BOSTON — Wayfair’s shares soared after the online retailer reported strong momentum and better-than-expected revenue in the first quarter of 2017. The company has continued to gain significant traction across key strategic initiatives and to steadily increase its market share in the $600 billion dollar home category across North America and Europe. Part of that success was driven by Wayfair’s house brands penetration.
For the first quarter ended March 31, Wayfair saw its direct retail net revenue climb by $228.5 million to $940.4 million — a jump of 32.1% year over year. The company’s total net revenue $213.5 million to $960.8 million — up 28.6% year over year. Gross profit was $236.9 million or 24.7% of total net revenue. House brands, meanwhile, grew to approximately 45% of Wayfair.com revenue. In the third quarter of 2016, house brands represented about a third of Wayfair.com revenue. Cofounder, CEO and co-chairman Niraj Shah expects to see that penetration increase as the company expands its house brands portfolio.
“The house brands that we are building are good examples of our best-in-class merchandising and technology capabilities that showcase the vast selection we offer our customers,” said Shah. “In addition, our investment in a proprietary logistics network customized for furniture and décor is paying off as we continue to increase sales conversion through faster delivery and greater customer satisfaction. With technology and innovation as the backbone of our business, we feel confident that we have built a category-leading retail brand that is exceptionally well positioned for long term growth and continued success.”
Shah added that the company used to refer to its house brands program as its private label program. But it isn’t a traditional private label approach, he explained. “Many retailers approach private label by disintermediating their suppliers and manufacturing product directly to pick up a few points of margin on the inventory they hold. Instead, we work with our suppliers to put their products, particularly their newer introductions, into one of our 40-plus different house brands. Consistent with our inventory-light model, we do not design the products nor do we carry the inventory,” Shah continued.
Each house brand includes products from multiple suppliers but has a consistent style and price range. Examples include Andover Mills, an entry price point traditional look; Wade Logan, a moderately priced contemporary look; and Lark Manor, a moderately priced cottage look. “By grouping products together and bringing them to life via visual imagery, we have made it easier for customers to be inspired and identify items on the site that fit her personal taste. This is incredibly important in the home category, where customers often do not know what they’re looking for until they see it,” Shah said.
Wayfair generated $3.59 billion in net revenue for the 12 months ended March 31. Headquartered in Boston, Mass., with operations throughout North America and Europe, the company employs more than 5,700 people.