Wayfair was founded with one goal in mind: to get as big as possible. Next stop: $1 billion.
Niraj Shah and Steve Conine were at a loss.
They felt they had lost their momentum. Four years earlier, the two college friends had sold Spinners, an IT consulting business, for $10 million. But their second venture, Simplify Mobile, which made mobile-phone software for corporate users, never got off the ground. Almost a year's worth of hard work was gone, without much to show for it. So as they considered their next move, Conine and Shah were determined to think big—really big. "We had aspirations," says Shah.
It took a while, but soon they felt they had found something really exciting: birdhouses. Or, to be more specific: a website that sold birdhouses.
Bear in mind that this was 2002, when public sentiment and the Dow Jones index held that the heyday of e-commerce had come and gone. But that wasn't what Shah and Conine were seeing. The two, for example, were impressed by a very simple website they had stumbled upon. It sold birdhouses and was run by a woman without a whole lot of Internet savvy. High-profile flops such as Pets.com and eToys may have been the poster children for the excesses of the dot-com era, but here was a site that was quietly doing a very respectable business. And as they searched, they ran across dozens of similar outfits. "They all had the same story—a husband and wife running it out of their garage, or two guys running it out of a spare bedroom," says Shah. "These were folks who didn't have a lot of marketing or technology expertise. They weren't getting rich, but they were doing a couple of hundred thousand dollars a year in sales—and growing at 25 to 30 percent."
It occurred to them that the Next Big Thing wasn't one thing at all. It was hundreds of little things. Like birdhouses. And beanbag chairs. And meat slicers and porch swings and gun safes.
All of those items—and about 4.5 million more, in 25 categories—can now be found at Boston-based Wayfair.com, the largest online-only retailer of home goods in the United States. The company pulled in sales of more than $500 million in 2011. Its head count is approaching 1,000. And yet, most people have never heard of it—even if they have shopped the niche sites. Some entrepreneurs would find that distressing. Shah and Conine think it's exciting. They have built a company this big with almost zero name recognition. Imagine how big it can get once people know what it is.
Part of the reason you don't know about Wayfair is that the company doesn't quite know itself yet. For the first nine years of its existence, it was known—if it was known at all—as CSN Stores. Rather than one brand, CSN Stores was a collection of more than 200 almost absurdly narrow niche sites, with names such as HotPlates.com and EveryGrandfatherClock.com.
CSN Stores's growth was a testimony to the power of Web analytics, target marketing, and near-perfect execution. No one has ever typed AllSwivelBarstools.com into a Web browser, but if you happened to be searching online for a barstool that swivels, you would probably land there. It was a business that suited Shah and Conine, both of whom are engineers with highly analytical minds. "It's an extraordinary story," says Eric Paley, a managing partner of Founder Collective, a Boston-based seed fund, and a longtime observer of the company. "These guys quietly built one of the great e-commerce powerhouses while somehow avoiding the limelight. They found a great formula, and they've been able to keep executing on that formula without ever hitting a blip. They were profitable Month One, and they just kept going."
Last year, however, Shah and Conine decided to change that formula. The 200 sites are gone; in their place is Wayfair.com, which Shah and Conine hope to make synonymous with all things home-related. The idea is that Wayfair will be a destination, not a site you stumble upon while searching for a new chaise longue.
It's a gamble, for sure. Shah and Conine are, after all, hard-core systems guys in the soft and fuzzy world of consumer branding. But the opportunity is huge. The home-goods market in the U.S. alone is more than $500 billion, and only 6 percent of that is online. The potential is there for Wayfair to become a billion-dollar business. "That's a goal for the company, but it's not an end goal," says Shah. "It's just another step on the road."
Let There Be Lights (236,648 Of Them)
Huge selection has been key to Wayfair's success. This Taniya Nayak ceiling light ($165.60) is one of more than 200,000 lighting items you can buy on the website.
None of this was readily apparent in August 2002, when Shah and Conine launched a website called RacksAndStands.com. The website sold furniture such as speaker stands and TV stands. Why racks and stands? "If you look at the market nationally, there are a lot of audiophiles looking for these things," says Conine. "But the brick-and-mortar guys couldn't capture it locally, because it's just not dense enough to reward servicing it locally. Best Buy might have a couple, but they're usually in the aisle where they park the ladder truck." RacksAndStands.com, on the other hand, had hundreds of models to choose from. Like the small-scale entrepreneurs who provided Shah and Conine's inspiration, the pair ran the business from home, in this case a spare bedroom in Conine's Boston townhouse. Unlike those other entrepreneurs, however, Shah and Conine had plenty of online marketing and technological expertise—and more on their minds than a tidy little business. Between search-engine optimization and targeted keyword ads, anyone looking for a place to put speakers found the website. Indeed, less than 24 hours after going live, RacksAndStands.com was already receiving orders. "Right away, we felt that we had a potential winner," says Conine.
As the only two employees, Shah and Conine were the de facto customer service department. They fielded the usual questions about shipping and product specs, and also got a lot of calls from customers who simply wanted to share their excitement about finally finding the perfect speaker stand. The site validated Shah and Conine's larger plan: to launch an array of similar sites, narrow niches all focused on the home-goods market.
