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SCT

Wayfair explores physical retail with two pop-up shops

November 7, 2018

A major online furnisher at the center of the Supreme Court case compelling states to levy sales tax on e-commerce purchases has opted to jump into the bricks-and-mortar fray itself.

Boston-based Wayfair, Inc., the largest U.S. online furnishings retailer (nearly $6 billion in annual revenues), has opened two holiday pop-ups, one in nearby Natick, Mass., at the Brookfield Properties Retail Group–owned Natick Mall; and the other at Westfield Garden State Plaza, in Paramus, N.J.

Wayfair’s chief product and marketing officer, Ed Macri, calls the shops another way of deepening customer engagement. For the first time ever, “shoppers will be able to step into the world of Wayfair,” Macri said. “We’re excited to connect with shoppers face-to-face and introduce them to the endless possibilities in shopping for the home.” The roughly 400-square-foot shops will close Jan. 2.

Next up will be Wayfair’s very first year-round store, a 20,000-square-foot outlet slated to open early this coming year, in Florence, Ky., near the Cincinnati metro area. This outlet will offer closeouts and returned items in good condition and will connect with an existing Wayfair distribution center, the retailer says.

“They are recognizing they need brick-and-mortar to connect with more shoppers”

Pure-play Internet retailers such as Wayfair are expanding increasingly into physical stores to create product touch points and complement online sales, according to Herb Tyson, ICSC’s vice president of state and local government relations. “There is a halo effect,” Tyson said. “They are recognizing they need brick-and-mortar to connect with more shoppers.” On the other hand, physical retailers with strong e-commerce offerings find that they start losing online sales when they shrink their brick-and-mortar footprints, says Tyson. “It’s obvious that the two augment one another.” Food-and-gifts retailer Harry & David and publisher Good Housekeeping are among those opening pop-ups of late.

Wayfair, which also operates specialized home-decor sites under the AllModern, Birch Lane, Joss & Main and Perigold names, had seemed resolved to sell online only — to the point of boasting on its website as late as last year that it had no physical stores. “No more searching ‘Wayfair store near me’ or planning an all-day family trip to a furniture store to shop,” the website read. And yet, last October Wayfair CEO Niraj Shah hinted at the Chief Housewares Executives SuperSession conference, where he was discussing e-commerce evolution, that the furnisher was looking at using physical stores primarily as online-business drivers, not as profit centers.

 

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Wayfair pop-ups will offer about 300 stock-keeping units of housewares and tabletop products, out of the retailer’s roughly 8 million online SKUs. Wayfair’s use of stores “will be an iterative process, and we will use our learnings from visitors to our pop-up stores to determine the best format to offer [our] shoppers in the future,” Shah said during an earnings call last month.

Two years ago Wayfair introduced a first-party, smartphone-augmented, reality application it calls WayfairView, which enables users to visualize digitally the way furnishings and other products will look inside their homes.

In April Morgan Stanley analyst Simeon Gutman said a key aspect of Wayfair’s ultimate profitability involves its ad-spend per incremental customer, which is increasing, and which is leading to losses among new customers while outpacing any improving profits on repeat orders. Morgan Stanley research concludes that Wayfair’s strong sales and essentially profitless growth will continue over the next three or four years. Wayfair posted a third-quarter 2018 net loss of $151.73 million, against a $76.43 million loss for the comparable quarter in 2017.

Ruling on South Dakota v. Wayfair in June, the Supreme Court overturned one of its own precedents in saying that online retailers such as Wayfair should collect state tax regardless whether the retailer has a physical presence in the state.

By Steve McLinden

Contributor, Shopping Centers Today

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