EP 94: Niraj Shah (CEO, Wayfair) Building To $10B in Home Decor Revenue

Niraj Shah is the Co-founder and CEO of Wayfair. In this episode, Niraj shares Wayfair’s journey from a collection of 250 sites generating $500 million in revenue to a single, unified brand achieving over $10 billion in online sales of home goods and furniture. He explains the challenges of overseeing a vast e-commerce platform with more than 10,000 employees, managing a complex supply chain with over 7 million products, and maintaining relationships with suppliers. The conversation offers detailed insights into Wayfair's strategic growth, effective talent acquisition practices, and the pivotal rebranding effort that propelled the company forward. (00:00) Intro (00:13) The Journey of Wayfair (01:02) Understanding the Market and Competition (01:45) The Genesis of Wayfair (03:11) The Strategy Behind Niche E-commerce (05:40) The Challenges of Inventory Management (06:18) The Evolution of E-commerce (07:26) The Growth and Expansion of Wayfair (09:59) Understanding the Retail Market (15:53) The Decision to Rebrand (18:24) The Challenges of Rebranding (20:22) Building the Wayfair Brand (25:22) The Importance of Logistics and Delivery (32:10) The Complexity of Final Mile Delivery (33:17) Investing in Advertising and Marketing (33:23) Building a Brand: Lessons and Insights (33:56) The Power of Branding and Customer Loyalty (34:47) The Journey of Building a Brand: The Apple Example (35:36) The Role of Independent Brands in Business (37:56) The Importance of High-Quality Images in Online Retail (39:49) The Role of Generative AI in Business (41:41) Building a Culture of Incremental Improvements (44:52) The Importance of Hiring for Specific Traits (01:02:19) Navigating Public Misinformation and Conspiracy Theories (01:05:47) Competing in the Market: A Focus on the Customer (01:11:08) Reflections on the Entrepreneurial Journey Executive Producer: Rashad Assir Producer: Leah Clapper Mixing and editing: Justin Hrabovsky Check out Unsupervised Learning, Redpoint's AI Podcast: https://www.youtube.com/@UCUl-s_Vp-Kkk_XVyDylNwLA 🎥 Subscribe on YouTube: https://www.youtube.com/channel/UCugS0jD5IAdoqzjaNYzns7w?sub_confirmation=1 Follow on Socials 📸 Instagram - https://www.instagram.com/theloganbartlettshow 📱 X - https://twitter.com/loganbartshow 🎬 Clips on TikTok - https://www.tiktok.com/@theloganbartlettshow About the Show Logan Bartlett is a Software Investor at Redpoint Ventures - a Silicon Valley-based VC with $6B AUM and investments in Snowflake, DraftKings, Twilio, and Netflix. In each episode of The Logan Bartlett Show, we sit down with the people behind today’s most important startups and extract the tactics, lessons, and frameworks they’ve learned the hard way. Conversations span hiring to GTM, product, growth, fundraising and everything in between - collectively forming the ultimate playbook to make you a better CEO, investor or board member. Tap follow and enable notifications to stay ahead of the game.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:05Logan Bartlett?

  Welcome to the Logan Bartlett Show. On this episode, what you're going to hear is a conversation I have with Niraj Shah. Niraj is the co-founder and CEO of Wayfair, a business doing over $10 billion, selling home goods and furniture online. Now, Wayfair had a very interesting story, bootstrapping its way to $500 million in revenue across 250 different sites, before they raised outside capital and rebranded the company from CSN Stores to Wayfair. We go into a bunch of different directions here about managing a company that has over 10,000 employees, what he looks for in talent, the complexity of e-commerce and supply chain, which includes having over 7 million SKUs on the Wayfair site, and their decision to rebrand from 250 discreet stores to the Wayfair brand that we know today. Really

• 0:50Logan Bartlett?

  interesting conversation with Niraj that you'll hear now. All right, Niraj, thanks for doing this. Welcome to my apartment, our makeshift studio we have here.

• 0:59Speaker 01

  Thank you for, thank you for having me. It's great to be here.

• 1:01Logan Bartlett?

  We cleaned it up decently for you. My wife was not thrilled this morning when we woke up.

• 1:06Speaker 01

  You told me this coffee table's from Wayfair. That's exciting right there.

• 1:08Logan Bartlett?

  I know, product placement, right there. Yeah, we'll list it in the show notes where you can get the link back. Well, thanks for doing this. I normally don't try to tell a story in a linear fashion of like the company's journey, but I think the foundation of Wayfair is such an interesting like story and genesis of how it all came to be. So maybe we can go back in time, 2002?

• 1:28Speaker 01

  2002.

• 1:29Logan Bartlett?

  You and Steve?

• 1:30Speaker 01

  Yep.

• 1:30Logan Bartlett?

  You guys were college classmates? You knew each other even going into Cornell, right?

• 1:35Speaker 01

  Yeah, we met at Cornell in the summer of 1990 at a summer program for high school students that they had.

• 1:41Logan Bartlett?

  Were you guys accepted both at the time or no?

• 1:43Speaker 01

  No, this was between our junior and senior years. Then, you know, we ended up each, unknown to the other, applying early. We both got in and then randomly ended up three doors apart on our freshman year floor.

• 1:55Logan Bartlett?

  So friends?

• 1:56Speaker 01

  This fall of 91.

• 1:57Logan Bartlett?

  Friends all the way through. You started two companies together prior to Wayfair.

• 2:02Speaker 01

  Exactly.

• 2:02Logan Bartlett?

  So it's 2002 and you're looking for a business idea? Is that fair to say?

• 2:09Speaker 01

  Yes, I think that's very fair.

• 2:10Logan Bartlett?

  And so did you stumble on racksandstands.com? Like was that the, was it an independent operating entity? Or how did, how did the kernel of idea come to be?

• 2:19Speaker 01

  Yeah, so we, one of the things we were doing is we were trying to think of an idea as we were poking around it. Businesses that were out there that were the the operators were looking to sell them, but they were small and they were seemingly doing well. And what we realized there was these all these small e-commerce companies that were, you know, there's a woman selling birdhouses and that's the one that I remember the most. But there's dozens of these and it was just growing fast, but it was like more than she could handle, you know, shipping these out of her garage or whatever. And so we ended up coming up with this thesis that niche e-commerce was a real opportunity. We then sort of researched it and we we basically came up with an approach on how to find categories that could be good and TV stands and speaker stands were both two of the top 100 search

• 3:02Speaker 01

  words on on Yahoo, on some of these shopping comparison sites at the time. So we created Racks and Stands.

• 3:10Logan Bartlett?

  Oh, you did, okay. I mean, it was there was no acquisition. You started it from scratch?

• 3:13Speaker 01

  Well, what you're probably thinking of is we bought a thing called Smart Tech Toys. We bought it very little money, but we bought it basically to it was up and running. We bought it to see how it was operating, you know, they were drop shipping all the goods from suppliers. So we bought that, we then built the technology to kind of let us track the ad spend, let us track the order flow, manage the customer service. And on the back of building that, the first website we launched from scratch was racksandstands.com.

• 3:40Logan Bartlett?

  And so the moment in time that allowed this to happen was basically Google search kind of popping up and e-commerce and all of that. Like what was the wine now of 2002?

• 3:52Speaker 01

  Yeah, so search obviously had been around and search, you know, internet was growing fast. But I'd say the now was that Google AdWords was brand new and Yahoo was using a third-party product called Overture, which was effectively same thing as Google AdWords. And so you were able to advertise in a very targeted way on these kind of high-intent words. That was quite new.

• 4:15Logan Bartlett?

  And so in 2002, you see this. And how do you actually get in touch with the business owners that, you know, to figure out, do they have contact information on their websites when you're sort of poking around and trying to figure out what's working?

• 4:29Speaker 01

  There was a website at the time, it was called like, I think it was called BizBuySell.com, something like that. And it listed these like, you know, it lists business that you could pay to list your business for sale. And then the person you contact would be the, you know, the operator, you'd just chat with them. And at first we were thinking, hey, you know, we could buy these, put them on a technology platform, streamline things. But what we realized is there was no inherent value in what you were buying. There was no, there's no equity value. There wasn't a repeat customer base. There was no brand. You know, there's nuance to all these categories. The truth was, we're better off coming up with our own approach to figure out, you know, we bought one. And then what we learned through Racks of Stands is better off coming up with our own approach. How do you pick a category? Get into it and kind of build that way.

• 5:09Logan Bartlett?

  Maybe explain drop shipping and how that works, because you actually, people weren't taking inventory at the time, right? It was, all these things were, for the most part, they were drop shipping businesses?

• 5:21Speaker 01

  Well, actually, most of them ironically were taking inventory, and that was one of their limiters.

• 5:27Logan Bartlett?

  Got it. So the woman was making the birdhouses in her garage and shipping them herself?

• 5:31Speaker 01

  Yeah, either making them, or I think she was buying them, you know, and so that was always a challenge in growing these businesses. You had to manage your inventory. The idea of drop shipping, most suppliers and manufacturers weren't set up to ship one at a time. And so they were not keen on doing that. And e-commerce was far from a proven thing at the time, you know. This is pretty fresh after the dot com crash. There's a lot of negative press about e-commerce and what its potential was said to be versus what it turned out to be. You know, if you remember, like, you know, there's a lot of skepticism that Amazon was going to be successful. I mean, it was not a

• 6:04Logan Bartlett?

  There were some magazine headlines, like, very dismissive of Jeff Bezos at the time, that I don't think have stood, stood up over, over the last couple of years.

• 6:12Speaker 01

  E-commerce has worked out okay, and Amazon has done fantastically well.

• 6:14Logan Bartlett?

  Seems like it was fine. But so it was a contrarian, though, take at the time. And so you go to these suppliers, and they're used to selling to traditional retailers, like they have TV stands or whatever it is, microphones. And how do you go about convincing them that they should be doing one-off shipping to individuals?

• 6:30Speaker 01

  I mean, you'd basically

• 6:34Speaker 01

  Approach them, you'd try to explain what the opportunity was. And honestly, the way it worked was that so that first website racks and stands. We basically, you know, we probably started with a maybe a third of the selection we would have six months later. Because you can only, only so many of the folks would say that they were interested and whatnot. But that was enough to actually have a very good selection relative to others. Then we'd advertise the site. We'd track it really quantitatively. We'd do a great job on pricing, on service, on fast shipping. And that would get us better conversion than others. So we became quite fast growing. And then what happens is suppliers notice that you're growing. So then those suppliers like, hey, I remember, you know, we went, we launched it at the very end of August, I think like August 31st. And in the month of December,

• 7:18Speaker 01

  I think that month we did $250,000. And so these suppliers were like, geez, you know, you kind of came out of nowhere, but it's unbelievable how fast you're growing. And all of a sudden, they want to do more business with you. So they, some of them would say, oh, hey, you know, some of the other online guys sell more of my beds than my TV stands. Or, you know, there's different guys sell more of my desks than my TV stands. So what happened was two different things at the same time. One is we would approach all the other folks who had TV stands, speaker stands that we wanted that we hadn't been able to get. You know, talk to them about how things were going and, and, you know, have them look at the site. And one by one, they would say yes. So over time, we were able to really build up that selection. That's one of the things that's a real advantage on driving conversion, attracting customers. The second thing is we started learning about what the next category was to go into from our suppliers.

• 8:02Speaker 01

  So our whole approach initially was like, hey, we're going to be super quantitative. We'll pick all these niches that are unrelated. That a little bit fell by the wayside because we found this incredible source of insight, which are the, all these suppliers. And they, they were generally not just in one category. They were in some adjacent categories. And they had a great set of data because they knew exactly what was happening.

• 8:21Logan Bartlett?

  And you didn't have to start cold with, if you went after whatever it was, lighting. And that shows up really well as a search term, but you don't have any supplier relationships. You, now you have supplier relationships and you say, okay, can we sell your other stuff?

• 8:33Speaker 01

  So we ended up doing a hybrid. So we ended up working our way across furniture, a lot of which was related. But then as we were doing that, we clearly wanted to get into core. So then when you wanted to go into rugs, you wanted to go into lighting, for example, we had to approach a whole new set of suppliers because the furniture folks didn't do those categories. So, so we ended up doing both. But by that point, we had realized that home was a really attractive, very large, very fragmented market. Difficult service, difficult logistics. So we we became quite enamored with the opportunity to focus on home because there were no real national retailers there. And it was just a it was rife with challenges. And so that's kind of kept people away. But our view is, hey, that could be the opportunity. Get good at them. That's the moat.

• 9:12Logan Bartlett?

  Well, this is interesting thing to go into. So e commerce in general, right? There's there's kind of the commodity goods as well. There's fashion.

• 9:21Speaker 01

  Yep.

• 9:21Logan Bartlett?

  There's home. Can you break down like the different components of it? And why home didn't have a big brand that was out there?

• 9:27Speaker 01

  Totally. Like, so the simple math, that I think the thing about is if you think about the physical goods retail market, ex automobiles. So automobiles, one market, kind of unlike the rest of physical goods. Inside physical goods, it's basically 60, 20, 10 and 10. And what that is, is start with the 20. 20 is grocery. Okay, everyone buys grocery once or twice a week. Everyone knows what grocery is. Because it's so competitive, high frequency, it's it's low margin. Well, sitting next to 20 is the 60. That's general merchandise. And general merchandise, think of all the stuff you buy at Walmart, or Target, or Costco. And what you'll think about about the three I just mentioned, you'll say, oh, they all sell a lot of grocery, too. In fact, it's their biggest category. Well, the reason is, in the 80s, what they realized is the way I can sell more general merchandise is

• 10:09Speaker 01

  to get into grocery. So they all got into grocery. And over time, they've become the biggest grocers in the country.

• 10:15Logan Bartlett?

  As like a loss leading bit, or whatever, low margin, tough business, because people were coming in with frequency and then go buy our paper towels, or whatever.

• 10:23Speaker 01

  If you need AA batteries, you know, you either need them on an emergent basis, or you buy them right around the corner, or frankly, you just pick them up while you're buying your groceries, you know. Yeah. So it's like you, all those other categories can get added on. But you don't seek out the dish soap, you don't seek out the paper towels. And so the idea was like, hey, where are you going anyways? Constantly, grocery. So that 60 and 20 are very different when you think about the logistics and the margins. But they're kind of, they sit side by side for the reason I just described. So the two that are both large and super different, the 10 and the 10 are fashion and home. And they're really different for a few reasons. One is fashion, you know, it's branded, the seasonal cycles are short, you know, you don't want to wear the same exact stuff as

• 11:05Speaker 01

  someone else. It's an expression of who you are, it's your identity. So you're going to find these places you love. And, you know, maybe it used to be department stores and now it's more brands you love and you go to those brands and maybe there's ways you discover new brands that you might love, you know, and that's sort of fashion. The 10% that's home, these are, again, people don't want to have the same items in their house as someone else. It's an expression of their identity. They want to be comfortable, they want to be proud. There the challenges are. These items are often big and bulky, they're bought infrequently, it's hard to know how to pick the right item. So there's a lot of endemic challenges in home and there's no national brands there, really. There's very few. And so it's sort of like as a consumer, hey, who's going to present me with a good

• 11:49Speaker 01

  selection, help me pick the right item, be there if I have a problem. And so neither fashion nor home really fit into that 60 and obviously they don't fit into the 20. So they kind of sit on the outside and that's why there's a real opportunity. And if you look in Europe with Zalando as a platform for fashion, or, you know, in the US, a lot of the brands have gone direct, once Zappos sort of ceased to be a platform for that, you know, and then what we're doing in Europe and North America's home, they just don't fit into the mousetraps of, you know, think of a Walmart or a Target or an Amazon that well.

• 12:22Logan Bartlett?

  And so, so, uh, once upon a time, I would go around the corner to buy my couch to the retailer that could give me the opinion. It was close, so the logistics were easy, drop off all that stuff and I could build a trusted relationship with this person. As you moved online, there was an opportunity, both because of the complexity of the logistics, as well as people are looking for personalized things and, you know, the, all the things that benefit e-commerce.

• 12:46Speaker 01

  Well, so I think the first thing that ended up making e-commerce sort of interesting for the consumer was access to selection. There's one problem you have going around the corner is, you know, there's just not a lot to pick from there.

• 12:57Logan Bartlett?

  And your neighbors might have it, or whatever.

• 12:59Speaker 01

  Generally, you want more. So actually, if you, even today, if you go visit a furniture store, you'll typically find there's five, six in close proximity, or even maybe eight to 10. And the reason is, the average consumer wants to visit multiple. So as a retailer, you're better off being near the others than being the one that's far away. Because you want to be in the mix that they visit. Because obviously, you're counting, hey, we do a better job with merchandising, our sales force is better, our pricing's better, merchandise, you know, whatever it is. And so, we're going to convince you to buy from us. But if we're not in the mix, how do we get you here, right? That's sort of the, how that worked. And that, you amass selection by going to a number of places. Now, all of a sudden, you know, it could be, you know, whatever time of day, and you could browse and see a selection that's many, many times what you would get by then spending all of your Saturday going from store to store to store to store. So

• 13:44Speaker 01

  that, that was like the first draw. Now, obviously, that doesn't necessarily solve for, as you said, how do you get confidence? How do you solve ease of delivery? How do you solve problems? And that comes into all the challenges I mentioned that we did solve through having our own customer service, ultimately, building our own logistics capability and delivery capability, you know, building our own brands that we curate. Those other problems are real problems. But the initial draw in the early, early days, kind of where you are right now in the story, is selection.

• 14:13Logan Bartlett?

  And so, so this selection problem exists, and you find a bunch of discrete opportunities, some from your suppliers, some you go direct on yourself. Any other acquisitions, or was it all organic that you built up?

• 14:26Speaker 01

  So that's really organic. The only acquisitions sort of subsequent to that in our history, at one point, we bought a brand called Dwell Studio. And at another point, we had a JV in Australia, which, which we bought and ultimately later divested.

• 14:37Logan Bartlett?

  Got it.

• 14:37Speaker 01

  We divested both of those.

• 14:39Logan Bartlett?

  And by 2012, you have 250-ish independent operating websites?

• 14:45Speaker 01

  Exactly. We peaked at like 250.

• 14:47Logan Bartlett?

  Do you, do you remember what the first couple ones were after racks and stands?

• 14:50Speaker 01

  Uh, we did an outdoor furniture one called Tea Quicker and More. We had one called Bedroom Furniture Direct.com. We did one called CSN Office Furniture.com, All Barstools.com. The initial ones were all furniture.

• 15:06Logan Bartlett?

  You didn't do birdhouses?

• 15:08Speaker 01

  We did have one. I think that came later when we were doing decor. I think it was everybirdhouse.com, but I don't.

• 15:13Logan Bartlett?

  I wonder if all these, I assume they still link back to Wayfair if there's any.

• 15:16Speaker 01

  I think they do. They all forward.

• 15:17Logan Bartlett?

  Allbirdhouse.com loyalists now they're on the Wayfair site. So 2012, you built a business of 500 million in revenue. And you make the decision that you're going to consolidate all this stuff together into the Wayfair brand?

• 15:34Speaker 01

  Exactly. So we started thinking about it in 2009, 2008, 2009, we were trying to grow our repeat base. And we had some success growing it, but we were hitting a ceiling and it was due to folks not really understanding all these different sites and how they work together. And so then that led us to deciding that we wanted to launch a brand. We actually launched it in 2011.

• 15:55Logan Bartlett?

  2011. And so you had a centralized database of all your customers, but they didn't know that the same person making the birdhouse thing also sold TVs and.

• 16:04Speaker 01

  We made the header on every site very similar, you know, the same. We said part of CSN stores and the emails, we started talking about the other sites. The problem is it just wasn't intuitive to folks and not everyone's going to read anything, everything you send them, you know, that's just not the reality in the world. So a lot of things need to be intuitive and simple. And if I'm in a home store and I see bar stools, but I look at the header and it's got all the furniture categories and, you know, the tagline's a zillion things home and you know, I'm going to think one thing about it. If I'm in a site called allbarstools.com, you know, I'm thinking this is a great place for bar stools.

• 16:35Logan Bartlett?

  Yeah. So CSN stores was the hold co. It was a amalgamation, I guess of what? Steve Shaw, Nearage, Conan?

• 16:43Speaker 01

  Yeah.

• 16:44Logan Bartlett?

  All those things together. And you purposely picked a boring name. I think it's fair to call CSN stores not the sexiest of names to appeal to suppliers?

• 16:53Speaker 01

  Exactly. I mean, in those days, when you'd go to a trade show, you'd go to like the High Point Market and you want to approach suppliers and talk to them about selling their goods. You know, they weren't interested in e-commerce folks. So.

• 17:04Logan Bartlett?

  They've heard about this Jeff Bezos guy. They, you know, that was a big crash market. They don't want to get in.

• 17:09Speaker 01

  There's a bunch of, you know, the early incarnation of furniture.com, you know, ramped and then went bankrupt during this period. There are some other folks that did that too, that raised a lot of money during the dot com boom and basically ultimately went bankrupt. So these. Suppliers, conservative folks, they decided like, hey, this just doesn't make sense. And so the best way to kind of build a relationship is to start to get into a conversation and let it be 15, 20 minutes into it, by the time they realize that you're, you know, selling online. And by that point, you know, and this is the piece that Steve did for years, was getting our new suppliers, is, you know, then they're like, well, the kind of business for them is like, hey, this guy sounds pretty bright, but he's selling this stuff online.

• 17:51Speaker 01

  But maybe he'll figure something out, you know, as you're hoping for that. Otherwise, they were just like, hey, you know, I don't want to, I don't want to deal with that.

• 17:59Logan Bartlett?

  And the cash flow dynamics are interesting, that you were able to bootstrap to 500 million, right? And so maybe talk through the, the dynamics of taking cash upfront and then the ability to pay net out to your suppliers.

• 18:10Speaker 01

  So what's, what's standard with suppliers is that they give you terms, you know, it might be 30, 60, 90 days, depending, you know, as you're a larger and larger retailer, typically they'll give you bigger, longer terms, but-

• 18:19Logan Bartlett?

  Until you have to pay them for-

• 18:20Speaker 01

  Until you have to pay them for the goods. So from the time they ship an item, they want to be paid, you know, on whatever those net terms are, number of days later. So standard is 30 days. So, you know, we would get 30 day terms, but when a customer orders something from you, they pay with a credit card. So you get that money, you know, two or three days later. So effectively, for that 27 days, you're holding the float. And so that basically, as you're growing, if you had to buy inventory ahead of time, that consumes capital. But if you are not having to buy the inventory until after you've sold it, you know, it's generating capital.

• 18:53Logan Bartlett?

  The benefits of drop shipping, among other logistical complexities that you didn't have to deal with, is that the, the working capital cycles were, were better for you to be able to bootstrap. Versus if you were taking inventory, not only did you need to store it somewhere, but you, you had to buy it upfront to be able to send it.

• 19:09Speaker 01

  Right. So the working capital cycle also, you know, access to selection, there's no way you'd be able to inventory that breadth of selection. So you're, you're accessing sort of this huge inventory pool.

• 19:18Logan Bartlett?

  So you get to 500 million, you probably have, are VCs reaching out to you across, like, do they know CSN Stores is this big entity that owns all these independent businesses?

• 19:28Speaker 01

  Um, yeah, so by that point, they did. Because along the way, we had some competitors, I mean, most notably would be one that was called Netshops, at one point, later renamed Hayneedle. Um, and they had raised capital from some top tier venture firms, and so that- You know, that they had, they had done that. A couple others had raised money. And so the, you know, there's kind of, it became a category. It became well understood. We were a leader in the category, the only one that hadn't taken in outside capital. So some folks, you know, over the years had approached us.

• 19:55Logan Bartlett?

  So you're getting phone calls and the impetus at that point to go all in on Wayfair was, it was, you, you saw trying to drive more repeat purchases and actually build a brand that people trusted?

• 20:07Speaker 01

  So our repeat rate, you know, sort of generously defined back then, went from 20% before we really focused on it to 40. And we just couldn't get it above 40 because just folks weren't paying enough attention. And even at the 40 wasn't really like year after year growing the way we wanted. Our theory was that with a brand, we could better tell the story. We could draw in traffic outside of just paying for this transactional traffic online, which is getting more expensive. As the years went by and, you know, we could really create a repeat base, which is sort of the lifeblood of any retailer. And so that, that, that, that was the, that was why we did it.

• 20:40Logan Bartlett?

  So, so your pitch, you called, I guess, or maybe got called on by my old boss mentor, Niraj Agarwal, who you also went to Cornell with. So there was some trust there, I guess.

• 20:51Speaker 01

  Yeah, we knew each other a little bit at Cornell and then we known each other over the years in Boston.

• 20:54Logan Bartlett?

  Yeah, in Boston. And so, but, but the pitch to these folks was, hey, we're going to pivot the business in some way. We're going to go after this brand opportunity and change what we're doing. And it was a big, how much equity did you end up taking in at that time?

• 21:09Speaker 01

  So we took in 165 million dollars from Battery, Niraj, Spark, Great Hill and Harbor Vest.

• 21:18Logan Bartlett?

  And right after that, the business tanks because you're not, maybe, maybe you disagree with the tanks characterization, but it was a scary six months or nine months or 12 months. Because all your backlinks and all the work you had done to build up all bar stools and all these different things, uh, fell off pretty precipitously?

• 21:38Speaker 01

  Yeah. So we'd been working towards the launch of Wayfair and, um, you know, we launched it. Probably within six months roughly after we had taken in the capital, the capital, a big chunk of it was the reason we did that fundraise, it was earmarked to build the brand, to build the brand Wayfair, because we knew we couldn't fund that out of cash flow. But as we were doing the redirects of these independent sites into the Wayfair domain, we just, the traffic was falling off far more than we had thought it would.

• 22:07Logan Bartlett?

  Because you're changing all the links and the headers and so Google SEO is punishing you for the newness and that they don't want to misrepresent things and you have to build up trust again with the sites, right?

• 22:18Speaker 01

  That was a piece of it. We also, in figuring out what happened, we realized some technical aspects of how the site was built that were causing problems. So it was a combination of things. And so, you know, once we figured out the technical issues, that caused traffic to recover to the level we thought it would come to. Like, we didn't expect it to jump up, but we didn't expect it to go down as much. It started to come down a little bit. The technical issues got us back to that level.

• 22:42Logan Bartlett?

  How long did that take, by the way, to figure out the technical thing?

• 22:44Speaker 01

  Well, you know, it felt like about 100 years at the time. But I think it probably took, it took many months, it probably took approaching a year.

• 22:55Logan Bartlett?

  Was, I mean, what you're feeling at that, I can only imagine, you've built this company that was cash flowing and doing really well to 500 million in revenue and now you change all this stuff around in pursuit of optimization and it's totally looks different. Like, did you doubt it moments of time when you were up late at night or did you know you would just be pushing through?

• 23:16Speaker 01

  We felt like we were going to figure it out. And, you know, in that sense, we felt like we were going to figure it out, but definitely nerve wracking.

• 23:25Logan Bartlett?

  Yeah, I can imagine. So that took how long until you got back? It was a couple of months on the technical side and then?

• 23:31Speaker 01

  There's a technical piece, then there was all the things we're doing to make the site experience better, to really optimize it, because, remember, we again had really optimized these independent sites that were just category specific. So when you have a home store like what we have today, you know, what do you put on the homepage? What do you, you know, how do you merchandise the whole thing? I'd say that kind of, that continues to get better as the years go by, but it probably took two years before we got to the point where that money that we had raised, that we'd earmarked to build the brand, it took two years before we were willing to start the TV advertising, because we finally felt like we'd gone it to a point where it was worth. Starting to invest in the brand building.

• 24:06Logan Bartlett?

  And so what is a brand in your mind? Like as you're sort of thinking about this, is it a place that people trust to make purchase decisions? Like, how did you sort of think about success of being a brand?

• 24:17Speaker 01

  So the first level of brand is just they have awareness, so they know what you are. So if they see an ad for Wayfair, they're like, oh, that's that's that home store. So that right there gives you a lift over not knowing who you are. But then really what you want it to be is that someone really understands what you do. They understand the real benefits you provide versus others. Through the process of that, it creates trust and confidence. And so brands that really do all of that, they have, that's a very strong moat. Because, you know, for a customer, you know, part of what you're trying to do is make a good decision and not not have a problem. Right? So there's all these goals you have. Going to a trusted source is generally very, you know, one of the things you want to do if you can.

• 24:56Logan Bartlett?

  So you had a plan for it. It sounds like it was measured initially that you were going to take in this capital and not do TV right away. Not big splashy television advertisements off the bat. How did you think about building the the brand and the the different ways you were going to go about doing it?

• 25:11Speaker 01

  Well, so the very first piece of it was simply, we knew how to get traffic that was high intent for certain products. If we bring a customer into a place that is a home store, if all our communications with them are about being a home store, how do we start just optimizing the repeat there? Because we're getting a lot of folks who are clicking on our emails, coming back. How do we drive drive the lifetime value that way? That was sort of one piece. Second is, hey, now we have a whole new surface for merchandising. How do we do more with that to tell the story? Because now we don't just have traffic that's high intent for a very narrow thing. We actually have this kind of secondary set of traffic. And one of the things we launched, and it was probably three years after we first launched the Wayfair brand, was kind of a concept that that was just regular sale events.

• 25:56Speaker 01

  The idea of just sort of giving folks a reason to kind of, you know, we modeled it after the old brick and mortar, you know. This is gonna date me as being way too old, but in the Sunday newspaper tucked in the middle, it used to be all these circulars.

• 26:08Logan Bartlett?

  Mm-hmm.

• 26:08Speaker 01

  And you'd get the circular and you'd see what, you know, Target or whomever was running on sale that week and you might see some items you expected and oh wow, that's a good price for that item and then may see some other items you didn't know, but that actually we could use that and it would be a reason to go to that store. In some cases, you actually had to cut out coupons, which most of the circulars didn't have, but that was on some of them. So, the idea was like, hey, how do you give someone that type of content which piques curiosity, gives them a reason to open email? So, there's a set of things that we were doing that were sort of improving the experience. Another thing was around faster and faster delivery. You know, in 2015, we started opening our own warehouses, targeting, just talking to suppliers, putting their most popular items in there off a fast delivery promise. That item would then get a badge online about the fast delivery, lifts conversion.

• 26:50Speaker 01

  And to this day, faster delivery items have much faster, higher conversion than slower delivery items.

• 26:55Logan Bartlett?

  So, so it's an interesting theme and this is maybe in the minutia of supply chain, but it's, you know, it's super interesting. So, 30% roughly of items that you guys shipped were too big to be shipped by FedEx and UPS? Do I have that roughly right?

• 27:09Speaker 01

  That's right.

• 27:10Logan Bartlett?

  And so, so how do you go about solving that? So, there's, there was Castle Gate and then the Wayfair Delivery Network, right?

• 27:17Speaker 01

  Yeah, so in the early years, you know, we were picking transportation carriers that we thought could do a good job, sometimes by geography, and then we would have folks who would just try to work with them and manage that to make sure that we optimized as best as we could. Then was we got bigger, we were able to say, hey, let's build our own transportation network. The problem with the transportation network is you need a certain amount of scale, because without scale, you know, your trucks are running empty, I mean, it's prohibitively expensive. So, today, what we've built, what we call the Wayfair Delivery Network is basically for those bulky items, we move all of them through our own transportation line haul, which is like trucks picking it up from the supplier, all the work to make sure the item is packaged well, doesn't get damaged, et cetera, and deliver it to the delivery agent who's gonna deliver it.

• 28:02Speaker 01

  And then what we did is we started in the popular markets, building our own delivery terminals. So, we in the, in the US and Canada, we have 40 delivery terminals. So, for example, you know, we're in New York City right now, in Linden, New Jersey, we have a building, it's probably a hundred thousand square foot building, and it's just every day, you know, items come in and, you know, every morning, whatever, you know, maybe a hundred trucks with two folks on it, go out and do a whole set of deliveries, each of these large bulky items. But it's our, all our items, all our folks, run the way we want, deliver the way we want.

• 28:31Logan Bartlett?

  And you picked originally two locations, right? Because you could reach some high percentage of the US through those locations?

• 28:38Speaker 01

  Those two locations were for warehouses, for fulfillment centers. And that was really focused on the items we could give to a carrier, like to a FedEx, for delivery. And so those were, yeah, we picked Utah and Kentucky because they covered the bulk of the US with two-day delivery. And that's when we proved out the value of speed. Then what we've done over time is build out a number of these fulfillment centers. So we have a lot of one-day coverage and then, you know, far more two-day coverage. But for the large items, we were still tendering to these other carriers. Then taking that over, which is what the Wayfair Delivery Network is, really upped the quality service level.

• 29:14Logan Bartlett?

  Hey, Logan, jumping in here, just with a brief request. If you're enjoying this episode or you have a favorite episode, would love for you to share that with anyone that you think would benefit from it. Anyone that is trying to be a better founder, a better operator, a better board member, a better investor, would love for you to share any episode that you think makes sense with them. We're trying to get the word out, continue to share with people in the ecosystem. And so that would be really, really helpful. Now, back to our conversation. So in some of those examples, you're actually not taking, I don't know the technical term, but you're not taking consignment of the item itself, or are you in those facilities?

• 29:53Speaker 01

  So, so if you think of sort of what comes out of our fulfillment centers, obviously, we're handling the transportation, whether we're tendering it to like a FedEx or handling it ourselves. If it's what you would think of as drop ships, so coming out of a supplier network, their warehouse, their fulfillment center, it either we tell them which carrier to give it to, you know, give this to FedEx, or we tell them we're going to pick it up. And we'll pick it up. And we do pickups all over the country every day, pool it into our transportation network, and we'll move it all the way to the destination.

• 30:23Logan Bartlett?

  What did you find about speed? You talked about this. I assume that was a big driver of repeat purchase and building out all this logistics around is a decent-sized moat, it seems like, of complexity around this. But what was the insight of speed? Obviously, people get it faster, they buy more, I assume.

• 30:41Speaker 01

  Yeah, so. People love fast delivery, right? So that's a clear insight. I think what the insight of logistics is, though, the irony of logistics is that as you optimize it, you actually get a few benefits all at once. So, speed goes up, which obviously people like. The second is, by the way you handle things, damage can go down, which obviously helps customers be happy and takes out cost. And the third thing is your transportation costs actually go down, because your really expensive transportation leg is the final mile leg. Now, if you can forward position it, you know, from wherever the thing is made, forward position it into that region from the get-go, that final mile leg, you know, there's a little more cost on the way in, but it pales and compares into the savings on the way out. So, all of a sudden, you can hit lower retails for customers, so they love that, faster speed

• 31:26Speaker 01

  for customers, they love that. Both of those drive up conversion, while at the same time, you're reducing damage, reducing your operating costs. So, it's a real, you know, real win, and it's impossible to do just through third parties alone.

• 31:39Logan Bartlett?

  Why is the final mile so difficult? Shopify bought Deliver, and then I think spun it back out to Flexport, and it seems like that's been a really difficult situation to figure out, like this last mile of logistics and all that. I mean, it makes sense that getting from a warehouse to someone's house is a bunch of complexity in there, but why is it so uniquely hard?

• 31:59Speaker 01

  Well, so I think, first is, you need to have enough volume to have the density to make it economical. So, if you have enough volume and the density, then to take it on, the trick is, you can neither approach it as sort of a pure software sort of solution, kind of a purist on that side, nor can you just do a great job just through physical operations without good technology support. So, it's the intersection of the two. And I just think most companies who are great at building technology are not also great at the physical operations, and you end up needing to care enough about both to really get it going. And there's a lot of companies who either try to be like a software overlay on other physical operations, or there's folks who are in the physical operations business, which are a lot of these 3PLs, but they've never really built the technology to add a lot

• 32:44Speaker 01

  of finesse.

• 32:45Logan Bartlett?

  So in building a brand, now you spend over a billion dollars a year on advertising marketing?

• 32:51Speaker 01

  Yes, we do.

• 32:52Logan Bartlett?

  I can't imagine there's too many people listening that have built a brand at the scale and is purposeful of a way. It wasn't like accidental. You guys actually set out to do this. So what have you learned that's interesting about marketing or like generalizable things about building a brand for people?

• 33:08Speaker 01

  You know, as an engineer, the idea of like building a brand's felt like a very foreign idea to me. As I've learned more about it over the years, a lot of it does fit the same way you'd think about solving other problems, which is, you know, you want this to stand for something. How do you help people understand what associations you want, then help them understand what the things you stand for are. They need to be true things because customers then validate it with their own experience. That then drives the loyalty back. Then there's these really powerful things like word of mouth and these other things that you sort of know exist, but you know, I guess one of the things that sometimes folks are challenged by is like they're harder to quantify. And so people tend to like things they can quantify a little more easy, but sometimes the most valuable things are a little harder to quantify. But so what we've found is like the power of having a brand is very substantial and

• 33:51Speaker 01

  what you can do with that earned trust and how you can then kind of keep building it over time. I'd say Wayfair today is a household brand. Everyone knows who Wayfair is. We still have a lot of opportunity though to build up a lot of understanding of some of the nuanced things we do to drive a lot more preference. And so it's also a journey that it's not sort of get known and you're done. It's like you can actually keep building value into the brand by whatever the next thing you do is. I mean, a great example would be Apple, you know, and everyone say, oh, Apple has such a powerful brand. It's one of the most loved, most valuable brands in the world. And so, yeah, and we say, okay, so now think about what their journey has been on, on the, you know, the glasses, on the, you know, AR/VR product, headset. And, you know, they obviously waited a long time to release the one they did.

• 34:36Speaker 01

  They're very thoughtful about how are they gonna, you know, they have a very large user base. How are they gonna kind of keep driving increased loyalty and kind of cover more ground with their base? So they don't really something too early, but they don't necessarily want to leave that space for someone else. They know where they sit in the market as a premium product. They have a strong point of view on what people care about there. So I think a brand, in building a brand, your journey's never done. And if you think about what I just said, the brand, it's not just the marketing aspect of it. It's sort of how it ties into everything you do.

• 35:04Logan Bartlett?

  In doing that, you have some independent brands still today. How many, outside of Wayfair.com, how many other brands are there?

• 35:12Speaker 01

  We have five retail brands. So we have Wayfair, which is a mass platform. We have three specialty retail brands, AllModern, Justin Main, and Birch Lane. And they sort of, they'd be at the very high end of what you could consider the mass platform really being good at. And they kind of sit above it. They would compete with specialty retailers. And then we have a luxury platform called Paragold. These are all the brands you would find in like the design center, you know, that typically sell through the entire designers and the trade that are, you know, kind of premium, premium products.

• 35:39Logan Bartlett?

  And how did you think about where the demarcation exists? What would go back to Wayfair versus what would have its own standalone brand? Because you were building this all purposefully, right? Some people fall into this and they buy something and, you know, they need to keep the brand around, but...

• 35:53Speaker 01

  The truth is they're different segments of the market. And one of the easiest ways to think about that is if you list who the competitors are for each one, you wouldn't list the same competitors in each of those lists. And so there's, you know, you could say, hey, we're going to do all of this in one place, but it'd be very hard to do that because the customers get to know you for one thing. That's their association. You're saying, oh, and I also do this other thing. They're not necessarily going to kind of view that as like sensible, or it won't feel right to the customers who are looking for that, that this is the place to come to.

• 36:24Logan Bartlett?

  And it's mostly, I guess, price point is one big distinction, it sounds like. Are there any other ones that you think about, about where things slot into?

• 36:34Speaker 01

  Price point...

• 36:37Speaker 01

  is important. You can use it as a proxy for quality, but it isn't always a proxy for quality. So as I say, you know, quality really is maybe the main demarcation, which that does carry over in a price point. And then in the specialty retail brands, there's also a big access on style, because especially retail brand by definition is pretty tightly curated for a very specific aesthetic look lifestyle. And so by definition, it can't cater to sort of everybody, even in that price band and quality band. It needs to pick that audience. But for that audience who says, well, hey, I either don't want to, or I'm not great at curating, and that's my look. And they want to go there and just immerse themselves in that environment, pick out their item.

• 37:16Logan Bartlett?

  There's, I'm sure a million things that you've learned about building confidence and trust in purchasing a product online with individual customers. One that there's a Harvard Business School case study on is the image catalog and how you go about scaling that. So once upon a time, you had, maybe, maybe still, maybe it's more 7 million SKUs across, across the platforms?

• 37:38Speaker 01

  And we probably have more than that.

• 37:39Logan Bartlett?

  More than that today. And all these things needed high quality images for confidence in purchasing, right? Is that a fair characterization?

• 37:48Speaker 01

  Yeah, I mean, you're telling the story of the item online. So you think about visual imagery, critical.

• 37:52Logan Bartlett?

  Critical. And so you had to make the, there was a debate of do you go take all the pictures yourselves, because these suppliers don't have the competency of building out high quality photographs, or trying to use technology to recreate elements of

• 38:07Speaker 01

  Yeah.

• 38:08Logan Bartlett?

  AR, I guess, in these, these items. Was it, is that a fair characterization?

• 38:12Speaker 01

  Yeah. So what it was, is like the early day of rendering imagery off a 3D model. And what we found was that you could much more economically render the imagery than doing the classical photo studio shoots. What's happened since is I would say that's become much more widespread. But now the real value of is the model can power certainly anything you're doing in augmented reality or virtual reality. But then the other thing is like, if you have an item and it's selling well, and you just think about what's happening with generative AI, you know, you could start generating lots of imagery very bespoke for a person for virtually no cost. But you need to have, you know, a certain set of information about the item to do that. And that's kind of what these 3D models were effectively capturing.

• 38:54Logan Bartlett?

  Was that the one you picked? In the case study. They get, they leave it open ended at the end of the, they don't tell you which, which one you ultimately pick. They give you this option of do they do it all in their studio or do they use the rendering?

• 39:06Speaker 01

  This was, this was many years ago now, but yeah, the answer was.

• 39:09Logan Bartlett?

  Ten years ago.

• 39:09Speaker 01

  They really pursued, yeah, the, the, the rendering, the modeling.

• 39:12Logan Bartlett?

  That was my answer. That's good. Yeah, that's, that's what I was gonna, I guess I would have passed that class as well. Um, I guess just because you touched on it, generative AI, like where does that fit into your perspective on, you know, uh, Wayfair as a business and the opportunity for you guys?

• 39:28Speaker 01

  So, you know, I mean, today we're, you know, 12 billion in revenue and, you know, 10,000 plus people. So there's a lot of areas where we have a lot of people doing things that we can enable them to do a much better job with generative AI. So that type of productivity increase is, is kind of what we have in production today, what we, were the first use cases that we tackled.

• 39:50Logan Bartlett?

  A lot of internal operations related stuff.

• 39:52Speaker 01

  Absolutely. Whether you're talking about tagging, merchandising, content onto items, or whether you're talking about helping the customer service folks with the best response for a customer, you know, these types of things are, are where you can get, you can go from sort of a pilot into production quite quickly with significant benefits for the customer, for the company. Where we're doing R and D and where we think like the real interesting potential is, is how, you know, the biggest challenge customers have in our category is like, how do I find that perfect item? And customers are generally, they can only describe what they want to a certain degree. And sometimes they can describe it with some pictures or adjectives or likes and dislikes.

• 40:32Speaker 01

  And the, you know, the holy grails take, make it easy for them to intuitively and quickly get onto a journey where they start seeing super exciting things for themselves. And so if you think about our catalog of items and all the data we have on these items and all the millions and millions of people that come through and what their experience has been, all that data. How do you then use what the, the power of generative AI is to basically facilitate that? And whether you're generating additional imagery along the way, or a lot of what you're doing is, you know, creating kind of a bespoke shopping experience. There's a real. There's a real opportunity there, but I would say that that's still early days.

• 41:09Logan Bartlett?

  Part of Wayfair's success in my mind has been building a culture of just incremental improvements, thousands, probably millions of lead bullets that you've just made things a little bit better, right? Everything from the SEO in the early days to the brand, to the website optimization, to the email marketing copy and all that stuff. How do you go about building a culture of like those incremental wins that that really maybe only moved the needle 0.2%? But 0.2% on 10 billion revenue is a big, big delta, right?

• 41:40Speaker 01

  So I think, you know, what we've always had is just amazing people who are, they're ambitious and driven, hardworking, they're collaborative, they're, you know, they're very bright, they're quantitative, analytic. And so as a result, you know, when you give folks ownership over a set of activities or an area of the business, you know, they're excited to kind of use the data to inform hypotheses to then go out and try things and unlock those gains. And, you know, you always think about what the customer wants and then kind of how do I do that better? Or, you know, obviously in retail, you always want to have low retail prices. So how do I take out any inefficiency that just allows us to be sharper? You know, that's in the ethos of the culture of the place.

• 42:25Speaker 01

  And so I don't know that we do anything to like, tell them, oh, you should go do this. I think it's the nature of kind of, we're always working on that. And that's sort of, and there's an old adage, you know, retail is a business of details. And it's just, it's true. There's no one thing that makes retail work. You need to really, you know, we use technology to kind of force enable, you know, really us to do a great job in all these areas. But there's still thousands of things. And unless you have a culture that's like not excited to just leave the status quo, but rather excited to keep making it better, I don't think you'll unlock those gains rapidly. Conversely, and the reason I think it works for us is if you do have that culture. You know, it's just happening all around you.

• 43:07Logan Bartlett?

  I'm sure the answer is different for a bunch of different problems as they present themselves. But how do you balance the autonomy of empowering people to go make the changes they need to with the shared framework and fabric of the business? And so, hey, you can't go switch our cloud hosting provider or our backend infrastructure just because you think it's a little bit better to do that. How do you sort of empower people in that way?

• 43:31Speaker 01

  Well, so what you try to do is you try to have as big an area as possible owned by like a single team and single individuals so that you create less kind of interaction points where you have to negotiate or priorities may differ. Obviously, as you have a lot of people, you still have a lot of those points. Then the second thing we do is every six months, we do a company-wide prioritization cycle that's for the next six months where teams talk about what they want to do. And in that process is what are their dependencies on other teams? And that sort of hashes things out to make sure teams are on the same page with priorities. And if there's any that are in contention, we debate those and we decide what we want to do. And that's whether it's a priority or not a priority, as well as if there's a debate

• 44:16Speaker 01

  about, you know, direction. And so that's kind of, it's sort of like to try it. The goal isn't to say that there's never going to be conflict, but the goal is to try to sort it out and the right answer fairly quickly.

• 44:26Logan Bartlett?

  How many people come to those six-month things? Like, what's the N?

• 44:31Speaker 01

  It's broken up into 95 areas. Each of the 95 areas kind of creates a plan. And then we do effectively 20-minute meetings on each of these.

• 44:41Logan Bartlett?

  Every six months?

• 44:42Speaker 01

  Every six months.

• 44:43Logan Bartlett?

  And that was something, I had heard you say at one point that there was this sprawling kind of conflicting cadence of meetings that just kind of got out of hand from an operational standpoint. Was this the outgrowth of that, that everyone was kind of marching to their own drum and timeline?

• 44:57Speaker 01

  So this was the outgrowth of two different things. So it was that kind of the confluence of the two sort of made it obvious that we needed to kind of redesign how we operated. One was that. The second was that. You know, and by that, what I mean is what you're describing is that certain teams, you'd meet with them quarterly, other teams you'd meet with them twice a year and not necessarily during the same months, you know, it might be, you know, and the, the second problem, which was an outgrowth of that first problem is that each team was creating their plan of what they wanted to do, embedded in that was assumptions of what all these other teams that they worked with needed to do to further their initiative. But then the other team meantime has created their own plan and their plan maybe didn't sync up with this plan. They're like, oh, hey, we're, we're tied up for the next four months with the plan we have, we can talk about it after that, but I'm not sure whether that's our priority or not.

• 45:41Speaker 01

  So we both decided you needed to be on the same time cycle and then you needed a way to sort out where there were conflicts in priorities.

• 45:48Logan Bartlett?

  What is the time horizon that you, you think about? There's the six month increments of like revisiting things in general, and then I assume there's some point in the future that you are aiming to as well. How do you think about the appropriate scoping?

• 46:01Speaker 01

  So it varies by area, but a lot of, I would say generally, there's a pretty good vision that goes out, maybe a reasonably tight version of that goes out maybe a couple of years, then it gets fuzzier after that. And then, so on these six months, a lot of times that initiative continues into the next one, but it's a point to say, how's it going? You know, what progress have we made? What are we hoping to do in the next six months, you know, so on, so forth. But it varies by area and so we try not to be dogmatic on, you know, you need to have a three-year vision, you need to have a five-year vision. We, we worked for a little while and we found that that just forces unnatural activity because in some cases you're like, hey, we know we need to get this done and as we figure that out, we know we'll know what to do next.

• 46:44Speaker 01

  And in other areas, it's like, well, you know, hey, it's pretty obvious what we need to do for the next N number of years. So writing that up, do we need to write that up in great detail?

• 46:53Logan Bartlett?

  Interesting. So building a culture of, I guess, the accountability around all these things, I think inherently forces you to accept failure in some ways or like failing to, to make progress towards goals. How do you go about like setting an expectation of excellence for people to succeed, but also being willing to accept the failures of different projects? Cause that's a function of innovation, right? Is continuing to have both of those?

• 47:20Speaker 01

  Yeah. I mean, what you try to do is separate input and output metrics and generally you're judging the success or failure by the output metrics. What you want is you want a well thought out plan with clear input metrics. You want to see that you did get that done. Now, whether or not it fully achieves your output goals is a separate thing. And generally, you learn along the way. If it's not, you learn some new things that cause you to have a different plan, right? And you keep evolving it. And you want to evolve it rapidly. If you have teams that are like cycle after cycle, struggling to get their input goals done, then you're like, hey, why is this? Are the plans never really that well thought through? Is the execution not that well managed? But you know, you're never going to get to your output goals if you're not getting done whatever you think the right plan is.

• 48:01Logan Bartlett?

  You've, you've gone through cycles of, of building this business, and I'm sure the culture has changed over the course of, you know, whatever, the 22 some odd years you've been doing this. Recently, there was, there was an email, I don't know if it was actually released or leaked, but about getting back to some of the grittiness and ambition of the early days of Wayfair. How do you go about like recalibrating people into, obviously an email, you tell people that, but like, you could do it on a podcast too, if anyone's listening, yeah, but.

• 48:37Speaker 01

  Yeah. So the irony on that, that email, that one was an internal email to kind of the corporate team that was leaked. The irony on that email is, you know, basically during COVID, we had all these like supply chain congestion and there's inflation. We had all these curveballs thrown at us that had caused our operation to just, our flywheel to stop flying so well. And we figured that out in the summer of 2022. And by the end of that year, we had gotten to flying again, and we were taking market share nicely. So the email I sent at the end of last year was like, we'd been now doing that for over a year. Things were humming again. You know, we were back to kind of like doing a great job that we'd done for, you know, decades before. And so it was more saying like, hey, we just need to keep at it. Like we're, we're, in the beginning, you know, we're saying

• 49:22Speaker 01

  like, hey, you know, we've a little bit lost our way. We need to get going. And by the end of last year, we're like, hey,

• 49:27Logan Bartlett?

  So like mission accomplished on?

• 49:29Speaker 01

  You know, just, you know, we're now on a good trajectory. Just keep going on that trajectory. And so I think, you know, that's what I was attempting to communicate. I don't know. You know, internally, I think it was well received. I think, you know, what some of the comments in the press, I think misconstrued what I was trying to say.

• 49:48Logan Bartlett?

  Yeah, got it. I mean, the, the point of it though, and I get, I'll get yelled at oftentimes if, when these things get cut up and they get posted on different social platforms and people get upset when you imply things about hard work. Or that, you know, I think once upon a time, working hard was something that people collectively valued and recognized that that often led to success. But it seems like that's a, not something that people are quite as willing to say in, in earnest, which was one of the themes, I guess, of the, the, the message that you sent out. Like, what have you found about hard work in general? And I guess that point you were trying to make.

• 50:30Speaker 01

  Well, I guess it goes back to what I was saying about culture. I mean, I think the thing that we really value about the Wayfair team, when I talked about the folks we have, they're hardworking, they're collaborative, they're bright, they're analytic. And these are ambitious driven people. They are hardworking. And so we've just had that in the culture. These folks, you know, that's why we succeed. I think it's why they've succeeded. It's, it's been very productive. So I think we, we have that, you know, I can't speak for every company out there, but I think, you know, every, every company has its own culture. And I think, but I think culture is a big determinant of how successful you are over time.

• 51:06Logan Bartlett?

  When it comes to hiring and managing large scale teams and all that, if you could go back and tell your 2002 self as you're getting going, is there anything that stands out as particularly interesting lessons that you've learned kind of throughout all these processes?

• 51:23Speaker 01

  Well, not to be too repetitive, but I think what I was talking about a minute ago, I think does hold around culture really matters. And so figure out. You know, what your culture is, and that is something you want to make sure that you communicate to folks. It needs to be what they want to join, and you need to make sure that they're a fit for that. That leads to, you know, when it's not a fit, it generally doesn't work out. It doesn't mean the person won't be successful elsewhere, but it's unlikely it'll be a great fit together. So I think that matters a lot. And then I'd say, over the years, you know, we've tried to think about, hey, can you, you know, what matters more, like someone's background of exactly where they were, or the traits, and I think I'm coming to the conclusion the traits really matter. And so what exactly they've done and where they've done it, you know, sometimes can be a signal to support that they have

• 52:08Speaker 01

  those traits, but honestly, you're better off just focusing on the traits because you can find those folks from any kind of background.

• 52:13Logan Bartlett?

  I want to ask about the traits in a second, but one of the things I heard is you actually have two different groups internally for potential hires, one that manages, I guess, competency or skill, and one that manages the culture fit. Is that still true? And how does that actually play out?

• 52:27Speaker 01

  I think the way it manifests today is in an interview process, and I think it's like, more so as you're interviewing at the kind of mid to senior levels, you'll assign the different folks on the interview panel, the different topics and specifically to vet for. And so they'll do a general, you know, they'll be asking whatever their general questions are, but you'll be asking them, you know, you want this person particularly to vet for this specific skill fit, or you want this person specifically to vet for this question around culture fit. And so sort of, people have like a side assignment in the interview, and together, the interviewers, you know, that that set of panel results gets shared with all of them, and then they discuss the candidate.

• 53:07Logan Bartlett?

  I heard the four traits that you hire for are intelligence, hard work, analytical thinker, and teamwork were the things that stand out.

• 53:16Speaker 01

  Yeah, collaborative.

• 53:17Logan Bartlett?

  Collaborative. How do you go about assessing those things? I think they all make sense and process, but have you found any particularly good interview questions when you're assessing these traits, or, yeah, things that you ask around when interviewing?

• 53:34Speaker 01

  You know, I think this is also why we typically have multiple people interview someone is that everyone sort of approaches trying to get a feel for the candidate in different ways. I think we're very open around like our people principles. Like today, we have a series of principles that we've articulated on our website that kind of take those old traits because I think that is something I probably talked about years ago and kind of fleshed it out more in this more detail. So we're trying to tell candidates what our culture is about and what helps someone be successful here because you know, you don't want to waste a candidate's time if they're like, "That's not a fit for me." At the same time, that's what we're vetting for. I don't know that we have a standard way to do that, though.

• 54:13Logan Bartlett?

  I heard you mention being a lifelong learner is actually like a really beneficial trait in employees. Is that something that you're able to feel out by pursuits outside of work? Or how do you sort of think about?

• 54:28Speaker 01

  Yeah, another way to think about someone being a lifelong learner is kind of, you know, how curious they are. Curiosity is a great trait. The danger often is if someone has done something for a long period of time, they feel like they know how to do it and their goal is to just keep doing it the same way over and over again. The risk you run is that if there's a better way to do it, that is not something that that person's pursuing. If you have someone who's always curious, what we've found is like, being curious is like a general trait people tend to have. They then apply it in most things they're doing because they're sort of, you know, they're trying to do things better. They're curious what might be next. They're curious about the thing that's adjacent. And so, we want those types of folks. And our view is that the world, whether it's obvious on the

• 55:13Speaker 01

  surface or not, it's always fast-changing. There's, you know, our markets can be fast-changing. The customer desires will be fast-changing. The ability to provide enhancements will be fast-changing. And even though it might not be like, super, super, super fast... If you're not looking for it constantly, you won't necessarily be able to be at the top of your game.

• 55:30Logan Bartlett?

  I heard also, I guess, on a similar vein, but you said something to the effect of ambitious people aren't just ambitious in one element of their their life. It's usually manifests across a bunch of different range of things.

• 55:41Speaker 01

  I think so.

• 55:42Logan Bartlett?

  Yeah, it's interesting. Those are two. I don't know what the way to suss that out is, but I tend to find like that iterative learning. One of the best traits in founders because the experience is going to change so much. I mean, your business in 2002 looks vastly different than in 2024. And if you're not the fastest learning person around the table, you probably get lapped.

• 56:05Speaker 01

  Totally agree.

• 56:06Logan Bartlett?

  What altitude do you try to operate in as a CEO of a big company? Like, what what details are you getting in versus? Yeah, sort of staying out of.

• 56:17Speaker 01

  So, you know, as you can imagine over, you know, we're now in our 22nd year. So, you know, it started with two of us. You know, now there's whatever 11,000, 12,000 of us. So it's changed a lot over time. What I've found is, you know, what we try to do now is, you know, those those twice a year business reviews, that's a good way to get up to speed on sort of the breadth of what we're doing. And the goals and priorities and what's working well and what's not at a high level, not just for myself, but for a much broader group of senior leaders. Then what I personally do is, you know, we're a big enough business. You need folks who are leaders owning their areas, really driving them forward because if they're counting on you to kind of always be there with them, the truth is, you're probably not going to be there often enough with them to really make it work well.

• 57:01Speaker 01

  You need to really bet on them to do that. And so then what I typically do is I tend to focus on just a handful of areas that are either new and I want to just help them get going in a certain direction. Or we're trying to do something substantially different and I have maybe some of it in my head. And so I try to kind of get involved with a few initiatives and generally just for a period of time. Until they're sort of trajectory wise headed the way we want and that there's a team around it and a leader around it who's going to, you know, keep it going. And I find that that when you couple that with the related travel, it seems like there's an infinite amount of travel I could do that would be productive for the business. And then other kind of corporate responsibilities, you know, obviously we do earnings calls quarterly. We mentioned the twice a year a business review process.

• 57:45Speaker 01

  Board meetings, you know, it tends to. Add up to being a lot of time.

• 57:49Logan Bartlett?

  Those individual projects you go into, is it a short, a small number of people around the table? Like, are you sort of getting back to some entrepreneurial level of like being?

• 57:57Speaker 01

  It can be if it's super early and then there's usually a phase where there's a core team on it, but it's early enough, you're still like meeting with them monthly or every three weeks, but you're no longer like on the inner circle of that team, but you're close enough that you can really stay abreast and you can help them.

• 58:11Logan Bartlett?

  You all have been fairly, I guess, on the side of in-person work. Is that a fair characterization?

• 58:18Speaker 01

  Well, I mean, we worked from home for, you know,

• 58:23Speaker 01

  decent amount of time, I think, relative to certain other parts of the country or headquartered in Boston. But what we started doing in the summer of 22 is we started trying to get folks back in three days a week. And so today we have a hybrid schedule. It's either three or four days a week in person and then the remainder has flexibility. But that's, that's worked well for us, getting people back together.

• 58:45Logan Bartlett?

  What do you think the benefit of getting people back together is? Like, where have you sort of seen it play out?

• 58:49Speaker 01

  Um, communication for sure. We get a lot of feedback on, you know, like the old classic whiteboarding session, the creativity that ensues from that and figuring things out quicker and sometimes more novel solutions, really good. And then one of the things that happened during COVID, we noticed is that the team got more senior on average because it was harder to hire junior team members and ramp them up and really get them kind of being a fully going member of the team. And we want to reconstitute that. And so one of the other obvious things is like most, I think, most businesses out there, this is true, but I think in most areas of our business, there's an apprenticeship model to how you learn. And I think you can learn a lot more if you're, you know, sitting next to folks that you're working with,

• 59:33Speaker 01

  you're overhearing conversations or you ask them quick questions versus everything having to be scheduled, you know, Google Meet calls.

• 59:40Logan Bartlett?

  Yeah, it's interesting. I, I've sort of found that any individual is probably more productive working from home, plus or minus, depending on how cross-departmental your job is. But that doesn't mean the business is more productive because of that, right? It's like easier to do tasks when you don't have people stopping by all the time, but it's harder to collaborate if you're not alongside your colleagues, it feels like.

• 1:00:01Speaker 01

  Absolutely. And then if you think about your business, like how, how do you bring the next generation up and through? Because a lot of it, when they start, they don't necessarily know how to do their job.

• 1:00:10Logan Bartlett?

  Yeah.

• 1:00:10Speaker 01

  So how are you gonna, you know, all the nuance that you're trying to impart to them. Some they'll learn through their own experiences, but some they'll learn from their colleagues. And that's a lot easier in person.

• 1:00:18Logan Bartlett?

  Yeah, there's a lot of soft diplomacy or whatever, like lessons just, just that you intuit from being around someone on a, physically around someone that you don't.

• 1:00:27Speaker 01

  We found the hybrid model works really well because there's days where everyone's together and you get a lot of exactly what we're talking about. It was always there historically, but now by knowing kind of, you know, what time is not necessarily together, it lets you schedule things in a way that kind of maximizes the time you're together and kind of makes your schedule more fluid.

• 1:00:47Logan Bartlett?

  Managing people and I guess hiring and then managing people out. Is there anything you've, you've learned about the managing out process that you would impart to different leaders of organizations of how that plays out?

• 1:01:07Speaker 01

  So I think the biggest thing, and I think it's the hardest thing to, to teach, you know, relatively new managers is they just, you need to always be giving feedback. And so don't expect that everything's always going to go perfectly, but be transparent, honest and open, be giving that feedback. That allows that person to get better at what they're doing to the degree that it's not going to be a fit. Also, it's important to have that conversation because you don't want that person, you know, spending years somewhere where they're not going to ultimately be successful and nor is it helping the business. And so I think like it starts by giving great feedback and then the, the next piece is in those cases where it's ultimately not going to be a fit, it's like having that conversation rather than avoiding it is important.

• 1:01:47Logan Bartlett?

  You were caught up in this very weird vortex of like

• 1:01:50Speaker 01

  Yeah.

• 1:01:50Logan Bartlett?

  social media and conspiracy theories and I guess what's it like to be in the eye of the storm of something with so much misinformation, disinformation and like fringe internet cult thing? I assume it's a very weird experience.

• 1:02:06Speaker 01

  Well, I, you know, I think that, you know, the promise of the internet is that, you know, all this information is available to you at your fingertips. And I think the downside of that is.

• 1:02:15Speaker 01

  Disinformation can spread like wildfire. And, you know, in this case, there's no truth to it. I'd say, you know, a learning we had is that, you know, we learned, you can't ignore things like that at first because just because you thought it was so far-fetched, it didn't make sense. It's important to pay attention to these things right away. I wouldn't have guessed at the very beginning that this was something that we would have to both explain wasn't true and have it debunked, fully debunked and proven to not be true. But ultimately, we did. And so I just think being cognizant of the fact that information flies around the internet, it's not necessarily true, is an important learning lesson.

• 1:02:51Logan Bartlett?

  And just getting out in front of it and saying, like stamping, because you're giving oxygen to it in some ways to say it's not true. In some ways, it's like validating that this is out there. But you're also cutting it off at the pass. And so I don't know if there's any insight around that because other companies go through, I'm sure we'll have countless other examples of this and you guys happen to be on, you know, an early one.

• 1:03:13Speaker 01

  You know, I don't know if there's a perfect example or perfect answer because it's very situation-specific. But I would say what we learned is you need to take these things seriously from the get-go because you just don't know what is going to somehow gain oxygen from whatever source.

• 1:03:31Logan Bartlett?

  Totally. And especially now, I mean, we talk about artificial intelligence, but the amount of disinformation with generative AI in some ways, it feels like we're on the precipice of like a real snowball of some of these things that now we can be sitting here and someone can dub what we're saying to each other, right? And take that video and now it looks like New York Times and Logan are validating this conspiracy theory or something. And it's, I think we're headed to a really weird world of that stuff. And I guess you guys caught an early version of it.

• 1:03:59Speaker 01

  Obviously, we can, you know, because you've seen it with some of these generative AI, some of these movies that have been made. So, yeah, I mean, obviously, it's a challenging world.

• 1:04:10Logan Bartlett?

  Yes, yes, yes. I, in a weird way, we need validators more than ever. In a time that all this stuff is kind of fraying and there's concerns about media bias and all that stuff, like having the stamp, we're moving to a world that we almost need the validation to be able to say, no, the, you know, Wall Street Journal, I'm sure, wrote a story debunking conspiracy theory. New York Times, I'm sure, wrote a story debunking the conspiracy. You need those points of aggregators almost to validate the things that aren't true.

• 1:04:41Speaker 01

  I think having ways for people to know what content is true is really important.

• 1:04:46Logan Bartlett?

  Yeah.

• 1:04:47Speaker 01

  Very important.

• 1:04:48Logan Bartlett?

  Yeah. Um, so there's this big company, uh, Amazon that, um, that I guess, I mean, they're not a hundred percent in your category. Uh, but there's elements of, of overlap and I, um, I think that you said something about watching competitors and being aware of them, but not focused on them.

• 1:05:09Speaker 01

  Yeah.

• 1:05:09Logan Bartlett?

  Um, how do you think about like for, for entrepreneurs or executives listening in? Like, how do you think about, you know?

• 1:05:15Speaker 01

  So being cognizant of what your competitors are doing, I think is really important. But generally the best plans you're going to create come out of thinking about your customers. You know, what, what do they need? You know, what's not going well, what's going well, what are their pain spots? What have you gone into? What are the other opportunities? Start with your customer and then figure out what you want to do. That's generally, and then obviously execute it very well. That's generally going to be the strategy that has you win. Um, whether a competitor does something or doesn't do something, doesn't necessarily make it right or wrong. Understanding what your customer wants and doing the right thing. That's really how, how you're going to determine what's smart. So you can learn great ideas from anywhere, including from your competitors. So that's part of why you want to pay attention.

• 1:05:59Speaker 01

  Um, but I think some companies get obsessed with their competitors. And so then their goal is to keep, you know, do whatever their competitor does. And what's missing in there is then there's an implicit assumption that that competitor understands your joint, uh, customer population better than you do. I think that's a, you don't want to get there.

• 1:06:14Logan Bartlett?

  Did you feel that temptation? We talked about, uh, earlier, some of the, uh, competitors that were venture funded, uh, that you were going after in the early days when you guys were bootstrapped. Did you feel the temptation of pursuing that sort of orthogonal path when they were, I'm sure burning lots of money and trying to do different, uh, paths around that or?

• 1:06:30Speaker 01

  No, and I mean, in hindsight, I think, um,

• 1:06:35Speaker 01

  By not raising capital, it sort of forces us to stay disciplined and frugal. We didn't focus on what the competitors were doing. We focused on what our customers wanted. I think ultimately that is a piece of why we ultimately succeeded.

• 1:06:48Logan Bartlett?

  Can you elaborate on that? That's bad for my business if not being VC backed is good for good for people. But there's constraints. I will say, if you look at some of the biggest companies ever created, like oftentimes they worked right off the bat and they didn't consume a ton of capital. It's like if you go down the list of Amazon and Microsoft, Wayfair, Atlassian, you know, Salesforce, ServiceNow, like all these big companies. Did you find constraints as like a real benefit to you guys that you couldn't pursue all those different paths in the early days?

• 1:07:18Speaker 01

  I think it is. And I think one thing that we subsequently had to learn is we had access to a lot more capital and made some of the same mistakes that others do is we had to learn how to create our own constraints so that we stay focused and we stay very disciplined and that, you know, access to money doesn't make it smarter to spend it. The ability to have a bigger team doesn't make it smarter to have a bigger team. On a self-discipline basis, that's, you know, you need to come up with a real way to do it. That's not necessarily the easiest thing to do because everyone wants those resources on their team and everyone wants to do those things. Having that constraint, just by the nature that we were self-funding, bootstrapping the business, I think helped us.

• 1:07:59Logan Bartlett?

  And so now, how do you how do you set the dials for people on constraint versus because you do have access to capital as needed and I'm sure your balance sheet looks way better than it did in 2003. So how do you sort of set those expectations and goals for people?

• 1:08:18Speaker 01

  You know, I think it took us going through a journey where we didn't have as good discipline to kind of learn those lessons. And so now, we, you know, we've created a framework and, you know, and there's a, you know, we're not the only one. There's a lot of other companies in the world that figured this out. So what we did is we learned a lot from them. And so some of it is, you know, before we viewed budgets as an anathema because we viewed budgets as, you know, artificially, they're either going to be too small or too large in any given area. What we learned is budget is just a mechanism to create a constraint to then get the team to focus on the execution, you know. Same with like the joint planning, you know, we'd say, well, you know, priorities means that you're not going to yearn to do more. Well, I think we've corrected that to say,

• 1:08:58Speaker 01

  no priorities are just getting everyone organized around what the most important things are. So I think we took some of the things that we didn't like that worked really well when we were much smaller, because we could hands on manage everything that broke down as we got bigger and we didn't have self kind of put upon constraints. And we've created a new set of things to basically drive us forward. When you couple that with the same culture we've had the whole time of these really bright, talented folks who really are ambitious, driven, go after it. Um, you know, that's worked really well. So that's kind of how we got, got it all back.

• 1:09:29Logan Bartlett?

  As being public, uh, I'm sure stock price volatility and earnings calls, uh, those two probably aren't your favorite thing. Maybe you love earnings calls. I don't know. Uh, but, but there's a lot of, um, stuff that goes into the day to day of being a public company. And I'm sure has added a lot of complexity to the business in some ways. I don't know if that's a fair representation.

• 1:09:51Speaker 01

  I'd say we're, we're big enough that it hasn't added that much because the incremental amount of resource to tackle that's not very large in the scheme of things. Um, and what we've always done externally is said that we're still going to take the long view and here's how we're going to tackle things. We're all going to prioritize things. The two largest shareholders in the company are myself and Steve. So, you know, our interests are fully aligned with that of the other shareholders. Um, so I think we've got a very good setup. Um, but I think the reason we have it is from the beginning of going public 10 years ago, we've been very clear around what we're trying to accomplish, what the goals are, how we think about success. And then we tried to update that for folks, um, and so that they can kind of have what would really be good transparency into what we're thinking.

• 1:10:36Logan Bartlett?

  So you, you've started three businesses, uh, first two with Steve as well. And now Wayfair is obviously the, the biggest and has been the biggest, uh, success of them. If, if you zoom all the way out and think back on your entrepreneurial journey to, to where you are today, and you're an entrepreneur listening to this. Is there anything that you would say, uh, to, to that person that's maybe thinking about pursuing an opportunity or already on the journey about picking markets or finding product market fit or anything around that that you wished you had known way back when?

• 1:11:15Speaker 01

  Well, I think, um, look, first you gotta love what you, what you're gonna do. You can't just do it out of like, logically, this is a good market and so I should go to, if you're not gonna enjoy it, you know, no business is really always up to the right. There's kind of rough patches and there, and so you need to really believe in what you're doing. You need to love it because that's gonna be, that's gonna give you that drive.

• 1:11:35Logan Bartlett?

  Did you kind of learn to love this stuff though? It was, uh, was Steve's mom a, like in the furniture sales business or something?

• 1:11:42Speaker 01

  She, um, she had two, uh, stores in New Jersey that were, uh, sold outdoor furniture.

• 1:11:48Logan Bartlett?

  Oh, interesting.

• 1:11:49Speaker 01

  Patio furniture.

• 1:11:49Logan Bartlett?

  So, so it was in his blood. It wasn't in your, uh?

• 1:11:53Speaker 01

  I don't know if the, the, the home goods category, maybe it was in his blood. I don't know if it was in our blood per se. The, this type of business, like a, you know, retail, which is a customer-driven business, details, uh, real opportunity with technology, that was very exciting. I would say the category is very addictive. So now that I've been in for so long, I, I just love it. But, um, you know, I think the type of business it is, the traits of the business really fit us very well. I think there's other business models that could be very good models that wouldn't fit us as well. So it'd be harder to be so excited about it.

• 1:12:30Logan Bartlett?

  Yes. So, so learning to, uh, or loving the thing you're doing. And it doesn't necessarily need to be the, uh, the day one, um, mission. Like you can really enjoy the process. I'm sure you love the infinite, um, canvas that you get to paint on with, uh, all the operational complexity and the, the logistics and all that stuff. I assume that's something that you, you enjoy. Um, so learning to love, uh, or loving what the market you're in is obviously an important one. Is there anything else?

• 1:13:00Speaker 01

  Well, I think that's one key thing. I think another key thing is the quicker you can really focus on spending time, understanding what the customers of your product. Want and then what they think related to it. That's where all you, I think you get all the ahas from.

• 1:13:14Logan Bartlett?

  How did you do that at scale? Were you calling up people in the early days to ask like where they were purchasing? Or it feels easier with like a B2B software company where you have a finite universe of potential buyers. You have an infinite universe of potential buyers.

• 1:13:27Speaker 01

  You do. I mean, there's certain things though, obviously things on the internet are very measurable. So the A B tests and other things, you can, you can do different things.

• 1:13:34Logan Bartlett?

  Yeah, interesting.