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Wayfair Sees Decline In Active Customers Amid ‘Murkiest Moment’ Of 2021

Furnishings and home goods retailer Wayfair said the fundamentals driving growth of online furniture sales remain intact despite falling orders and active customers in the second quarter.

The Boston-based retailer saw active customers drop by 2 million in the second quarter and a nearly 18 percent year-over-year decrease in repeat customer orders. Orders delivered in the second quarter were 13.9 million, a decrease of over 26 percent.

Wayfair CEO Niraj Shah said, though, that “despite any short-term noise,” the elements that will drive long-term demand for online home furnishing sales remain in place. “Interest in the home is not going away post-pandemic, even if there is some shorter-term normalization,” Shah said.

“Customers tend to shop one item, one room, one project at a time,” Shah said. “While they may be rebalancing their spend some, home to-do lists are nearly endless.” He added that the second quarter is likely to be Wayfair’s most difficult year-over-year comparison because of the number of new customers and orders placed in the spring of 2020.

Earlier this week, Chairish CEO Gregg Brockway also told PYMNTS he expects online home furnishing sales to continue growing at a more measured pace.

“What you’ve seen in other industries is that it never goes back,” Brockway said. “I think people have come to learn and appreciate the benefits of purchasing online.”

Read more: Chairish CEO Says European Acquisition Provides ‘Next Big Step’ For International Expansion

In the second quarter, Wayfair had $2.9 billion in net revenue, down about 10 percent year overyear but up over 28 percent compared to 2019.

Looking ahead, Chief Financial Officer Michael Fleisher said “it’s difficult to be definitive” because of uncertainty about how COVID-19 will progress, but noted that a faster-than-expected economic reopening has pushed out Wayfair’s expectations for a “return-to-normal” revenue flow.

“This is probably the murkiest moment of 2021,” Fleisher said. “It’s the most complex macro environment to read that I’ve seen in my entire career.”

Embracing The Office Return

Wayfair executives also shined a spotlight on its B2B business, which it launched in 2017. Since then, the number of commercial-grade products available has grown by approximately 25 times, and Wayfair is now beginning to expand its B2B reach into Europe.

Though still in early stages — Wayfair is focusing on building out its European B2C business before layering on the professional platform — Margaret Lawrence, vice president of Wayfair Professional and Perigold, said the total addressable B2B market in North America and Europe is $200 billion, less than 15 percent of which is spent online.

During the pandemic, Lawrence said Wayfair “seized the opportunity for differentiation,” working with more than 35,000 food service customers to reorient their business for social distancing and increased outdoor seating.

Over the last four months, 80 percent of Wayfair Professional orders were placed by business customers who have already placed at least four other orders. And with a return to the office on the horizon, many businesses are in the midst of “a meaningful refresh cycle.”

“We have enviable momentum in North America, with a long runway ahead, and are just starting to embrace a proven playbook in Europe,” Lawrence said.

Supply Chain Woes 

Shah said Wayfair has seen “sequential improvements” in inventory availability and fulfillment, though bottlenecks still exist at nearly every point in the supply chain.

“The progress is incremental and does not happen overnight,” he said, noting that some port congestion has begun to ease, and Asia-based international supply chain services are growing quickly to support suppliers. Still, lead and delivery times are unlikely to normalize until some point in 2022.

Related: Wayfair’s Revenue Soars With Growth Of Active Customer Base

All this is leading to inflated costs, which Shah said Wayfair is working with suppliers to pass through, paying close attention to how customers react to higher prices on nearly every product. “So far, we believe customers are generally absorbing the higher prices reasonably well,” he said.

Wayfair has a nearly $28 billion market capitalization, down from $32 billion at the end of April. Year-to-date, the eCommerce platform’s stock has risen about 17 percent, approximately the same increase as the S&P 500.

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