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Fast-growing startup a model for success.

Byline: Peter Cohan


It's not often that a startup snags $165 million in its first round of venture capital. But that's what Boston-based online home goods retailer Wayfair did in June 2011. And its success highlights important principles for any startup seeking to grow.

The more Wayfair Chief Executive Officer Niraj Shah told me about the company in an Oct. 8 interview, the more I kept wondering why I had never heard of it until then. Here are some eye-popping statistics:

In 2012, it's "seen 750 million page views, with half a million mobile visitors each week."

Wayfair, which has sold 4.2 million items and with its links to 5,000 brands and 3,000 suppliers, expects in 2012 to exceed the $500 million it sold in 2011.

Wayfair's 72-hour home goods flash sale site, Joss & Main, started 2012 with 400,000 members and expects to end the year with 3 million - a 650 percent annual growth rate. AllModern, its retail site for original modern design, is "growing at over three times the market average."

Wayfair has 1,100 employees worldwide and is hiring to expand at all of its seven global locations, including its Boston headquarters near the Christian Science Church's reflecting pool.

Mr. Shah graduated from Cornell University in 1995 and moved to Boston, co-founded an Internet consulting business with a classmate, Steve Conine, that they sold in 1998; worked as an Entrepreneur In Residence at Greylock Ventures; started and sold a software company; and in 2002 began building a network of small e-commerce ventures - starting with a site that sold birdhouses online that were built in the founder's garage and extending to online furniture stores - that they re-branded as Wayfair in 2011.

Wayfair is going after a huge market. The U.S. home goods market is $500 billion, but the online portion represents 6 percent of that - $30 billion - and it's growing at a rate between 10 percent and 15 percent, according to Mr. Shah.

Wayfair is growing faster than that - it had $250 million in 2009 revenue, $380 million in 2010, and $500 million last year. "We are continuing to see that kind of aggressive growth in 2012," says Mr. Shah.

Slim margins are typical of online retailers, where gross margins range from 20 percent to 30 percent, according to Mr. Shah. And Wayfair is growing because it beats the competition when it comes to three benefits that its customers value. It has access to a big selection, its prices are competitive and it consistently delivers great service.

For example, it has access to its suppliers' inventory systems and knows which items are ready to ship, can estimate how long items will take to get to a customer's location, and if things are not going as fast as planned has a team that resolves the problem so Wayfair can meet customer expectations.

Thanks to the profits they made from selling their previous companies, Mr. Shah and Mr. Conine did not need outside capital to fuel Wayfair's growth. In June 2011 they closed a $165 million Series A round from "growth-oriented investors" that included Spark Capital, Battery Ventures, HarbourVest Partners and Great Hill Partners.

Wayfair is using the money for branding and international expansion. It runs television advertisements; has hired an editorial team to develop content related to home goods; is expanding into the UK, Germany and Australia; and is adding staff to keep up with the growth of Joss & Main and its other properties.

And as Wayfair adds to its staff, Mr. Shah wants to preserve its culture. To that end, everyone from Mr. Shah to line employees have desks without private offices, so they can communicate with each other more easily.

Wayfair's idea on hiring is to bring in intelligent people who are team-oriented and provide what Mr. Shah calls "an analytical platform that gives them quantitative data that answers their questions." Those people will in turn want to hire other great people like themselves.

Within the next five years, Wayfair expects to go public. But Mr. Shah seems particularly eager for Wayfair's brand to represent taking good care of its customers - women between the ages of 30 and 60.

At the rate Wayfair is growing, Mr. Shah's goals appear well within reach.

Even if your company is not growing at Wayfair's rate, its success offers three important lessons.

The first is to address the needs of a big market. This is important because venture capitalists typically assume that the best a company can do is to get a 10 percent share. And even if the company does not come close to that share, focusing attention on a big market will leave significantly more room for error. Wayfair's focus on a $30 billion market growing at 10 percent or more is a key part of its success.

Second, the few startups that survive offer customers something they can't get elsewhere. As I mentioned, Wayfair delivers three unique benefits that customers value. And while simple to describe, those benefits are hard for competitors to replicate - that's because Wayfair's large size gives it negotiating leverage with its thousands of suppliers.

Finally, a company's ability to sustain its growth depends on the quality of the people it hires and the quality of the work environment. More specifically, a company with growth ambitions must hire people with intelligence, a strong work ethic, integrity and the desire to work with others. Then it must give them the information they need to do what will help the company fulfill its mission.

Wayfair has done all three, and in so doing is a role model for organizations everywhere.

Peter Cohan of Marlboro heads a management consulting and venture capital firm, teaches business strategy and is the author of 10 books. His column also runs Mondays and Wednesdays on His email address is
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Publication:Telegram & Gazette (Worcester, MA)
Article Type:Company overview
Date:Oct 21, 2012
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