Wayfair: Way Far Ahead in Digital Transformation?

How e-commerce furniture giant Wayfair.com is using digital transformation to built a competitive moat within the furniture and housewares industry.

Wayfair.com is a mass market retailer in the e-commerce space: its business model and primary value proposition depends on offering customers over seven million diverse furniture and houseware SKUs across hundreds of distinct product categories.  The brand sells a myriad of product styles, prices and quality levels, touting the mantra: “Wayfair offers a Zillion things home” [i]. As “the largest online-only furniture retailer in the U.S.,” Wayfair’s highly digital, inventory-light operating model is critical in delivering on this promise [ii]. The company brought in $2.25 billion in revenues in 2015 [ii], and actively promotes digital transformation.


On the user interface front, Wayfair has used digital transformation to enhance the customer shopping experience.  Furniture is a challenging product category both to buy and sell online.  Not only do these items tend to be higher price-point pieces that require longer consideration periods, but they’re also characterized by a high-touch shopping brick-and-mortar experience, where customers can see, try, and measure products before committing to a purchase [vi].


Wayfair “End Tables” category page filtered to items classified as “Glam”

To simulate this interactive shopping experience, Wayfair’s engineering teams have worked to create a variety of avenues for customers. To simplify what could be an overwhelming website, the company has developed a complex set of criteria upon which customers can refine the assortment displayed on a given product category page: these filter sets include intuitive qualities like size, material, color and price, as well as more subjective attributes like style [iii].  While such navigation is not a revolutionary feature, given the scale of Wayfair’s product assortment and the sheer size of its pool of over 7,000 vendor partners, achieving this level of SKU tagging is highly impressive, especially given that the company collects over 100 pieces of information about each individual SKU on site [ii].  This push to digitalize every nuance of each product has been a major contributor to the company’s low 5% return rate, as customers better understand the products they’re ordering [ii].


Wayfair’s Idea Board Functionality

An additional layer of innovation comes in the form of the brand’s “Idea Boards”.  Akin to Pinterest boards, customers are able to tag items of interest as they browse the Wayfair website, and when inside a board, view their selections together in aggregate, to vet for aesthetic compatibility or to save the items for the future.  In early 2016 Wayfair reported that 4 million users of this new technology had saved over $3.8 billion worth of products to their Idea Boards.  The boards already drove an impressive 31% of Wayfair app revenue [iv].


Image: Boston Globe
Image: Boston Globe

Wayfair’s recent foray into virtual and augmented reality via its focused team of five employees, Wayfair Next, has begun to set the company apart from competitors [vi].  The team has worked to create a program called WayfairView that will allow customers to port the products they see online into their own living spaces [v]. One feature would allow Wayfair app users to capture their space on camera via a special device, such as Google’s Project Tango tablet, and digitally superimpose Wayfair products into their space as they focus on various parts of the room [vi].  For even more interactivity, the company is working to launch a virtual reality feature where, wearing a headset such as the Rift by Oculus, users can interact with a three-dimensional living space populated with Wayfair products [vi].  The launch of this technology will take time, as in order to be made into a three dimensional representation, each product must be photographed from all angles on a rotating turntable; a process which takes between five to ten minutes per product, and requires 3 gigabytes’ worth of still photos [vi].  Once scaled, however, the project will have many potential applications, including use for interior design partnerships as well as product placement and purchasing capabilities within video games and similar software [vi].

Image: https://www.technologyreview.com/s/601664/how-stores-will-use-augmented-reality-to-make-you-buy-more-stuff/
Image: https://www.technologyreview.com/s/601664/how-stores-will-use-augmented-reality-to-make-you-buy-more-stuff/

This fall, Wayfair also launched an innovative new television show, “The Way Home,” on Lifetime.  The show provides customers with helpful interior design tips, and every single item on the show is available for sale on Wayfair.com through limited-time sales including the highlighted products [vii].  In conjunction with the show, Wayfair has launched a virtual showroom app called IdeaSpace, where customers can browse perfectly styled spaces and virtually interact with the featured products [viii].  This clever pairing of television and high-tech , interactive commerce is an excellent manifestation of the company’s transformative thinking in the digital space, and surely indicative of more such innovation to come.  As I think about Wayfair’s future in this arena, I hope they’re able to retrofit these exciting innovations for compatibility with more pervasive forms of tech such as Apple devices: at the moment, ownership of the specific complementary tech items is going to be a costly hurdle for customers to surpass, and I worry this friction will lead to limited short-term adoption.

Image: Boston Magazine
Image: Boston Magazine


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i. Wayfair, “About Wayfair,” https://www.wayfair.com/about/, accessed November 2016.

ii. Khadeeja Safdar, “Why Wayfair Inc. Thinks It Can Be the Amazon of Furniture,” The Wall Street Journal, October 2, 2016, [http://www.wsj.com/articles/why-wayfair-inc-thinks-it-can-be-the-amazon-of-furniture-1475460361], accessed November 17, 2016.

iii. Wayfair, “End Tables,” https://www.wayfair.com/End-Tables-C414604.html, accessed November 2016.

iv. Carpenter, Jane, “Inspirational Idea Boards on Wayfair.com Drive 31 Percent of Mobile App Revenue for Online Retailer,” Business Wire, March 22, 2016, [http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1774755519?accountid=11311], Accessed November 17, 2016.

v. Elizabeth Woyke, “How Stores Will Use Augmented Reality to Make You Buy More Stuff,” MIT Technology Review, June 17, 2016, [https://www.technologyreview.com/s/601664/how-stores-will-use-augmented-reality-to-make-you-buy-more-stuff/], Accessed November 17, 2016.

vi. Scott Kirsner, “Adding a level of reality to online shopping,” Boston Globe, May 5, 2016, [https://www.bostonglobe.com/business/2016/05/05/adding-level-reality-online-shopping/wXRlzWBdGIo7j5LO8sOg5K/story.html], accessed November 17, 2016.

vii.  Madeline Bilis, “Wayfair Is Launching Its Own TV Show on Lifetime,” Boston Magazine, October 19, 2016, [http://www.bostonmagazine.com/property/blog/2016/10/19/wayfair-tv-show-lifetime/], Accessed November 17, 2016.

viii. Madeline Bilis, “Wayfair Rolls Out a Home Design Virtual Reality App,” Boston Magazine, November 11, 2016, [http://www.bostonmagazine.com/property/blog/2016/11/11/wayfair-virtual-reality-app/], Accessed November 17, 2016.


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Student comments on Wayfair: Way Far Ahead in Digital Transformation?

  1. The virtual reality potential for furniture is fascinating! I’ve often struggled to understand the practical application of virtual reality given the gaming context in which demos are generally performed; however, being able to physically understand how furniture fits in your space seems like it would have huge potential in the industry. Do you think in 5-10 years this technology will be the norm?

    I was also curious how Wayfair thinks about customer data collection and personalization. Given that they intricately assort each item with 100s of tags, I would think that they could develop a very sophisticated understanding of their repeat customers needs and preferences. Do you know if they “push” product through email, google ads, or geo targeting? Do you think there are opportunities to combine virtual reality and personalziation?

  2. Very interesting post! As with the comment above, I had never really thought of the practical uses of VR–only saw it as an entertainment device. Do you think that they can or would want to license the technology platforms they are creating to the retailers they already partner with?

  3. Thanks for sharing this! What Wayfair is doing in terms of harnessing technology to improve is operating model and customer experience is incredible–I would certainly use the technology to assess furniture acquisition! However, I think some of the concerns I have are representative of what general consumers would be concerned with. First, I think you nailed it when you said the biggest drawback is making someone purchase another type of technology (ie tablet or oculus) in order to use Wayfairs software / furniture technology. This is a part of the assessment process and should not be something consumers have to pay for — instead, would it be possible for Wayfair to partner with certain furniture retailers have these tools available for use in convenient locations? For example, at a local West Elm or Crate & Barrel, users can use the tablet or the Oculus to see how furniture would be displayed. Obviously their competition would likely then also make the technology available for their products, so that would be one concern. Alternatively, as you mentioned, they would have to develop the software so it is accessible by desktops or mobile apps. Ideally having an app enables you to scan your room would be incredible and easy to use. I am excited about Wayfair’s foray into the digital space and hope they can create cost effective uses of these innovative new technologies!

  4. Great post! Interesting to learn about these digital initiatives at Wayfair, particularly the Pinterest-like boards and TV channel. In many ways, these digital companies like Wayfair are leveraging older business models and distribution channels to sell their products. West Elm recently announced plans to build a boutique hotel exclusively featuring their products — I wonder if Wayfair will adopt similar low-tech approaches to augment their digital investments.

  5. So interesting – I never knew about Wayfair’s use of new technology! Like you mentioned, I think their use of technology is truly innovative, but the implementation is difficult. So much of Wayfair’s brand awareness is as an e-commerce site, providing reliable and cost-efficient furniture, therefore the usage of such technology among buyers will be difficult. I wonder if there are other ways to innovate on their existing platform or perhaps they could look towards partnerships (not necessarily in the retail space, but maybe through real estate brokers) where they can showcase this program.

  6. Wayfair is such an innovative company. Really liked the article. The quality, customer service, and buying experience for Wayfair is really what sets the company apart from its peers. They have built this amazing brand and the implementation of VR makes sense given how focused they are on the customer experience. I would be interested to see if the company will introduce any brick-and-mortar stores to capture the “bricks and clicks” strategy like Casper, Warby Parker, or Bonobos have done?

    On the digitization initiative, I wonder if Wayfair should also focus on more pressing issues like mobile? While VR is amazing and will be the way of the future, we are still many years (or a decades?) away from VR being as common as your iPhone. Also, given that Wayfair is now publicly traded, there are always issues with pleasing shareholders while also innovating on capital-intensive projects like VR. I hope the company continues to innovate and lead the way in the home-buying sector.

  7. Thanks for this post! One thought I have about digital transformation of low-end furniture purchasing is that no matter how advanced the VR technology becomes to assess a potential purchase, the end user still has to assemble the furniture when it arrives. Having purchased a few items from wayfair for my apartment in Boston, I found the UX pleasant and more advanced than Ikea, or other retailers at similar price points. But at the end of the day, the furniture still arrives in a flat pack with instructions that are difficult to follow. Is Wayfair considering creating content to explain furniture assembly? Given the 7 million SKUs you cite, this would be impossible to create for all of the pieces. But for some of the more complex or popular, I thought it would be a differentiator for Wayfair to compete with some of its new competitors like Greycork or Article, which promise quality, variety, and simple assembly.

  8. Great post and great idea!
    Although this will for sure differentiate Wayfair, I am a bit skeptical on a few topics:
    – Competitive advantage: how easy is it to copy the idea? How far are competitors (e.g. IKEA) from implementing the idea, given cost and resource constraints? Haw Wayfair thought of patenting the idea?
    – Errors: How certain will the application be in determining the size of the customer’s room (i.e. what is the mistake probability in calculating the dimensions?) and placing the products in the room? If this is high at the moment of launch, I can imagine an increased amount of returns and, thus, costs. How is Wayfair accounting for this?

  9. The application of virtual and augmented reality is really interesting here. I know several other home brands are pursuing similar strategies, but in my opinion it’s too early to tell if the VR/AR applications here are truly value-add or more simply gimmicks. Also, I wonder if companies like Wayfair that don’t design their own products may have difficulty procuring the CAD files necessary to produce the digital 3D images. Suppliers may not want to provide these files for security / privacy reasons, and it is likely unrealistically costly for Wayfair to recreate the files themselves.

  10. This article was a great summary of the exciting ways Wayfair is capitalizing on the digitalization movement. They have already disrupted the way consumers buy furniture, and now they used technology to vertically integrate up the furniture buying process, and ingratiate themselves in the purchase consideration phase. I wonder about the role of interior designers in the future, as consumers use more services like Wayfair’s Idea Board and virtual reality to understand how certain pieces will fit into their homes. Will interior designers be out of jobs in 10 years? Or is there something to be said for having an eye for design, that is unique enough to defend their roles?

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