Wayfair Inc (NYSE: W) may be familiar to you from the number of commercials you’ve seen for this e-commerce furniture company. W has carved out a niche in the online furniture retail space. Its aggressive entry into the online space is a very interesting — and risky — idea that has paid off so far. Wayfair stock is up 150% in the past 3 years and much of that growth has happened in the past 18 months.
Wayfair.com was launched in 2011 and now sells over 10 million products from 10,000 suppliers in the US, Canada, Germany, Ireland and the UK.
With the backing of a number of investment banks, Wayfair stock is aggressively trying to grow its market share. W now sells its goods under the sites Wayfair, Joss & Main, AllModern, Birch Lane, DwellStudio and Perigold. The other sites allow the company to sell furnishings and accessories to specific demographics.
Wayfair Is Digging A Moat
Obviously, the big competitor in Wayfair stock’s space is mega-retailer Amazon.com Inc (NASDAQ: AMZN) and there has been talk of AMZN acquiring W as it grows. Wayfair already sells a number of its products on Amazon as well.
W has been aggressively trying to grow its market share in recent years. This makes sense whether it’s trying to carve out a strong brand presence in this sector or it’s looking to be acquired by AMZN or some other big retailer looking to move into the online furniture sector.
Traditional furniture companies haven’t yet moved aggressively to capitalize on this growing market, largely because many people believed that buying a sofa or chairs sight unseen wasn’t a model that would work with consumers as easily as it has for say, clothing.
After all, returning a dining room set is a lot different than returning a sweater.
But once again, those retailers that weren’t open to new ideas have lost significant competitive advantage. And W is looking to widen that gap.
Wayfair is spending huge amounts on advertising, not just during the holidays but for the past year. In 2017, W spent $500 million on advertising and it expects to spend more in 2018: Advertising spending hit the $541 million mark in just the first 3 quarters of the year so far.
Some analysts are concerned that this kind of spending means that W is acquiring new customers at a loss, which it most likely is. But that is the kind of risk you have to take if you’re looking to become a dominant player in e-commerce.
And none of this is really shocking, since AMZN did the same thing for many years to get to the point where it is today.
The encouraging thing about Wayfair stock’s Q3 numbers was its revenue came in ahead of expectations while earnings were lower than expected. It also added 3.6 million new active members so far this year.
Wayfair is by no means an established growth company. But Wayfair stock is an exciting tech disruptor that has a lot of potential, whether it is bought out or stays independent.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
