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personalization things, where you come on our site. I think we are exceptionally good at surfacing products that you are interested in—quickly. And if we’re doing it right, you won’t even notice it because you’ll feel like, “Well, I just searched for bunk bed, and the bunk beds I saw, out of the 30 you showed me, 10 looked pretty good.” Well, you know what, five years ago, you would’ve said one looks good.
Personalization is probably the most obvious one. I think, if you get deeper into the company, we have an adtech team inside Wayfair that is probably bigger than a lot of adtech companies. And there’s a huge amount of A.I. inside that world that’s trying to figure out how do you track customers, how do you target them when it’s appropriate, and in channels that work with good payback?
And so, that’s a team we’ve been investing in very heavily.
We do a tremendous amount to try to build very complicated demand forecasting models using machine learning. That helps on our side because we can have products that are in stock in the locations they need to be.
It helps with our supply chain, too. Our suppliers look at us as an amazing platform to run their businesses on. We have over 10,000 suppliers on the other side. They’re using our platform to then compete in the market, bringing their products to life, getting them in front of large groups of customers, to generate demand.
And so, we are increasingly using A.I. and our expertise there to help them out. It’s not something they’re going to go and invest in, a large team of data scientists to go build complicated demand forecasting models. But we can do it for them, and it’s super beneficial. We have products in stock when we need them to be.
X: What’s the path to profitability, and do you have a timeline for that?
SC: The U.S. business is right around breakeven, and it has been profitable for a number of quarters. We ran this [entire] business profitably from 2002 to 2010, when we were a private company.
I think as an entrepreneur running this business, we definitely have a long view. And shareholder value, in my opinion, is created with a long-view time horizon. As long as we have opportunities that we are super confident have yield, and we have the cash balance to do it, then we will continue to be aggressive investors against the opportunities that we see. [Editor’s note: Conine and Shah are Wayfair’s largest shareholders.]
We don’t have any specific timeline we’re aiming at [to become profitable]. We don’t feel a burning timeline.
The public markets—it’s always a cacophony of people giving their opinion.
One thing about investors I think is that they can be really good sounding boards and free consultants, and you learn a lot from ideas they have. But you also have to be very thoughtful about sticking with a long-term investment mindset. And if you can do that, I think you can have more success because there’s a lot of people who probably miss that, and they tend to play a shorter game, and as a result they’re trimming their long-term value creation.
X: How do you win against Amazon?
SC: This business, retail, it’s a business of, it’s the old adage, the customer comes first. If you are delivering an experience that is superior in the customer’s mind, you will continue to do well. [Home goods] is a category that it’s much more emotional, it’s much harder for people to describe, it’s non-branded, it’s not part number-driven. Most of our customers find products through browse, not search. And so, the characteristics of this category, they’re different than core, mass-market retail.
As a result, the mouse trap you build for that is going to be optimized for that. Sure, you try to do a bit of everything well. The problem is, you can’t do everything great. And so, we’ve built a machine, and we focus purely on home. We try to make sure we’re doing everything with that focus, exceptionally well, so in the customers’ eyes, we’re building an experience that really sets us apart from anyone in the marketplace.
I think that’s what, over time, you just keep doing, and it builds the durability of why customers care, why they want to keep being loyal to you. You see it in our repeat metrics and you see it in the customer behavior we have. We increasingly have the majority of our orders are through repeat customers and our repeat [business] is growing very nicely, and active customers continues to grow very nicely.
At the core of it, it’s kind of as simple as that. Just keep focusing on the customer. This category is different enough.
X: The idea has been thrown out there that Amazon would try and buy you. Would you ever sell to them?
SC: We don’t comment on that at all.
X: Do you see ever selling to another company, or do you want to stay independent?
SC: We don’t comment on that at all. We’re definitely long-term shareholders, is what I’d say. We have a long view on this business. I think there’s a big opportunity ahead of us.
X: Wayfair is one of the early partners for Magic Leap. Can you talk about that partnership and your company’s vision for augmented reality and virtual reality?
SC: My belief is, at some point in the not-too-distant future, every home in America will have a 3D model tied to it. If you give us access to it, we can use that to … Next Page »