Snow flurries are flying in the Northeast, but the competition in home furnishings e-commerce seems to be getting hotter by the moment—and Boston-based Wayfair is making a pretty convincing case to be the leader, even if you have to read between the lines to see it.
Last week, San Francisco-based home-goods seller One Kings Lane said that it had raised a new round of private investment: a $112 million Series E investment that valued the company at $912 million post-financing.
One day later, Wayfair announced its annual sales figures, saying it collected $915 million in revenue for 2013, up 55 percent from the previous year.
Wayfair had been making a lot of noise for the past year about its march toward $1 billion in annual sales. So a sub-$1 billion year was actually a little anticlimactic.
But the firm’s finance chief Michael Fleisher, a big-company veteran hired just a few months ago, illustrated the real point Wayfair wanted to make, saying in a press release that “the sheer scale of our business sets it apart as a true leader in the emerging class of ecommerce winners.”
Later that day, even bigger news leaked out. Reuters, citing anonymous sources, reported that Wayfair had actually raised another $150 million in investment that valued the company at “around $2 billion“. Investment giant T. Rowe Price reportedly led the round, an auspicious sign that suggests the private company might be close to becoming publicly traded.
Wayfair wouldn’t comment on the Reuters report when we asked. But it’s hard to believe the information wasn’t released with a clear message in mind: One Kings Lane’s valuation is cute. Ours is double.
What’s up with this bit of press-release one-upmanship? If we can take a lesson from some other recent e-commerce categories, there’s likely to be one big, successful brand that emerges from the latest crop of privately held home goods companies. And nobody wants to be left behind.
The dominance of Amazon and eBay in broad-based retail has made the next generation of e-commerce innovation a game of niches.
For all of its stumbles, Groupon kicked off the current wave by parlaying a digital coupon craze into a rapidly growing public company. Its only true competitor, out of dozens that emerged, is the money-losing (and Amazon-backed) LivingSocial.
“Flash sales,” where a limited amount of heavily discounted merchandise is sold to digital shoppers, also became a popular startup strategy in recent years. The clear winner in this arena is Seattle-based Zulily, which sells clothes for kids and moms with a daily e-mail and rocketed to a successful IPO last year.
Other companies that have tried the technique haven’t fared as well. In a span of less than six months around early 2013, the CEOs of flash-sales companies RueLaLa, Gilt Groupe, and Ideeli were replaced as investors tried to find a successful direction.
It now looks like a similar race is coming in the home furnishings niche. Probably the most highly publicized startup in this category has been New York-based Fab, an endlessly pivoting design-focused retailer that has racked up more than $300 million in investment. Fab moved away from a flash-sales focus in recent months and has, as AllThingsD put it, sought to become “ a more mainstream online store backed by inventory and warehouses.”
Which sounds a lot like Wayfair, of course.
Wayfair itself is a really unconventional tech company story. The firm has been around in one form or another since 2002, starting as a collection of hundreds of different online retail brands—Cookware.com, Strollers.com, Luggage.com—united under the banner of CSN Stores.
In 2011, the company rebranded as Wayfair and took on its first outside financing of $165 million, later adding another $36 million to develop flash-sales brand Joss & Main. With the new $150 million investment this year—assuming the report is accurate—Wayfair has now collected about $350 million in private backing, making it by far the most heavily financed private technology company in the Boston area.
Co-founder and CEO Niraj Shah hasn’t been shy about saying Wayfair is working toward an eventual IPO. But, let’s be honest, a lot of private company CEOs say that sort of thing before selling the company to a big-pocketed acquirer.
That’s why I found one particular note intriguing amid some of the online discussion of the latest Wayfair financing news—former Wayfair employee Micah Moreau, now marketing director at Simon Pearce, said the motivation of Wayfair’s executives is clear:
@Besvinick @ScottKirsner Internally, a sale would be seen as a massive failure. Don’t see it happening.
— Micah Moreau (@micahmoreau) February 1, 2014
