by Platform is ‘in full control of its destiny,’ CFO says
BOSTON — The one-two semantic punch from CEO Niraj Shah and CFO Kate Gulliver on Wayfair’s most recent earnings call, which punctuated more than respectable quarterly and annual metrics, produced an intriguing effect. Their attitude was one of quiet confidence, as if they knew they had found Ali Baba’s cave and had managed to arrive well before the Forty Thieves.
The headline figures include 5.1% growth in annual sales, adjusted EBITDA more than doubling year over year, a loyalty program crossing 1 million members, and good progress reducing its yearly net losses. Annual sales are up to $12.5 billion, including $11 billion in the U.S., with an annual net loss down to $313 million, or just 2.6% of the sales total and a sum more than a third lower than 2024’s $492 million.
The subtext of Shah’s and Gulliver’s two-step to the music of these promising (and big-time) numbers, however, seemed to indicate that Wayfair has reached an inflection point. “We figured out how to grow regardless of the weather outside,” they seemed to be saying.
During a quarter in which home furnishings contracted in the low single digits, when the housing market remained locked in a slow-burn stalemate of high mortgage rates, Wayfair grew. And not only did Wayfair grow, but its growth accelerated and its margins improved.
Gulliver concluded her breakdown of the numbers by saying, “We are in full control of our destiny, and we are well set up to drive healthy top-line growth independent of the macro. … We are turning that growth into more profit dollars than ever before.”
It only takes a stone to start an avalanche, and Shah described the “compounding” nature of Wayfair’s current initiatives, an adjective that by repetition he turned into a sort of mantra throughout the call.
The loyalty program (Wayfair Rewards) costs gross margin but saves on advertising spend, because members come back without needing to be reacquired. Physical stores cost operating expenses, but they generate new customers and expand basket size in surrounding regions. Each initiative, in theory, feeds the others, creating what the big digital platforms call a “flywheel.”
In short, the flywheel effect brings in new customers, a percentage of them loyalty program members, with low prices and a large selection. This attracts suppliers and vendors who are eager to sell to this growing network of customers, and the virtuous cycle makes each more important to the other. The paradigm for this flywheel effect is Amazon Prime.
“The big benefit of multichannel is it allows suppliers to put in a broader breadth of products,” Shah explained, “which then allows us to figure out which ones are really great winners on our platform. And then suppliers can lean in and put a lot more product. We can then position it into more and more facilities, faster and faster delivery, lower and lower shipping costs, less and less damage.”
This could be Jeff Bezos talking.
The BAM Retail Bet
The store expansion is perhaps the most visible signal of how seriously Wayfair is leaning into this flywheel strategy. Their first location, outside Chicago, opened in May 2024 and has been the subject of careful, almost clinical praise on every earnings call since. Next come Atlanta, Columbus and Denver.
Shah said Illinois has seen a 10%-plus compound annual growth rate over the national average since the 150,000-square-foot Wilmette store opened in May 2024, noting that more than half of store visitors are new to the brand.
“Each store will showcase the true breadth of our catalog in a variety of special ways,” Shah said. “And you will find some of the favorites from Chicago, like the Dream Center and shower wall, appearing in our Atlanta store, as well.”
The 150,000-square-foot Atlanta location is expected to come online in the next month or so.
Another key to the bricks-and-mortar approach has to do with working capital, Shah argued, in response to a question about inventory risk. The products on the shelves are largely owned by suppliers, he said, not Wayfair, making the physical stores as much consumer marketing as traditional retail. Thus, Wayfair appears to be positioning its BAM not as a costly new business line but as an extension of its existing platform.
Whether analysts buy that framing will matter in terms of how the store rollout is valued on the Street.
“Walking through a physical store gives every shopper a broad view of the breadth of our categories and the depth of our assortment, often inspiring purchases they did not know they could get through Wayfair,” Shah said on the call. “We are seeing this work in real time.”
Members Only
The Wayfair Rewards members account for more than 15% of U.S. revenue despite representing a relatively new subscriber base, mainly because they convert on furniture at nearly three times the rate of nonmembers, Shah said. And more than half of recent new subscribers are lapsed customers, or people who had drifted away and were drawn back in by the benefits of the program, according to Shah.
This, too, is a play straight from the Amazon Prime flywheel playbook.
I don’t have any empirical data, but it’s my guess based on what I do know about Prime that whenever Wayfair Rewards members shop for furnishings, they almost always begin that shopping at Wayfair because they are already vested. In platform-speak, customers are “locked in,” with the loyalty program tethering customers to Wayfair with a silken ribbon.
“Compared to nonmembers, reward shoppers have a conversion rate on furniture and decor that is nearly three times higher and a conversion rate on housewares that is more than three and a half times higher,” Shah said. “All of this comes alongside noteworthy benefits on the P&L.”
With a 5% discount on purchases, customers break even on Wayfair’s $29 annual fee (Prime’s is $139) after spending $600. Once a customer has paid the fee, every subsequent purchase feels like recapturing that sunk cost. The difference between Wayfair Rewards and Prime is Wayfair’s business in products that are considered “high consideration,” for which such loyalty programs rarely work. So, the fact that the program is defying economic gravity just might be the biggest takeaway from the call.
“Once you spend the $29, you have sunk the $29,” Shah said, explaining lock-in. “You want to want to maximize your benefit,” so the customer spends more than the $600 break-even. “Particularly when you start realizing what you are getting in the members-only sales and some of the other benefits, you realize that probably you should have been spending that money with us even before, but now you are getting even more juice out of it.”
With more than a million members after just a year, Wayfair is powering ahead with plans for similar loyalty programs for Canada, the U.K. and its specialty retail brands, including Perigold.
“There is even more we are working on behind the scenes to drive value for rewards members,” he said. “We are expecting to add even more members in 2026 than we did in 2025.”
Get me some AI
If Wayfair Rewards isn’t the biggest takeaway from the call, Shah’s description of the company’s approach to AI has to be. Goldman Sachs analyst Eric Sheridan asked about that AI strategy, giving Shah the opportunity to elaborate on the section of the annual letter to shareholders that addresses the same.
Wisely, I think, Shah led with AI’s benefits behind the scenes rather than customer-facing bells and whistles. He framed AI as a rare “triple win” with respect to tech. Most innovations are like trading one currency for another, giving you speed or quality but charging you more for the privilege. AI, he argued, simultaneously promises better quality, faster execution and lower cost.
“When you have a technology that comes along that is transformative, usually there is an opportunity for quality and or speed, but it comes at a cost,” Shah said. “Here, what is tremendous about (AI) is that you could actually do all three at the same time,” improve quality, improve speed and reduce cost. “The ROI is there.”
The last time Wayfair experienced anything like this, he says, was when they built their proprietary end-to-end logistics network, CastleGate. AI, in his view, is that same kind of moment, only bigger.
Internally, Wayfair is charting three phases of AI adoption, according to its shareholder letter released coincident with the earnings report. The first was getting employees to use chatbots, including Google’s LLM, Gemini, that Wayfair connected to internal data. The second phase, where Wayfair is now, focuses on agentic workflows, or asking AI systems not merely to answer queries but to chain actions together, reason through multistep problems and handle subjective judgment calls.
Shah used the example of assessing a damaged item from a photo, something that only very recently required human review. The goal, he said, is to free employees from repetitive, low-value work so they can concentrate on things that genuinely require human creativity and judgment.
In terms of customer-facing AI, to implement its growing workbench of AI tools, Wayfair is drawing on what it learned from its early relationships with Google, Meta and Pinterest, Shah said. Just as the company learned to show up well in those ecosystems through organic placement, product data feeds and paid advertising partnerships, Wayfair is doing the same with AI platforms like Gemini and ChatGPT.
Wayfair wants to be the trusted “first-party source of truth” for home goods in an AI-driven commerce world, partnering on the infrastructure for how AI agents execute transactions on behalf of consumers. Shah said he sees it helping Wayfair fulfill its vision of becoming an “always-on digital interior designer helping customers discover what they want by exploring aesthetics, visualizing rooms and populating those rooms.”
The hydraulics for all of this AI-powered lift are already in place, Shah described. Wayfair completed a major multiyear technology re-platforming. Thus, the platform’s systems are efficient and up to date, providing AI tools with an infrastructure that makes those tools faster and more effective.
“The amount of technology resource we can put into product-led growth is substantial,” he said, asking those on the call whether they believed retail will continue to become more tech-dependent or less?
Previous tech cycles for the internet, mobile and cloud computing seemed to track on roughly two-year rhythms. AI is compressing this to six months or less. Shah argued that Wayfair’s flexible planning processes and technology-first culture make Wayfair’s platform better suited to operate at AI’s quickened tempo than larger, more rigid competitors.
“Being technology-driven, Steve and I’s background both as engineers has been a mainstay of how we have been able to grow the business,” Shah said, referring to Steve Conine, cofounder and cochairman.
You can almost hear The Ride of the Valkyries starting up in the background. Wheels up!
(Disclaimer: The author has zero connection to, affiliation with or investment in Wayfair.)
Transcript of the earnings call is available here.
