🧠 Takeaways:
Wayfair's stock is down 45% in a year on a marketplace model Amazon dominates at 3x scale.
1. Kill the marketplace, go 100% private label (60% margins vs 30%)
2. Cut 25% of headcount surgically ($492M savings)
3. Build 50 stores as the anti-IKEA (walk out w/ furniture same-day)
+ The power of posting on LinkedIn
LBAB Community:
Last week, this post where I talked about my awful experience with Deel (We use for EOR for our European employees at Coco) went a little viral.
And is a great ex of why I post so much on Social Media.
It wasn’t the views, or the $100 Starbucks gift card, or everyone & their mother slinging a competitor that made it worth it.
Or even wayyyyyy more Sr. people @ Deel who reached out (comments, email, even calling).
It was getting the exact deal I wanted from Rippling.
When I was writing this post the week before, I decided I had enough with Deel and reached out to Rippling to get a demo. By Friday, when this post took off, I was at the final mile negotiating with Rippling on 2-3 final terms.
Because the post had gotten shared in multiple internal Slack channels, my AEs got top priority.
The same internal reviews and requests that were taking days before got answered in hours.
As the post gained more traction, I got responses faster and the pushback to my impossible requests in the morning turned into an easy yes by 1pm.
In the end, I got every concession I asked for, and we’re happily migrating onto Rippling now.
Let’s Examine This Biz
Note: As always, none of what follows is legal, tax, investing, financial, or any other sort of advice. And I was never here.
Wayfair (the dropshipping cheap furniture marketplace) is dying a slow, painful death.
Amazon already ate their lunch, stole their spot, and kicked them out (while owning 3x the Market Share Wayfair does).
Stock price: $93
Market Cap: $9B
L5 Performance: -45%
P/E Ratio: N/A
Today, we're acquiring Wayfair to burn the marketplace to the ground and rebuild it as the anti-Amazon, anti-IKEA $40B furniture retailer.
Financial Summary
TLDR Analysis:
Rev: $12.5B (+5.5%) 💪
Gross Profits: $3.8B (+30%) 😟
OPEX: $3.9B (+23%) 👍
Net Income: -$313M (+47%) 🤮
FCF: $329M (+296%) 🤤
Link to Wayfair's FY 2025 earnings: https://investor.wayfair.com/
TLDR Analysis: Dead marketplace walking
Rev growing 5.5% while Amazon dominates at 3x scale
30% gross margins vs Williams-Sonoma 46% (they own brands, we don't)
Burning $500M/year on stock comp (4% of Rev) eliminates all profits.
The biz generates $329M FCF, which proves the model works.
But it's a slow march to irrelevance unless they change the game entirely.
Let’s TLDR This Biz
Founded:
2002 by Niraj Shah and Steve Conine (Cornell engineers).
Started as CSN Stores - 200+ niche sites (cookware.com, luggage.com, etc).
Basically a marketplace aggregator before marketplaces were cool.
Aha Moment:
2011, consolidated 200 sites into Wayfair.com.
Insight: Customers don't want 200 specialized sites, they want ONE place for home goods.
Built recommendation engine to surface the long tail.
Growth:
Marketplace model = infinite selection w/ zero inventory risk.
Free PLG (Google search for "midcentury sofa" lands on Wayfair).
As ecom penetration in furniture grew from 10% (2010) to 40% (2020), Wayfair rode the wave.
IPO 2014 at $29/share.
Model:
Take 25-30% commission on supplier sales. Suppliers handle inventory, Wayfair handles traffic + conversion.
Built CastleGate (3PL network) to speed delivery.
Cross-sell customers from furniture to decor to outdoor.
Collapse:
Pandemic spike to $18B revenue (2021), then crash back to $12.5B (2025).
Amazon quietly became the real leader (12-16% share vs Wayfair 5%).
Stock ran from $64 (2023) to $93 (early 2025) on "physical retail" hype, now back to $76 (-45% from highs) as reality hits: marketplace model is cooked when Amazon plays the same game at 3x scale.
Let’s Fix This Biz
Here are our 3 moves to turn Wayfair into a $30B juggernaut.
1) Burn the Marketplace - Go 100% Private Label
Amazon already won the US Home furnishing market.
Amazon owns ~15% of sales.
Wayfair is a distant #2, @ 5%.
HomeGoods is a close #3, @ 4% (part of the $179B TJ Maxx empire)
In a marketplace war against Amazon at 3x scale and HomeGoods with a massive retail footprint already, Wayfair has nowhere to grow.
Wayfair wants to be the Expedia for furniture, taking 25-30% commission on OPP (other people's products).
That worked when Wayfair was the only game in town. Now Amazon is the town.
We’re going to kill the marketplace + transition to 100% Wayfair private label. Play the 80/20 rule and go to the makers of the top 200 products on Wayfair and give them a Godfather offer.
“You can make this product for us and take a 3% Royalty fee in addition to the COGS, or we:
Source IDENTICAL designs from Vietnamese/Mexican factories at 50% the cost,
Slap "Wayfair" on them,
Price 20% UNDER current marketplace pricing.”
Let’s not pretend like the Chinese/Vietnamese furniture manufacturers aren’t already copying each other.
The Math: Current $12.5B GMV x 30% margin = $3.75B gross profit.
Yr 1 Private Label: $10B GMV (assume -20% during transition) x 60% margin = $6B gross profit (+30%).
By year 3, we grow back to $15B revenue at 60% margin = $9B gross profit (+300%).
Amazon can't do this. They're a platform.
Antitrust would murder them if they went 100% private label.
But we're already unprofitable and nobody expects anything from us.
We have nothing to lose.
Takeaway: Marketplace plays only work if you're the biggest marketplace. Otherwise, you're just expensive middleware waiting to get crushed by Amazon.
2) Cut 25% of Headcount Surgically
Wayfair isn’t a tech biz.
It’s time to accept reality and stop paying employees $500m (4% of Rev) in Stock based comp EVERY YEAR.
Wayfair has 13.5k employees to run a website that loses $313M/year.
Amazon runs their entire furniture operation w/ maybe 200 people.
Layoffs have already proven they work. In Jan 2024 Wayfair cut 1.6k employees (13%), saved $280M. But they didn't cut deep enough.
Wayfair needs to cut 3.4k employees (25% RIF) and get to ~10k employees so we can add in some key roles.
How can they be a Tech Biz when the largest team (25% of org) is Ops.
Cut list:
International ops (700 - exit UK/Ireland after Germany).
Bloated corporate functions (800 - flatten VPs managing VPs).
Redundant marketing (600 - kill brand marketing, keep performance only).
Overlapping tech post-Germany (400 - consolidate platforms).
Middle management purge (900 - increase spans from 5 to 8 direct reports).
Keep/Hire List:
CastleGate fulfillment (+500 for private label quality control).
Retail stores (+400 for 50-store expansion).
Product design/sourcing (+50 for private label).
R&D on differentiation (200 - AR/VR, loyalty tech, things Amazon can't do).
For everyone who stays, we’re ending the Stock Based Comp program and replacing it w/ cash bonuses tied to ONE metric: GAAP profitability. Hit 5% net margin = 20% cash bonus. Hit 10% = 50% bonus. Miss = salary only.
Savings: 2,450 net reduction x $150K fully loaded = $367M.
Stock comp reduction = $125M.
Total: $492M annual savings.
Flipping the company from unprofitable to real profitability in 1 move.
Takeaway: Wayfair is a retail biz, not tech. Time to start acting like it.
3) Build 50 Stores as the Anti-IKEA
Wayfair’s early Retail will be its salvation.
It’s how we can protect ourselves from Amazon on the eCom front and Ikea on the Retail front.
Amazon won’t open furniture stores (infinite selection model breaks w/ physical).
Wayfair’s new Wilmette store showing early signs of life:
50%+ new customers
Sales halo in local market
20-30% in-store conversion
Today there’s only 12 stores. IKEA has 50+ US stores.
It’s time to build 50 Wayfair Experience Centers in 36 months.
Steal the Ikea fully furnished room vignettes retail experience, but you walk out with easy to assemble/assembled for you furniture in beautiful store concepts that create a "third place" environment:
15-25k sq ft stores for only the top 200 private label SKUs.
AR "Design Your Room" stations (iPad-based, our tech).
POS integrated w/ Wayfair.com (buy in-store, ship free, OR take floor model now).
Add a coffee bar to every store (not full restaurant, just coffee/pastries like IKEA but better).
Then tie in Wayfair Rewards:
25 points for store visit,
50 points for AR design save,
1 point per dollar spent,
500 points for referrals.
Members get 10% off in-store + free coffee.
Every store visit is tracked. AR room designs = exact home layout + style preferences.
We know what they're shopping for BEFORE they buy. Retarget online w/ "complete your room" recs.
The Store Economics:
Build-out $1.5M + Annual rent $400K + Staff 15 people x $50K = $750K. Total annual cost $1.35M per store.
Revenue: In-store sales $3M + online halo $5M = $8M total per store. Additional $4.8m Gross/store.
50 stores = $400M revenue, $172.5M operating profit on a 1 time Capex of $75m.
Takeaway: Streamlined retail + Product catalog unlocks new profitable growth vehicle.
Final Thought
It’s time to treat all of these ecom bizs as what they are. Retail NOT Tech bizs.
No matter how Wayfair wants to, their job is to move couches. Same as Home Goods, West Elm, or Raymour & Flannigan.
The lie that they’re a tech stock (to trade like a biz that delivers software) has to end.
It’s ruining the biz through a ridiculous strategy whose only purpose is to inflate the stock price, not grow the profits of the biz.
Salesforce isn’t opening 15k sqft retail showrooms.
If Wayfair were serious about this, they would clean up the culture to focus on strategies like this because these types of tactics are how consumers buy furniture.
It’s unfortunate they couldn’t unlock a 2nd and 3rd market for their marketplace to become a true competitor to Amazon.
But they didn’t.
And at 12 years into the game, it’s time to accept reality. Focus on what actually moves the needle and stop these ridiculous programs.
Wayfair spends as much/yr on SBC ($500m) as Home Depot ($380m) + Williams Sonoma (~$70m) + Restoration hardware (~$50m) combined.
Somehow they’ve all figured out how to move furniture without paying Silicon Valley Engineers.
