1 million customers lost in Q3! Is the end of home furnishing giant Wayfair coming?

It is learned that on November 3, the US home furnishing e-commerce giant Wayfair released its third-quarter performance report, which showed that its net income fell 9% year-on-year to US$2.8 billion. Among them, US revenue fell 6% from last year to US$2.4 billion, while international revenue fell 24% to US$400 million.

Wayfair has failed to turn a profit every year except 2020, falling into an even deeper loss in the third quarter of this year.

Wayfair's operating loss swelled to $372 million in the third quarter from $70 million last year, while net losses grew to $283 million from $78 million. Gross profit was $824 million, or 29% of total net revenue, compared with $883 million last year.

The report shows that Wayfair increased its advertising spending in the third quarter, with its advertising expenses rising to $353 million from $315 million a year ago. However, Wayfair's active customers experienced another sharp drop in the third quarter.

Wayfair reported 22.6 million active customers as of September 30, down 22.6% from the same period last year. Compared to the second quarter, Wayfair's active customer base shrank by 1 million, or more than 4%.

Even existing customers, which account for 77% of Wayfair's sales, placed 19% fewer orders than last year. One bright spot was that revenue per active customer rose 13% to $547. Average order value climbed sharply, from $283 to $325.

“Consumer churn is happening faster than we expected,” wrote Jaime M. Katz, a senior equity analyst covering the company at Morningstar. She had predicted a 15% decline in customers, not a 23% decline. In addition, customer acquisition costs are at an all-time high.

Is the end of Wayfair coming?

Wayfair's sales got a big boost in the early months of the pandemic, but the retailer has since faced a decline as demand has weakened. On a two-year basis, Wayfair's net income is down about 26%.

Neil Saunders, managing director of GlobalData, said that while inflation has an impact on most retailers, Wayfair is more affected by the current economic environment because most of the items it sells are impulse buys.

And consumers are the first to cut back on spending on these products due to inflation and other economic pressures. GlobalData's research shows that "the average Wayfair customer is more vulnerable to economic tightening than customers of traditional chain stores."

Neil Saunders, managing director of GlobalData, was more pessimistic about Wayfair's prospects, noting that the poor third quarter performance underscored the fact that Wayfair's efforts were not working and that it was losing a lot of market share, especially in North America.

The good news is that slowing demand provides Wayfair with an opportunity to reset its spending profile, with company leadership noting that more than $500 million in cost savings will be realized by 2023.

However, Neil Saunders said the cuts would eliminate marketing spending, which could hurt rather than help sales. "Overall, we had little confidence in Wayfair before this slowdown, and we have even less confidence now," he said.

Editor✎ Ashley/

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