Special Report: Wayfair's Road to $1 Billion

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 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, 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 and

CSN Stores's growth was a testimony to the power of Web analytics, target marketing, and near-perfect execution. No one has ever typed 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, 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 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.", 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, 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.

Huge selection, it was clear, would be critical. That meant that Shah and Conine would need a lot of suppliers. For that, they would have to get creative. Or, to be more precise, they would have to get dull.

In 2002, in the wake of the dot-com crash, manufacturers were understandably skittish about dealing with Internet retailers. So Shah and Conine camouflaged the fact they had an online address by giving their new business a name so plain that no self-respecting Web start-up would ever choose it: CSN Stores. "It's actually just our initials mixed together," says Shah. "We knew it wasn't a very good consumer name, but we did it for the supply chain. We'd be talking to suppliers at a trade show for 15 minutes before they realized that we were actually 100 percent Internet. By that point, they could tell that we seemed pretty credible. If our name was something dot-com, we wouldn't have even gotten a chance to chat with them."

With suppliers on board, CSN Stores began branching out to other niche sites. Need a dog bed? had more than 1,000 to choose from. A cuckoo clock? had hundreds. At one point, CSN Stores had eight websites alone dedicated to different types of barstools. Twelve months after launching, the pair had half a dozen websites selling stuff such as sofas, TV mounts, and patio furniture.

This wasn't exactly where the two expected to find themselves when they met in 1991. They were engineering students at Cornell University who shared an entrepreneurial bug. After graduating in 1995, they launched Spinners, which built Internet software systems for businesses, and soon had clients such as Merrill Lynch, The New York Times, and Time Warner. In 1998, they sold their company to iXL, an interactive advertising agency that would eventually go public, only to fall apart following the dot-com crash.

The pair stayed on with iXL for two years after the sale but never quite got over the itch to start another company. In 2001, they launched Simplify Mobile, which aimed to create a mobile-phone brand geared toward corporate customers. After about eight months without much traction, the pair pulled the plug and went back to the drawing board. A few months later, they had their birdhouse epiphany.

Conine grew up in New Vernon, New Jersey, and his mother owned two stores that sold outdoor furniture. His work for his mom as a teenager was the full extent of the pair's retail experience. But Shah and Conine were undeterred. "The retail business is such a basic business," says Shah. "But it is fairly complex. Not everyone does a good job at it, because it is very competitive. I think that's what made it an exciting market for us."

In fact, it turned out that you don't necessarily need retail or merchandising chops to build an effective online retailer. Each of Shah and Conine's websites was run with the efficiency and know-how gleaned from the experience of running each prior website. In fact, by poring over data on search analytics, Shah and Conine were able to determine what shoppers were searching for (say, diaper bags, Adirondack chairs, and shag rugs) and build an online store to meet their needs (,, and

The growth was exponential. By the end of 2006, CSN Stores had 150 websites, nearly 250 employees, and revenue of more $100 million. The next year, with help from new sites such as and, sales more than doubled. By 2010, CSN Stores had about 200 sites, 4.8 million customers, and $380 million in sales.

Churning out websites is easy enough, but selling several million different items means promising that you will actually be able to deliver them to customers in a way that makes and keeps them happy. That is much more difficult. "We realized that there was a reason that no one offers this kind of selection," says Shah. "The world isn't set up to operate this way." The two began working to change that.

Most e-commerce companies, to guarantee selection and on-time delivery, keep inventory in their own warehouses and fulfillment centers. That increases costs in terms of labor and real estate but is considered simply a cost of doing business. Shah and Conine were determined from the outset not to be hobbled by such expenses. Although they added two warehouses in 2011, 90 percent of their products are still being shipped directly from their suppliers. Indeed, the true guts of CSN Stores are less the sites themselves than the mammoth back-end system they share. It's a staggering feat of computing that is capable of coordinating the order flow and logistics of the more than 4,000 suppliers that ship out an average of 93,800 items each week.

"I don't want to name names, but there are companies much larger than Wayfair, and in some cases much smaller than Wayfair, that are littered with bureaucracy," says Mike Horowitz, president of Southern Enterprises, which supplies the company with tables, media stands, and other furniture. "They've got smart people there who are very approachable, and there's very little bureaucracy. It's very much a two-way street. They want to help us do more with them, knowing that it helps us grow and it helps them grow."

"In my mind, that's the secret of the business—teaching thousands of small, mid, and large manufacturers how to do drop-ship so well," says Alex Finkelstein, general partner of Spark Capital, a Boston venture capital firm. "That's what really enables the engine behind the engine to work."

By mid-2011, revenue was on track to break the $500 million mark, up from $450,000 in 2002. For nine straight years, Shah and Conine had been on a winning streak. The planning and execution had been meticulous, and there was no reason to believe that the growth curve wouldn't remain on that same upward trajectory. And the enterprise had been entirely self-funded; they hadn't taken a dime in venture capital.

In many ways, this would seem to be the logical end to the company's story. But Shah and Conine had something else in mind. And pulling that off would mean taking nearly everything they had learned and flipping it on its head.

When is a Niche Not a Niche?
With more than 200 websites, CSN Stores was an expert at going narrow. But was just too small. So the site was folded into, whihc, in turn, was folded into Wayfair.

Last September, the more than 200 sites of CSN Stores began directing shoppers to a new one: To help spread the news, 700 CSN employees went on a massive pub crawl in Boston; in fact, you could scarcely enter a tavern that day without seeing someone in a Wayfair T-shirt.

It's not hard to see why Wayfair employees might have needed a drink. This was a big move, perhaps the biggest the company could make. For years, CSN Stores had been intentionally mysterious. Anonymity, after all, has its benefits: There's no risk of damaging the brand if there isn't a brand to damage. Even the biggest customer service screwup on one site was unlikely to affect customer loyalty on any of the other sites.

But there were also opportunities being missed. Through customer surveys, Shah and Conine knew that their customers were happy with the service and selection on individual niche websites. But customers didn't know that there were plenty of other niche sites where they could buy lots and lots of other things. In surveys done around 2007, customers were asked whether they were aware that CSN Stores had more than 200 other websites. Seventy percent said no. "We had the selection, the price was compelling, we had a 1-800 number to answer any questions," says Shah. "And after all that, the person would say, 'I love you guys, and the next time I need a bunk bed, I'll come back.' Well, they're probably not going to need a bunk bed for a while." Conversations like that led Conine and Shah to consider something truly radical: putting all of their tiny niches under a single umbrella—that is, turning CSN into a brand.

The more they thought about it, the more sense it made. As diverse as they were, CSN's sites were anchored around items for the home. This was the market Shah and Conine had decided on when they launched the business. And it remained a huge opportunity that no one else had really conquered. "We decided to launch a site that would be the destination for everything 'home' and then build up the brand equity around it," says Conine. Target and Walmart had presences online, but they didn't have CSN's selection. In fact, sites such as and used CSN Stores as a third-party supplier for much of the inventory they didn't keep in their own warehouses.

Shah and Conine considered trying to build a brand under the name CSN Stores. But that notion was quickly dismissed. "Even my mother, after eight years, would still call it CNS Stores," Conine says. "We needed a name that felt more homey and less industrial." Shah and Conine were no strangers to naming websites; they had done it more than 200 times. But didn't exactly require a lot of creativity. For this one, they would need some help.

Enter Michael Estabrook, art director of the Newton, Massachusetts-based branding firm BrandEquity. Soon, 35 possible names were being bandied about—White Rhino was a brief contender, until it was learned that there was a type of marijuana called White Rhino. Four months later, they had what they were looking for: Wayfair. The team at BrandEquity had come up with it through a process of trial and error and collaboration. "It was a name that was easy to say, easy to understand, but yet there's a lot of meaning that can be built into it," says Estabrook. To hear Shah and Conine talk about the name now, it's clear that these two engineers have embraced the dark arts of branding. "There's a nautical sense to the name; it evokes being on a voyage," says Conine. "Way and fair are both English words that have positive connotations to them," Shah adds.

What's In A (New) Name
This unfinished Windsor arrowback chair was the first item sold under the Wayfair brand when it launched in September 2011. It helped fuel a 30 percent jump in holiday-season sales.

Wayfair's unveiling last fall appears to have gone off without a hitch. The signage in the office was changed. Employees got new e-mail addresses and business cards, and all the former CSN websites were redirected to But those things don't get to the real challenge facing what is essentially a new company. "They've designed an identity, and now they've got to do a lot to actually build the brand," says Founder Collective's Paley.

To do that, Wayfair has hired people like Kristine Kennedy, the former East Coast editor of Better Homes and Gardens. Kennedy's task is to create a community out of users who previously were only customers. "The microsite model is a very transaction-driven business," Kennedy says. "But now we're trying to interact with the customer in a very soft way. If you're in the home space, you have to act like it." In practice, that means a website that is far more visually appealing than any of the niche sites had been. Kennedy also helped launch Wayfair's new blog, My Way Home, with a team of writers who discuss topics as diverse as parenting and marriage, interior design, and photography. (Of course, they also mention some of their favorite Wayfair products.)

Another big difference: Brand building is not cheap. So to fund the effort, Shah and Conine did something they had never done: They raised their first round of outside capital. Last June, four Boston-area VC firms—Spark Capital, Battery Ventures, Great Hill Partners, and HarbourVest Partners—invested $165 million, in exchange for an undisclosed minority stake. "When you walk in my shoes as an investor, there is risk in this transition," says Neeraj Agrawal, a general partner at Battery Ventures. "But at every turn along this journey, Shah and Conine have outexecuted my expectations. When you have the type of team they have, and are as passionate about the business as these guys are, they are going to figure it out."

After spending nine years running the largest retailer nobody has heard of, Shah and Conine are working to get their message out loud and clear. "You can't build a consumer brand overnight," says Shah. "But in a year or two, if you ask people where the best place to shop online for home goods is, can we get them to say, 'Wayfair'? We think that's very possible."

If it's any indication of how things are shaping up so far, Wayfair had the biggest single-day sales in company history during last year's holiday season. It sold $4 million worth of items on Cyber Monday, just two months into the rebranding. So maybe the Next Big Thing is just one thing after all. One thing with more than 4.5 million items.

Last updated: Apr 3, 2012

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