Wayfair aims to use investments in warehouses, shipping and hiring to boost earnings, company executives said on Wednesday (May 2) when announcing a 48 percent year-over-year revenue increase for the first quarter of 2018.
In the Q1, Wayfair revenue hit $1.40 billion, beating analyst expectations of $1.36 billion and sending the home furnishing retailer’s stock on an upward swing after the earnings release. The online retailer booked a $108 million net loss — compared with nearly $57 million for the same period last year — and its $0.91 loss per share was worse than expectations of $0.90.
However, international was a bright spot for the eCommerce operator, with direct revenue up 97 percent year over year, to about $203 million. Average order value increased 5.8 percent, to $236. Repeat customers placed 3.8 million orders with Wayfair in the first quarter, a 49 percent year-over-year increase. Orders per customer grew to 1.79, up from 1.73 from the same period last year.
Canada provides an example of how Wayfair is improving its logistics in a bid to boost revenue and bring earnings into the black, said Niraj Shah, founder and CEO of the retailer, during a post-earnings conference call. Wayfair began selling in that country, and in two years its business there, especially in Quebec, has shown significant “momentum,” he said, without providing figures.
“Logistics has been a key enabler of our growth today in Canada, and we believe that the investments we’re making to scale the proprietary infrastructure we have in Canada will be central to our continued gains in the region,” he said.
That’s why Wayfair has invested in an 800,000-square-foot site, scheduled to launch later in the second quarter, that will serve as a “storage facility, a cross dock, consolidation center and a last-mile delivery agent,” Shah explained.
The advantages of that facility go beyond faster deliveries. “Products that are forward-positioned in our CastleGate warehouse will have lower aggregate duties relative to the products shipped directly to customers from the United States,” he said. “Shipping costs will be reduced as we lower our reliance on third parties and take greater control over the transportation of customer orders, optimizing the process to benefit suppliers, customers and Wayfair.”
Besides the Canadian warehouse, Wayfair has recently opened two additional last-mile delivery facilities, one in Pennsylvania and the other in New Orleans, bringing the total to 22 facilities in the United States, Shah said.
Better logistics can help Wayfair sell more products that are bulky and come with a higher risk of damage during shipping, such as bathroom vanities, Shah said during the call.
“The players can forward-position vanities in our (new) warehouse, often with us receiving the product container direct from the manufacturer,” he said. “This coupled with our increasing control of the middle mile and last mile of transportation reduces the number of touch points in transportation, thereby improving the speed of delivery and reducing risk of damage.”
Hiring, too, remains a focus for Wayfair — and that includes not only employees for the vanity category, whose annual run rate has doubled to $100 million — but also engineers, data scientists and other types of workers, company executives said during the call.