Video Transcript

00:07 Niraj Shah: 'Cause you have to do it with this faith that in the end it was all worth it. We had that faith, but we were scared about the journey.

In 2002, Niraj Shah co-founded CSN Stores, which sold home furnishings online.

At first, the company had more than 200 websites, each with a specific product niche.

00:25 Shah: We started the company in 2002.

00:27 Shah: And when we started the company in 2002, these categories, home goods, were not thought of as great internet ecommerce categories. Who was gonna buy their furniture on line, that type of thing. In order to make it easier for customers to find what they were looking for, we named the sites very clearly about what the category was. So, if you were looking for a bunk bed for your kids and you put the term bunk bed into Google or what have you, you find CSN Bunk Beds. You go to the site, and you were like, geez who knew there was a store that sold bunk beds. They have 450 of them. Wow! And so, that strategy worked well to take these categories that were not obvious internet commerce categories and make them very accessible. But we had one big problem, which is customers would tell us they had a fantastic experience and then 70% of them would tell us that they didn't know we had 200 other web sites. And we decided that was a big problem because if your loyal customers don't know about that, well, you're not gonna be able to get that repeat business.

In 2010, CSN began to consider shutting down its niche sites--and redirecting customers to one main site.

But the plan came with risks.

01:34 Shah: The way we thought about this change, we were convinced that the new site would be, from a consumer's standpoint, what they really wanted. What we were nervous about, very nervous to be honest, is the transition from this model that was working great, to building up this new model. It's one of those things where you know you're gonna basically go off a cliff and you're gonna have to rebuild some of your momentum. Once you build it back up you're gonna be on a better trajectory then you've ever been on, but that journey is going to be a bad one in terms of the near term consequences. And we didn't know what that looked like. We didn't know what that curve looked like, because there's not very many companies who redirect sites at that traffic level, to a new site. So, it's generally viewed as a bad activity by Google.

02:15 Shah: The math is if traffic goes down, volume goes down. If volume goes down, all of a sudden, as a company we employee 1,200 people and we have a certain fixed cost to operate. And as volume goes down, all of a sudden, we went from making money, we knew we'd go to not making money. That's scary. Right? And for us, we had not taken in outside capital. So, one of the things we did, we decided to bring in investors. And we said, well, let's bring in investors who believe in this strategy, but let's put some money on the balance sheet because we know we're gonna do something that's very risky but for this great outcome. And so, we did that and we did it because to be honest, we had no idea what the numbers would look like.

On September 1, 2011, CSN Stores consolidated almost all its websites into one, Wayfair.com.

The company's overall traffic fell after the change--but grew through 2011, surpassing what it had been.

03:00 Shah: The thing about change is it introduces uncertainty. You're not sure what's gonna happen. You're not sure that you're introducing risk, and these are not things people generally want to do. But, I think if you don't change, you run the risk of things actually changing against you.

To date, Wayfair has raised $201 million from Batter Ventures, Great Hill Partners, Spark Capital and HarbourVest Partners.

In 2012, its revenue was more than $600 million.