Wayfair (W) has had a rough few months. The home goods retailer has been struggling with a startling shift in consumer behavior that is having a negative impact on the company’s balance sheet.
In Wayfair’s third-quarter earnings report for 2024, the retailer revealed the number of its active customers has decreased by 2.7%, compared to the same time period last year. Also, the number of orders its repeat customers placed during the quarter shrunk by 6.3% year-over-year.
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Wayfair also delivered about 6% fewer orders than they did during the same quarter in 2023. This contributed to its total net revenue to decline by $60 million during the quarter, which translates to a 2% year-over-year decrease. Specifically in the U.S., its net revenue dipped by 2.3%.
Related: Wayfair CEO flags alarming change in consumer behavior
During an earnings call on Nov. 1, during a discussion about the earnings report, Wayfair CEO Niraj Shah claimed consumers continue to increasingly pull back on their spending as the company saw “a broader pullback by shoppers in the lead-up to the election.”
“Consumers remain trepidatious in their spending patterns and are demonstrating more price elasticity than we saw in the early months of the year,” said Shah.
Shah also said that even though Wayfair saw success in its Way Day event, which offered discounts to customers between Oct. 5 and Oct. 7, consumers are avoiding making large purchases on home goods.
“Attention is focused away from the home right now, and when customers are in the market, it’s increasingly for lower investment, lower consideration purchases versus larger ticket items that represent our traditional area of strength,” said Shah.
In August, Shah flagged that slow home sales in the U.S. is a major factor hurting the company’s business. During the earnings call last week, he once again emphasized that the home goods industry is suffering from “a historic slowdown in the housing market.”
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“Redfin published an analysis at the end of Q3, noting that just 25 of every 1,000 US homes changed hands in the first eight months of the year, the lowest level they saw in their study running back to 2012 and more than 30% below the turnover levels back in 2019,” said Shah.
Wayfair is betting on a new program to boost consumer spending
In order to repair Wayfair's losses at a time when it is facing macroeconomic headwinds, Shah revealed that the company is banking on a new initiative.
The company is relying on its new Wayfair Rewards program, which launched on Oct. 22, to encourage customers to make more than three purchases a year. The goal is to boost the company's revenue.
Gabby Jones/Bloomberg via Getty Images
“For $29 per year, Wayfair Rewards customers will unlock exceptional value and experiences with benefits including 5% back on purchases, free shipping on all orders, access to exclusive shopping events, special offers, and a dedicated members-only support line,” said Shah.
The company is hoping its catalogs, such as “kitchenware, tabletop, decor, and bedding,” will benefit from the program.
Related: Wayfair CEO sends a harsh wake-up call to employees
“We plan to lean into the ‘treat yourself’ angle of the program and encourage customers to use their rewards for all those upgrades and finishing touches that they have been dreaming of but may not have had the budget for,” said Shah. “We're also eager to bring the program to new movers and project shoppers like renovators or remodelers. These are customers with high category needs who can draw a lot of value from the program.”
The move from Wayfair comes after some of its customers have been complaining about facing inflated prices for items on the company’s website. So it is no surprise that the company is focusing on affordability in its new Rewards program.
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