The results also showed that the retailer's investments in its own private-label products, advertising and its logistics network are paying off.

Wayfair Inc., No. 13  the Internet Retailer Top 1000, soared past investors’ forecasts by generating 43.6% growth last year, the home furnishings retailer reported on Friday. In the fourth quarter, the web-only merchant’s revenue rose 40.0% year over year.

The revenue gain showed that, unlike some other retailers, Wayfair was relatively unscathed by a number of recent retail headwinds, including the U.S. government shutdown and Brexit.

The results suggest that the retailer’s investments in its own private-label products, advertising and its logistics network are paying off. Wayfair has spent heavily to build brand recognition; it spent $774 million on advertising last year, a 40.7% jump compared with 2017. Those dollars flowed to a mix of marketing formats, including: digital display, social and search ads; product placements and TV ads on Discovery/Scripps and other networks; direct mail; and major promotional campaigns built around efforts such as Way Day, its one-day sales holiday that it touted in TV, digital and print ads. The result of those efforts is that 89% U.S. consumers are aware of the Wayfair brand, according to Qualtrics and Hanover Research.

By building up its brand, the retailer has been able to drive consumers to buy its higher-margin private-label brands, which include the traditional Andover Mills, industrial chic Mercury Row and retro-oriented Langley Street. For each of those brands, the retailer uses the same drop-ship approach it uses for the other products it sells. It works with suppliers to develop the products, which it then photographs and merchandises, but it doesn’t own the inventory. Sales of Wayfair’s own branded goods accounted for 69% of Wayfair’s revenue last year, a 12 percentage point increase over 2017, and a dramatic increase from 6% three years earlier.

“We continue to view Wayfair as a disruptor in the $600 billion home furnishings market with a superior shopping experience, an asset-light business model, and proprietary delivery systems,” wrote Stephens Inc. analyst Rick Nelson in a note.

advertisement

For the quarter ended Dec. 31,  ecommerce sales reached $1.996 billion, up 40.7% from $1.419 billion a year earlier. The retailer’s U.S. ecommerce sales reached $1.709 billion in the fourth quarter, a 39.2% increase from $1.228 billion in fourth quarter of 2017. International ecommerce sales reached $287.1 million in the quarter, which is a 49.8% increase from $191.7 million.

Profitability remains an issue for the retailer. Wayfair lost $504.1 million in 2018, which is more than double its $244.6 million loss in 2017. That spending stems from the retailer’s aggressive efforts to build out its logistics network and to bolster its still-small international business. The retailer says it has made significant strides on the logistics front. For example, 90% of its U.S. large parcel orders flow through the Wayfair-controlled middle-mile network, which the retailer says helps decrease delivery times, lower damage costs and improve customer satisfaction.

Home goods is the fastest‑growing merchandise product category online in 2017, according to an Internet Retailer analysis. The combined online sales of the 109 housewares and home furnishings retailers profiled in the Internet Retailer Home Goods Report soared 29.3% in 2017. And Wayfair believes there is plenty of room for continued growth, given that ecommerce only accounts for 13% of the market, according to its research. That’s a far cry from the 28% ecommerce penetration within the apparel market or the 34% ecommerce penetration within consumer electronics, according to Wayfair.

For the fourth quarter ended Dec. 31, Wayfair reports:

  • Ecommerce revenue of $1.996 billion, up 40.7% from $1.419 billion a year earlier.
  • Net revenue of $2.014 billion, a 40.0% increase from $1.439 billion a year earlier.
  • Net loss of $143.8 million, compared with a loss of $72.8 million a year earlier.
  • Repeat customers placed 66.4% of orders compared with 62.4% a year earlier.
  • Average order value was $227 compared with $229 a year earlier.
  • .

For the year, Wayfair reported:

advertisement
  • Ecommerce revenue of $6.718 billion, up 44.7% from $4.643 billion a year earlier.
  • Net revenue of $6.779 billion, up 43.6% from $4.720 billion a year earlier.
  • Net loss of $504.1 million, compared with a loss of $244.6 million a year earlier.

Read more about Wayfair and its quest to build a profitable business model here.

Favorite