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Wayfair's new physical retail location is a big bet on growth

Illustration of a series of segments of an upward trending line in frames on a gallery wall.

Illustration: Gabriella Turrisi/Axios

With its first physical store location, Wayfair is taking a big bet on growth.

Why it matters: The online furniture retailer is not yet profitable and is contending with challenges like shifting consumer preferences and a slowing housing market.

Driving the news: Next month, Wayfair plans to open its first large format brick-and-mortar store in Wilmette, north of Chicago.

How it works: The company says its roughly 150,000-square-foot store is running on an "inventory-light" model, with rapid delivery available for items that aren't able to be taken home immediately.

  • This ideally helps mitigate excess products, the company says.
  • "We will be forward-positioning that inventory, as opposed to being in our last-mile facility. It's in the store. And we're working with our suppliers on that," CFO Kate Gulliver said at a Bank of America conference last month.
  • "We already manage a pretty large-scale operation in our logistics networks through our distribution centers that cover the whole country and enable us to deliver things very, very quickly," Liza Lefkowski, vice president of curation, brands and stores, told Axios on the sidelines of Shoptalk.

Reality check: Wayfair posted a net loss of $738 million for the year ended Dec. 31, 2023.

  • "The longer a company operates in a burn state, the less efficient and the less than optimal that is. They have been in that position for a long time," Rapid Ratings' James Gellert says
  • While Wayfair doesn't have material debt it could default on in the short term, Rapid Ratings places the company's financial health rating — which indicates short-term default risk — at 25 out of 100.

The other side: Wayfair says it has meaningfully improved its cost structure over the past 18 months.

  • "We intend to take a measured and prudent approach to new store roll-outs based on learnings from the launch of the first Wayfair store," a company spokeswoman says.
  • "Our growth profile has ebbed and flowed over the time period, but we are still very focused on growth while keeping costs contained," Lefkowski says.

Yes, but: "If they are continuing to burn down cash and not get to a state of profitability, then there are only two things that can happen: They run out of cash or they have to raise money again in some other way," Gellert says.

Zoom out: Gellert also says Wayfair has yet to truly differentiate itself from competitors like Beyond.

  • "People will buy from them if it's cheaper," he says, and they'll have to raise their value proposition to attract people to their stores.

What's next: The company plans to roll out more U.S. stores — and "size is a pretty big variable so you'll see us experiment," Lefkowski says.

Editor's note: This story has been changed to correct James Gellert's first name.

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