Online furniture retailer Wayfair is planning to broaden its global reach, including a focus on growth in Canada and Western Europe.
“We believe these markets represent a tremendous opportunity for us,” said Niraj Shah, co-founder, CEO and co-chairman of Wayfair, in an fourth-quarter earnings call. “Western Europe has a total addressable market size similar to that of the U.S. of nearly $250 billion. Canada is much smaller but highly fragmented and underserved today.”
Shah said the company plans to start with a focused approach in Canada, the UK and Germany.
“We think of our UK and German businesses as similar to our U.S. business in 2013,” he said. “As with the U.S., before turning up the dial in marketing, we worked to establish our European supplier base and core operations infrastructure.”
Over the past year, Wayfair have invested heavily in building its international team. By the end of the year, it had approximately 12% of its workforce in Europe.
In late 2015, Wayfair started implementing its U.S. advertising playbook with a particular focus on the UK, and results there were very promising.
“As we have seen success in the UK, we have started to execute the playbook in Germany,” Shah said. “Over the course of this year, we plan to significantly ramp up both advertising spend and the continued build out of our team in Europe.”
The opportunity in Canada, while smaller, is also enticing, he said.
“In January we served the Canadian market from our U.S. website,” Shah said. “Customers had to purchase in U.S. dollars and there was no free shipping. Also, the site was in no way tailored to the Canadian customer.”
While it is extremely early in Canada, with Wayfair’s Canadian site launching on Jan. 4, the company is already seeing a significant increase in orders based on simply tailoring the site to the local market.
“We now price items in Canadian dollars, we have parts of the site in French, and we offer free shipping on order over $75 Canadian,” Shah said. “Because of the proximity of the Canadian market, we can utilize our U.S. supplier network and logistics infrastructure to serve it.”
In 2016, Wayfair plans to roll out more direct Canadian suppliers and some of its own proprietary logistics network in Canada. It will also invest in brand-building and customer acquisition and retention through its advertising spend, similar to the UK and Germany.
“In aggregate, these markets represent a compelling opportunity to unlock an incremental wave of growth for the business,” Shah said. “Obviously, the investments we intend to make in these markets are significant.”
Steve Conine, co-founder and co-chairman of Wayfair, said the company has been developing proprietary technology to meet the unique needs of the home market since 2002. Areas covered include personalization, search, mobile web and apps for its supplier interface, advertising stack and its logistics network.
“Our systems are largely homegrown and developed utilizing our proprietary data to build the best tools to serve our suppliers and customers,” said Conine. He added this approach is one of the reasons Wayfair believes it will be successful in Canada, the UK and Germany.