The way ahead for Wayfair UK

Posted in UK on Friday, 29 May 2015. Print

The world’s biggest dedicated homewares website landed in the UK back in 2008. Having cornered the US market by deploying a unique combination of technological, logistical and commercial smarts, Wayfair’s CEO Niraj Shah looked next to Europe – and few markets match the potential of our own. It may have taken some time, but Wayfair’s commitment over here is rapidly becoming clear, discovers Paul Farley …

The way ahead for Wayfair UK

I last visited Wayfair UK’s headquarters in the summer of 2013. Its office, located just off the Strand, housed around 20 staff. Upon arrival at the company’s new base in Islington this year, and I can see that things have changed.

Around 70 staff occupy the open-plan office floor, which easily dwarfs its predecessor. Google-style breakout zones and a diner flank the workspace, alongside attractive reception areas – furnished, of course, with items from Wayfair’s extensive portfolio.

It’s a reflection of the astonishing progress Wayfair has made recently in the UK, mirroring expansion in Ireland and Germany.

“In the last eight months, we’ve begun to step on the gas pedal,” explains senior vice president of strategic initiatives and international, John Mulliken, who worked as a consultant in Boston before joining Wayfair four years ago. “We’ve been training in the UK and Europe for several years now, and we’ve only just begun to run the same playbook that has spelled success for us in the US.”

According to John, everything up to this stage has simply been recon – understanding how the market differs from the US, and laying the foundations for growth. The parent company went public last year, and remains the world’s largest homewares-dedicated online outlet – today, Wayfair is a $1b-plus company, with offices in the US, the UK, the Republic of Ireland, Germany and Australia.

However, overseas expansion is never a matter of simply plugging in and playing.

“Globally, we’re doing this on a scale that no-one else is,” says John, “but that doesn’t give us a free pass. We know that we’ve got a recipe that works, but Europe is much more complex than the US – its multiple markets mean that the level of investment it’s going to take to capture the opportunities is far greater.”

It’s an exciting time for Wayfair to be entering the ring. Competition for spend between pure-play sites, big multiples and independents is fierce, and particularly so in the homewares sector, where online market share lags behind other consumer goods.

“Competition is a great thing,” John asserts. “It means that the market is successful, that there’s opportunity.”

“The UK is probably the most advanced online market in Europe,” cuts in Maxim Romain, Wayfair UK’s general manager and head of European business, a Frenchman who joined Wayfair from the world’s biggest sports retailer, Decathlon, “and it’s been ripe for quite a few years – but now we’re ready too.”

“And,” continues John, “despite its size, the UK is such a fragmented market – both offline and online. The actual share of individual home furnishings retailers is so low compared to sectors like office supplies, food, even fashion. So, for us, it’s a wider playing field – and an open opportunity for success that, we believe, could be similar to what we’ve experienced in the US.”

The company operates two brands in Europe – Wayfair and Joss & Main. John describes flash-sales site Joss & Main as “highly curated, themed, and fashion oriented, with a narrow, ever-changing selection. Wayfair is the all-encompassing catalogue for someone who knows what they are looking for – Joss & Main is for those who didn’t even know they were looking”.

Recognising that Europe’s many markets have vastly different homewares tastes, Wayfair has approached trading on the Continent accordingly. “With our breadth of offer, we have the ability to adapt our assortment to different markets,” says Maxim.

“We’re making a push in several markets at once,” adds John. “The skillset required is the same, as are many of the capabilities – logistics, pricing algorithms, etc, all of which benefit from the fact we’re in multiple markets – but we believe that the race will go to those who treat Europe as multiple entities.”

According to the pair, the seven years of groundwork in the UK were spent developing several areas of the business, starting with the freight network – now a highly-integrated, EU-spanning operation, able to convey large, bulky goods within a competitive timeframe.

“These are very challenging products to fulfil – we don’t just slide them into a polyethylene bag or squeeze them into a mail slot! – so it’s taken us a long time to reach the level we’re at in the US,” says Maxim.

The transfer of Wayfair’s US logistical methodology – overpacking facilities to protect products, multiple line routing, and freight zone skipping, for starters – to Europe has proved invaluable.

“We’ve built up so much partner and process knowledge which we can transfer to new markets,” says Maxim. “In terms of freight, Europe is actually quite similar to the US – just replace states with countries! There is no home delivery freight network established in Europe, just national carriers, so the difficulty is in linking them together.”

Of course, a delivery network means very little without goods to deliver, so cultivating a strong supplier base has been essential.

“The majority of what we sell in the UK comes from the UK,” says Maxim. “We believe in strong, very open relationships – and, over the years, lots of suppliers here have learned how to work online through working with us, on a drop-shipping business model.”

“We sell a lot of our UK vendors’ products into France and Germany,” continues John. “For some, it’s a huge portion of their business. For vendors looking to try their hand at e-commerce, flash sales can be a good way to get started – Joss & Main is very good for those who want to just dip their toes in. In the long term, however, vendors can build a substantial share of shelf with us.”

Another crucial factor during those seven years was the need to develop a customer service approach fit for the market. “We don’t believe that UK and US consumers are fundamentally different,” says John, “but when you launch 7000 items every week, you need to translate them perfectly and make sure all the cultural connotations are correct.”

By 2014, Wayfair’s UK infrastructure was ready for the next step – establishing the brand.

“For some time, the investment in the UK was very lightweight,” explains John. “Getting the freight network and customer service off the ground takes a while – you don’t want to step on the gas in terms of marketing dollars until you’ve got all that settled.”

In the US, Wayfair began its brand journey in 2012, when the company’s 200-plus microsites were merged under one brand umbrella – a Google ranking necessity – and the advertising began. Two-and-a-half years later, and Wayfair is, says John, a “household name” in the US.

Although the company’s UK branding process began in earnest with its first television advertisement in August 2013, and the subsequent creation of a European marketing team, there’s a long way to go. John admits that Wayfair UK’s key challenge today is the same as every other internet retailer – validation. Even today, as the proportion of consumers willing to engage with internet buying rises inexorably, the enthusiasm for homewares remains relatively low.

“I think that will always be the case,” admits John. “A sofa will always be a harder sell online than a laptop – people still need to touch and feel it – but the numbers we’ve seen in the US prove it’s possible. I do feel that bricks-and-mortar stores will continue to turn over the majority of furniture sales in the foreseeable future, but a physical store can only display so many products. The online customer has access to so much more.”

It’s no idle boast. Worldwide, Wayfair offers around seven million products, sourced from some 7000 suppliers.

“I see the work some retailers have done to bring their online offering into their showrooms – and I do think that in the future more and more stores will become just showrooms for their online counterparts – but the scale of what we do is on another level,” says John. “The key thing now is to build validation and trust, by understanding the many paths consumers take to bring an item into their home.”

In the US, Wayfair has developed a unique approach to validating its brand – Get It Near Me, a scheme which refers browsers reluctant to buy online to a bricks-and-mortar partner store in their locale. It’s an ingenious approach to overcoming consumers’ uncertainty – and those of Wayfair’s physical competitors – while remaining part of the sales process.

Says John: “We view the market as an ecosystem that we’re part of. We recognise that we have a very high level of execution online, and that building a breadth of offering like ours is going to be near impossible for a retailer – but they’re still always going to own a proportion of the market.

“To be honest, 99% of the visitors who come to our site are not going to buy anything, they are just doing research. Maybe they’ll buy from us someday, maybe they won’t – but the fact is, if they are looking for a sofa online, they are going to buy one somewhere.

“No-one does that just for fun! Get It Near Me allows us to recommend a store they can buy from, which is good for us, good for the customer, and good for the local retailer. It’s just a matter of achieving the right scale before we launch it in the UK.”

According to Maxim, trust is the final obstacle. “If customers are increasingly confident that when they buy online it will be a better experience than if they buy in store – because they can choose the time of delivery, and have any problems solved quickly – we can win a lot of business,” he says. “We offer a lot more products and styles, manufactured across many countries – we offer something truly special.”

John describes Wayfair UK’s turnover growth as “substantial”, and the level of investment evident in the UK operation would seem to support his assertion. Moving forward with an ever-growing product offer, class-leading buying tools and fulfilment – and, crucially, the support of its big brother across the Atlantic – there’s nothing I can conceive of that might hold back this juggernaut now it has momentum.

John smiles, and says: “Rome wasn’t built in a day. But we do at least know what Rome looks like …”

This article was published in the May issue of Furniture News magazine. Read Paul’s interview with former Wayfair UK MD Joel Richardson, plus details of the company’s IPO and recent financials, at www.furniturenews.net.


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