some answers. Shah (pictured above) took me on a quick tour of the 26-story building in Christian Science Plaza where the majority of Wayfair’s 1,200 employees work, spread out among many floors (see building, left). Each floor and department had a slightly different feel, from engineering and design to marketing and sales, to customer support (in roughly increasing order of noise volume). The company’s space for its private-sale site, Joss & Main, had its own elegant décor, furnished with stuff from the site, of course.

But these days Wayfair has been more about unifying itself around one brand—and trying to get name recognition among consumers. As Shah puts it, “What happens when people do know who we are? All of a sudden you’re talking about a business that could easily be multibillion dollars in sales. The market’s very large. Once you build a brand around it that has recognition, it’s a huge amplifier.”

To that end, Wayfair is running TV ads, reaching out to the media, adding more compelling content (stories and photos) to its site, and forming partnerships with magazines like Coastal Living. But in the grand scheme, that’s relatively small stuff—tactics, if you will. I wanted to know the deeper strategy: where Shah sees Wayfair fitting into, and helping to drive, the future of e-commerce.

Shah was willing to go there. But it takes some background first. A lot has changed at the company over the past couple of years, and the transition from CSN Stores to Wayfair has not been all roses.

Biggest technology bet

First of all, why take that huge outside investment in 2011—$165 million from Battery Ventures, Great Hill Partners, HarbourVest Partners, and Spark Capital? (The company added $36 million more last month.)

“When you bring investors in, I think you need to believe that in a five-year time horizon, there’s going to be an opportunity for investors to get their money back out, hopefully having made a lot of money,” Shah says. “When Steve [Conine] and I started the company, we were very focused on building something of real scale, and we didn’t really have a time frame in mind. You can easily get into a bad situation in terms of interests not being aligned [with investors]. So we didn’t take money in early for that reason.”

CSN Stores did well enough in the early years to fund its own growth. “You don’t want to raise money if you don’t need it—you just take dilution, to what end?” he says. “Also it was unclear how an investor would be able to help us in the near term.”

But fast forward to early 2011, Shah says, and “within five years, we see this company having an opportunity for an investor to exit. … Next Page »

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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  • http://twitter.com/ranjeetiitb Ranjeet Vimal

    Wayfair is the inspiration for several bootstrapped company. http://www.mebelkart.com is going to be the wayfair of India.

  • Frustrated sleeping on floor

    Wayfair uses HEP as their Delivery Co. for Furniture. I ordered a Samuel Lawrence bed in October of 2013, which I was told was in stock and I would receive it in two to three weeks. Hep delivered it Mid January, however, there were pieces missing. Wayfair apologized and said they would re-order and get it to me ASAP. today is February 5th and I still do not have the bed. HEP blames Wayfair and Wayfair blames HEP telling me there is nothing they can do about when HEP does their deliveries. I think everyone should know about this problem especially Wayfair CEO.
    Frustrated and without a bed