Wayfair and the Future of E-Retail: CEO Niraj Shah Talks Transition Strategy
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“We think public market investors are very excited about e-commerce,” he says. “Could we ever sell the business? Sure, but there’s a small list of buyers. I don’t know that you’d say, ‘We did all this work, we’ve got accelerating growth, we’ll go to the moon—we should sell it today.’ We’re not dying to get out of this business so we can go sit on a beach.”
Granted, that’s the kind of stuff CEOs tend to say right before they get bought by Amazon for a gazillion dollars. But if we take Shah at his word, Wayfair is preparing for an IPO, but it isn’t ready just yet. “Being private affords you some opportunities, and being public affords you some opportunities,” he says. “There’s a point where the benefit to the shareholders in the company crosses over. I think right now we’re still on the side where being private affords us more opportunities. We totally foresee that changing, which is why we talk about being publicly traded. It’s just, we don’t see that happening in the next 12 months.”
Amazon vs. Wayfair?
In the meantime, Shah has some time to ponder the future of e-commerce (at least when a reporter is bugging him about it). Will we be looking at 3-D retail sites and touch interfaces for Web shopping anytime soon? And where will social shopping and mass customization lead?
“People like to jump on some new trend and say it’ll be revolutionary, it’s e-commerce 2.0, 3.0, maybe we’re onto 4.0,” he says. “If you look at how e-commerce is really conducted, you’ll notice Amazon is really growing; eBay is back to really growing; all the brick and mortar retailers have growing e-commerce businesses. A certain amount of the retail experience out there, people want. They want access to product selection, they want things delivered quickly, they want it to be an easy experience, they want good service, they want a compelling price. I don’t think you can say, ‘Oh, well, that model is inherently flawed—here’s something that’s totally different and better.’ Some people say curation will replace e-commerce 1.0. I don’t think that’s true.” Instead, he says, “You’re taking a model that’s always existed, but making it better because of mobile, because of the Internet.”
In other words, he says, “E-commerce is perhaps changing slower than people think, but folks who are doing a great job of it are figuring out ways to just make life easier and easier for customers, and doing more and more for them.”
How so? “The companies in retail that have stood the test of time and become real big forces, typically they’ve built an amazing supply chain,” Shah says. He notes that Walmart beat out competitors by lowering its costs via an efficient supply chain. More recently, retailers like Zara, H&M, and Warby Parker have streamlined their design and delivery processes so as to bring customers the latest styles for lower prices.
Some examples from Wayfair’s supply chain: “We’ve focused on speed of delivery,” Shah says. “Historically, we shipped directly from the manufacturer to the end customer. We still do that the vast majority of the time, but we’ve taken a lot of days out by automating the order process and working with our manufacturer partners to figure out how our orders can get shipped very quickly. We’ve coupled that with something that’s relatively new in the last year and a half. We now have half a million square feet of warehouse space in Kentucky and Utah. It’s a slim piece of the product assortment—it’s the better sellers for very fast delivery, within two days to anywhere in the U.S.—for categories like TV stands and bar stools.”
When Shah talks about consolidating freight and changing packaging to reduce damage rates, the average techie’s eyes might glaze over. But that’s the point: “Those things which don’t sound as sexy are actually the hard things that are driving the big wins,” he says.
Other experts in e-commerce seem to agree with that. “Wayfair has cracked some really tough supply chain integration problems that are inherent with dealing with so many suppliers. That work alone is impressive,” says Jules Pieri, the CEO of Daily Grommet. And, intriguingly, she hints at a coming showdown in the field. “Amazon has two great weaknesses. First, it’s not a brand as much as a machine, and second, they are absolutely dreadful at merchandising. Wayfair is hitting them in these flanks with their deep investment in both.” (OK, we’ll have to keep a close eye on this.)
Just when I’m starting to think the future of e-retail is all in shipping and distribution—and Amazon vs. Everyone Else—Shah reminds me that advances in digital shopping interfaces and graphics could, eventually, lead to some dramatically new user experiences.
“One of the biggest complaints with online [shopping] is how do you get a real feel for it? There’s a bunch of technology being developed. You can take a picture of your room and drop furniture in it. Those technologies aren’t mainstream yet, but they’re far closer than they were a few years ago,” he says.
“There’ll be a point at which you would never buy an item for your house without basically holding up your iPad—it’s got a camera, you pick an item, you drop it in the room, do I like how this looks? I do, I’ll buy it,” he says. “At that point, shopping online could actually be better than shopping in a store. How is it going to look in my home? That’s the ultimate question you’re trying to answer. If you can actually see the bedroom set in your bedroom and decide, that’s pretty much your perfect experience.”