Home furnishings giant Wayfair Inc. reported a drop in sales for its third quarter and a growing net loss.

Total net revenue dropped 9.0% year over year to $2.84 billion for the third quarter ended Sept. 30. That’s down from $3.12 billion in Q3 2021.

Wayfair again reported a net loss of $286 million, much higher than its loss of $78 million in Q3 2021. Wayfair is No. 7 in the 2022 Digital Commerce 360 Top 1000.

Although Wayfair turned a profit for a few quarters a few years ago, the home furnishings giant emphasized cost-saving measures to again return to profitability on its call with investors, according to a SeekingAlpha transcript.

Wayfair cuts costs

One of the main ways Wayfair said it is reducing costs is via personnel reductions. In August, Wayfair eliminated 900 corporate job to “reduce redundancies and remove excess management layers,” CEO Niraj Shah said. In addition, it is also reducing “third-party labor,” such as contractors and consultants.

Other initiatives include returns monetization, scam reduction, incident prevention and logistics optimization, Shah said.

For example, when a shopper returns a product, Wayfair is looking to improve how it resells that product after it is returned.

“We see an opportunity to improve the accuracy of our grading to increase open box sales through platform and pricing improvements, and the decreased shipping expenses by changing how we manage logistics,” Shah said. “This initiative alone should result in tens of millions of dollars of savings.”

During the pandemic, many shoppers spent their discretionary dollars in the home goods sector, and Wayfair and other home retailers benefited with booming sales. Now, in 2022, Wayfair is struggling to grow on top of those large gains from the past few years. Digital Commerce 360 projects the top online retailers in the houseware/home furnishing category will collectively decrease sales 2.3% in 2022 compared with 2021. This comes after the category grew 10.2% in 2021 and 48.2% in 2020, according to Digital Commerce 360 estimates on the housewares/home furnishings retailers in the Top 2000.

Wayfair turns to promotional events to bump up sales

In addition, consumers are being more judicious with their dollars and are concerned about inflation, Shah said. These factors are impacting Wayfair’s sales and how it is looking to grow sales.

“While interest in the broad home category remains, we are seeing shoppers being more deliberate with their spending patterns as they seek out great value and wait for promotions,” Shah said.

“As a result, promotional activity across the industry remains high and customers are responding very positively,” Shah added.

For example, Wayfair held its annual sale “Way Day” for a second time in 2022 to drum up sales. The event was a “success,” and worked given the current market conditions, Shah said. But Wayfair does not plan to typically have two Way Day sales within one year in future years.

“There’s excess inventory and customers are — even though they have plenty of money — they’re a little more sitting on the sidelines,” Shah said. “And that’s kind of a reflection of when we look at the customer sentiment. What you do in those environments is you flex out the promotional kind of calendar, and it works well. But what you don’t do is you don’t keep it there forever.”

Overall, Wayfair says it expects the costs savings to be apparent in Q4 and holiday sales to increase in the high single-digit range.

“In just a few weeks from now, we’ll get to the traditional Cyber 5 tentpole events,” Shah said. “Each of these promotions is an opportunity to provide value to our customers and our suppliers. Importantly, without compromising our gross margins, given our inventory light mode.”

“We continue to see customers respond to promotional events in a positive way and are optimistic for what the holiday season will hold this year,” added Kate Gulliver, chief financial officer and chief administrative officer.

For the third quarter ended Sept. 30:

• Total net revenue of $2.84 billion, a 9.0% year-over-year decrease from $3.12 billion in Q3 2021.
• U.S. net revenue of $2.44 billion, down 6.0% year over year from $2.60 billion.
• Net loss of $283 million compared with a loss of $78 million a year ago.
• Active customers totaled 22.6 million, a 22.6% year-over-year decrease.
• Repeat customers placed 77.8% of total orders in the third quarter of 2022, compared with 76.3%.
• Average order value was $325 compared with $283.
• 58.6% of total orders delivered were placed via mobile device, compared with 57.7% in Q3 2021.

For the first nine months ended Sept. 30:

• Total net revenue of $9.12 billion. That’s down 12.8% from $10.46 billion from the nine-month period ended September 2021.
• U.S. net revenue of $7.78 billion, down 8.6% year over year from $8.51 billion.
• A net loss of $980 million compared with a profit of $71 million in the year-ago period.

Percentage changes may not align exactly with dollar figures due to rounding.

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