Shoppers Are Abandoning Wayfair, New Data Shows—Here's Why
Results from the third quarter fell short of expectations, per a new earnings report.
Buying furniture always comes with a few decisions, including whether you want to really invest in a piece or whether you'd rather find a bargain. Luckily, online retailers offer both, and if you prefer more affordable options, Wayfair is typically a reliable bet. Like many others in the home sector, Wayfair's business was booming during the height of the COVID pandemic, but now, new data suggests that shoppers are actively abandoning the retailer. Read on to find out more.
Wayfair sales missed the mark during the last quarter.
According to CNBC, Wayfair's sales fell short of expectations during the last quarter. The home retailer was anticipated to bring in $2.98 billion, falling just shy of that by bringing in $2.94 billion, the outlet reported, citing data from a survey of LSEG analysts. However, per a press release from Wayfair, this was a 3.7 percent increase from the same quarter in 2022.
International sales also saw a 7 percent decline year over year, dropping $28 million, while revenue in the U.S. was up 5.4 percent. And while Wayfair did report a $0.13 loss per share, this was much lower than the $0.48 loss that was expected.
Wayfair also saw a slight dip in active customers.
Revenue from individual customers also dropped slightly over the last 12 months, down to $538 (a 1.6 percent decrease). During the last quarter, specifically, customers also spent a bit less. In the third quarter last year, the average order value was $325, but this year, that number was down to $297.
When compared with 2022, Wayfair also reported fewer "active customers," which were down by 1.3 percent to 22.3 million. However, the company noted that the average customer count has improved from quarter to quarter, and repeat customers are now purchasing more.
The company is optimistic—and continuing cost-saving efforts.
Like many other home retailers, Wayfair was particularly successful during the pandemic when consumers were confined to their homes and looking to elevate their space. But when stay-at-home mandates were lifted, spending shifted to travel and experiences—and this year, with climbing interest rates and a slower housing market, Wayfair has struggled to regain momentum.
But while the latest results aren't exactly in line with Wall Street's expectations, Wayfair is actively working to cut costs, CNBC reported. Following a hiring freeze in May 2022, the company made significant cuts to its workforce in January, eliminating roughly 1,750 employees.
Executives also shared a positive outlook, stressing that the company is making its way back to profitability.
"Wayfair is now in a place where we can drive profitability while simultaneously investing for growth," Niraj Shah, Wayfair's CEO, co-founder, and co-chairman, said in the press release. "Q3 is one more proof point of exactly that."
Customers might not actually be buying less.
Even though the drop in revenue and lower average order values suggest that fewer shoppers are frequenting Wayfair's website, CNBC also points out that shoppers who do buy from the company might not necessarily be buying less.
Wholesalers are actually charging Wayfair less for freight and raw materials due to lower costs, with Wayfair transferring those savings to customers by offering more competitive prices. So, while customers are benefiting from lower prices, it may have had a different impact on Wayfair's overall numbers.
With that said, following the release of the earnings report today, investors were still a bit rattled. As CNBC reported this morning, Wayfair's stock fell by 12 percent.