Wayfair Inc. increased spending on advertising in fiscal 2014 and that helped contribute to a year-over-year direct-to-consumer sales growth of 63.3%, the company reports.
Home furnishings retailer Wayfair, which ranks No. 45 in the Internet Retailer 2014 Top 500 Guide, generated $1.32 billion in revenue in 2014. About 85% of that revenue, $1.10 billion, came from selling direct to consumers online on its five e-retail sites, up 63.3% year-over-year from $673.4 million in 2013. The $22 million difference between direct retail revenue and total revenue includes revenue from its media business, such as the sale of ad space on Wayfair-owned sites, and sales through retail partners, Wayfair says.
The e-retailer, which went public in October, also reported a much wider net loss for the year compared to a year earlier. For the year ended Dec. 31, Wayfair’s net loss was $148.1 million versus a 2013 net loss of $15.5 million, an increase of more than 855%. This figure, however, includes a one-time catch-up expense for equity-based compensation and taxes related to the terms of Wayfair’s IPO. Adjusted to exclude these expenses, Wayfair reported a 2014 net loss of $84.9 million, a 447% increase from 2013.
Wayfair spent more in 2014 in all major operating areas, including 50.1% more on customer service and merchant fees (including payment processing fees), 76.3% more on advertising, 54.0% more on merchandising, marketing and sales, and 58.5% more on operations technology, general and administrative expenses.
The increased spending on advertising–$191.3 million in 2014—helped raise aided awareness of the brand from 36% in December 2013 to 55% in December 2014. Wayfair CEO Niraj Shah said this increase reflected Wayfair’s TV and online advertising efforts. Shah also pointed out that nearly all of Wayfair’s advertising spending is aimed at acquiring customers. The e-retailer estimates it spent an average of $64 to acquire each customer in 2014, and that new customers spent an average of $342 with Wayfair. Wayfair had 3.2 million active customers as of Dec. 31, up 53.8% year over year, the e-retailer says.
“Wayfair’s ongoing strength has been the result of continued improvement across the platform in how we acquire customers, in the customer experience including site merchandising customer service and logistics, and in the growing awareness and increasing strength of the Wayfair brand,” Shah said on the investor call.
Shah also elaborated on the role mobile plays for the e-retailer. 29% of orders placed on Wayfair.com in 2014 took place on a mobile device. Meanwhile 43% of Joss & Main orders took place on mobile devices. Wayfair’s two iOS apps —one for Wayfair.com and one for Joss & Main—have been downloaded 2.7 million times. Joss & Main is a flash-sale site selling home furnishings.
For the three months ended, Dec. 31, Wayfair reported:
- Total revenue of $408.6 million, up 38.4% from $295.3 million in Q4 2013.
- Total direct to consumer sales of $346.6 million, up 55.1% from $223.4 million a year earlier.
- Net loss of $72.6 million including the one-time expenses related to compensation and IPO costs. Excluding those expenses, Wayfair’s Q4 net loss was $14.8 million, up 208.3% from a net loss of $4.8 million a year earlier.
- It delivered 1.70 million orders during the quarter, about 45% more than the 1.17 million in Q4 2013. The average order value was $204, up from $191 in Q4 2013.
For the year ended Dec. 31, Wayfair delivered 5.2 million orders, about 57.6% more than the 3.3 million in 2013. The average order value was $210, up from $204 in 2013.