Online furniture retailer Wayfair reported sales declined over both the fourth quarter of 2022 ending on Dec. 31 and the entire year.
Total net revenue for the quarter decreased 4.6% year over year to $151 million. The company also reported a net loss of $351 million, significantly higher than the net loss of $202 million in the fourth quarter of 2021. Wayfair is No. 7 in the 2022 Digital Commerce 360 Top 1000.
Net revenue was also down for the 2022 fiscal year, dropping 10.9% over 2021. The net loss over the year was $1.3 billion.
Wayfair is cutting costs and adding promotional deals to turn losses around in 2023, CEO Niraj Shah said in a Feb. 23 call with investors.
Wayfair cuts corporate spending
The furniture retailer has taken several measures to cut unnecessary costs, Shah told investors. Wayfair laid off 1,750 employees in January, totaling about 10% of its total workforce including 1,200 corporate employees. These cuts were on top of earlier layoffs of 900 corporate workers in August to “reduce redundancies and remove excess management layers,” Shah said at the time.
The company has also had a hiring freeze in place since spring 2022.
Wayfair saves money on customer service
The furniture giant also found ways to cut costs in the sales process. Wayfair saved time and money by connecting customers directly with suppliers on product issues, Shah said. For example, when a product has a faulty piece, the company now connects customers directly with the supplier. Wayfair saves by only sending the replacement part, rather than replacing the entire product.
The company is also reducing advertising budgets that had grown beyond the small tests that they were originally intended for, Shah said.
Promotions still bring in customers as sales decrease
Despite the sales slump of the last year, promotions still work to entice customers, chief financial officer Kate Gulliver said. Customers show a “strong” response to promotions, she said, and customers in the top three quintiles of income have significant savings to spend. They have money but are waiting for a “call to action” like a sale to buy furniture, she said.
The annual “Way Day” sale and other traditional promotional periods were successful, Shah said. Wayfair sold a mattress every 12.2 seconds, on average, over the Thanksgiving weekend.
Wayfair is optimistic about growing customer base
Despite challenges, Wayfair said there are reasons to be optimistic.
“Scarcity is a good thing for Wayfair,” Shaw told investors, adding that some promising signs are emerging.
Wayfair’s Perigold website saw encouraging results. Perigold sells premium designer furniture rather than private-label products. 30% of Perigold customers in 2022 were new to Wayfair, Shah said. The website had high customer satisfaction, and it’s growing popular with professional customers like interior designers, he said.
Shipping and inventory look better than before
Inventory at the end of 2022 reached its highest levels since before the COVID-19 pandemic, Shah told investors. Shipping also became faster and less costly over the quarter, thanks to easing port congestion and decreased demand from the height of the pandemic. Wayfair shaved one day off averaged delivery speed in 2022, Shah said, leading to higher customer satisfaction.
For the fourth quarter ended Dec. 31, Wayfair reported:
- Total net revenue of $3.1 billion, down 4.6% over the same period in the previous year.
- U.S. net revenue totaled $2.7 billion, down 1.8% year over year.
- Net loss was $351 million.
- Active customers reached 22.1 million, a 19% decrease over the previous period.
- Returning customers placed 77.4% of total orders, an increase from 76.3% of orders in the fourth quarter of 2021.
- The average order equaled $283, up from $269 in 2021.
- 61.7% of all orders were purchased through a mobile device, compared to 59% in the fourth quarter of 2021.
For the full fiscal year ended Dec. 31, Wayfair reported:
- Total net revenue reached $12.2 billion, down 10.9% over 2021.
- U.S. net revenue decreased 7% year over year to $10.5 billion.
- Net loss of $1.3 billion compared to a loss of $131 million in 2021.
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