Online furniture and home furnishings seller Wayfair is set to open its first brick-and-mortar store next month in Wilmette, Illinois. The 150,000 square foot store will also feature an onsite restaurant called “The Porch,” following in the footsteps of Ikea’s store setup. While this will be the first physical store for the Wayfair brand, the company has experimented with opening test stores for other owned brands like Joss & Main and AllModern.
The decision to expand its flagship Wayfair brand into physical stores comes as the company faces challenges with sluggish sales and increased advertising spending. Neil Saunders, a retail industry analyst, noted that Wayfair’s online business has been successful in generating sales but struggles to be profitable due to the high marketing costs needed to attract and retain customers. Furniture stores require constant advertising as people typically don’t purchase furniture frequently, necessitating a need for continuous customer reminders about the company’s existence.
In addition to the significant advertising spending, Wayfair has seen a decline in sales, reporting a 1.8% drop in annual sales in 2023, resulting in a net loss for the year. The company also faced layoffs, shedding 13% of its global workforce in January, following previous rounds of job cuts in 2023. Wayfair’s CEO, Niraj Shah, attributed these hardships to overhiring during a strong economic period amid the pandemic, which saw a surge in online shopping as people upgraded their homes, doubling Wayfair’s sales to $18 billion.
As the pandemic subsided and inflation persisted, consumer spending on discretionary big-ticket items like furniture decreased among budget-conscious shoppers. Saunders believes that the new store could potentially boost sales and provide Wayfair with a more visible presence in the market, enhancing its online operations as well. Recognizing that consumers shop in an omnichannel way, Saunders noted that people in the furniture and home furnishings sector prefer to see and try out products in-store before making a purchase.
The success of the new store in Wilmette may indicate a potential wider physical expansion for Wayfair, according to Saunders. If the store proves to be successful, it could signal a shift towards a more prominent physical presence for the company, complementing its existing online operations. The move to open a physical store reflects Wayfair’s acknowledgment of the importance of combining online and in-store shopping experiences to meet customer preferences and drive sales growth. The impact of the new store on Wayfair’s financial performance remains to be seen, but it could mark the beginning of a new phase in the company’s retail strategy.
