A tick after midnight on April 25, Wayfair Inc. launched Way Day, an ambitious one-day sales holiday it touted in TV, digital and print ads that would feature “the lowest prices of the year” and free shipping on all orders. The event offered discounts on roughly 70,000 of the retailer’s more than 10 million SKUs, with new deals launching every six hours.

In launching a sales holiday, Wayfair was following a path paved by some of the largest e-commerce companies. For instance, Alibaba Group Holding Ltd. in 2009 turned Singles’ Day (Nov. 11) into an online shopping holiday. The event has since grown into a cultural phenomenon that last year grossed more than $25 billion in sales on Alibaba’s marketplaces alone. Similarly, Amazon.com Inc. in 2015 launched Prime Day to celebrate its 20th birthday and to entice consumers to sign up for its Prime loyalty program as the sale’s discounts are only available to Prime members. In its third year in 2017, Amazon’s Prime Day sales were roughly $2.41 billion.

With Way Day, Wayfair was laying down a marker that it’s time had arrived: its aggressive investments to build out a logistics ecosystem, expand internationally and develop customer-facing and back-end technology were coming to fruition. And Wayfair aimed to do so during the prime time when consumers typically shop for home goods, says Liza Lefkowski, the retailer’s head of brand and promotions.

Looking at Wayfair’s comments about Way Day’s top-line numbers, the sale appeared to work. Wayfair posted its biggest-ever day in terms of revenue despite the sale taking place on a random Wednesday in April, says Steve Conine, the retailer’s co-founder and co-chairman. And, in the retailer’s first quarter earnings call, CEO Niraj Shah noted the sale wouldn’t negatively impact the retailer’s second quarter margins.

But the good news didn’t last long. Five days after Way Day, and two days before the retailer reported its first quarter earnings, Wedbush Securities analyst Seth Basham downgraded Wayfair’s stock rating to neutral from outperform. The note accompanying the downgrade highlighted the investment firm’s concerns over some of the very elements that enabled Wayfair to launch its own sales holiday, notably, its aggressive spending on marketing and logistics. The note also highlighted other potential challenges Wayfair could face over an increasingly competitive digital advertising landscape and intensifying competition. Basham’s note helped drive a 13% dip in Wayfair’s share price. And while strong top-line growth in the first quarter helped propel Wayfair’s share price past its pre-downgrade price, the scenario shined a light on concerns shared by many experts about the company’s long-term viability.

Wayfair grew its e-commerce sales more than 42% last year to $4.64 billion. And, in the first quarter of this year, its sales jumped almost 48%. But it lost $244.6 million last year and $108.1 million in the first quarter alone this year. Those losses stem in part from its aggressive spending to build out a fulfillment network and to develop flashy tools, such as augmented reality features in its app that enable a consumer to visualize how a sofa would look in her living room.

In many ways Wayfair encapsulates the quandary many online retailers face today. With Amazon’s outsized influence casting a shadow across e-commerce, it has become increasingly difficult for retailers to stand out. Wayfair has found ways to garner a sizable share of the online home goods category thanks to marketing campaigns that aim to build brand recognition and its ability to leverage its massive marketing, engineering and technology teams (they totaled 4,659 people at the end of the first quarter, a 46.1% jump from 3,190 people a year earlier) to stay on the cutting-edge of online retail by developing tools such as a visual search feature. But, for now, those costly investments haven’t shown signs that they’ll eventually help the retailer turn a profit, Basham says.

“A year from now, I think Wayfair may well be 30% bigger…

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