Businessmodel of Wayfair

Customer Segments

Wayfair has a segmented business model, dividing its customer base into five categories with slightly different needs and problems. These segments align with its five key brands, which are as follows:

• Wayfair.com, a mass market brand with a wide range of styles and prices
• Joss & Main, an online flash sales site offering home decor and significant savings
• AllModern, an online source for original design for modern home enthusiasts
• DwellStudio, an online design studio for fashion-forward modern furnishings
• Birch Lane, a collection of classic furnishings and timeless home décor ### Value Proposition

Wayfair offers three primary value propositions: accessibility, customization, and brand.

The company’s main website acts as a one-stop shop, combining the wide range of prices found at big box retailers with the merchandising experience found at specialty retailers.

The sites for its various brands offer a personalized experience, customizing the interface based on past browsing patterns, shopping habits, and personal preferences.

Lastly, Wayfair has a well-established and strong brand as the largest pure-play online retailer in the U.S., with a vast selection of 7 million products.

Channels

Wayfair’s main channel is the online channel, consisting of the websites it operates for its five brands; it does not have any physical outlets. The mobile medium represents an increasingly prominent part of its business, as it launched apps for Joss & Main in 2012 and Wayfair.com in 2014.

Customer Relationships

Wayfair’s customer relationship is primarily of a self-service, automated nature. Customers utilize the service through the main platform while having limited interaction with employees. That said, the firm also offers personal assistance through its customer service organization.

Key Activities

Wayfair’s key activities focus on platform management. The company’s business model entails maintaining a common platform between two parties: customers and product suppliers.

Key Partners

Wayfair’s main partners are its 7,000 suppliers, who provide the stock for its various brands. Many of the companies are small, family-run operations who would otherwise have difficulty gaining access to such a large customer base (over 3.2 million active shoppers).

Key Resources

Wayfair’s main resource is its proprietary technology platform. The system is designed to enable suppliers to easily offer their full merchandise selection, and they are given an updated view of demand and inventory need courtesy of real-time data and analytics.

The platform is maintained by over 300 engineers and data scientists. Another key resource is its customer service organization, which consists of over 600 employees.

Cost Structure

Wayfair has a cost-driven structure, aiming to limit expenses through significant automation and the holding of minimal inventory – it usually ships products directly from suppliers to customers.

The company’s biggest cost driver is advertising expenses. Other major expenses are operations/technology/general/administrative (fixed), merchandising/marketing/sales (variable), and customer service and merchant fees (fixed).

Revenue Streams

Wayfair has two main revenue streams:

• Direct Retail: The company generates revenue from the sales of products through the websites of its five brands and those of its retail partners.
• Advertising: The company also generates revenues through fees from third-party advertisers that pay based on the number of clicks, actions, or impressions for advertisements placed on its websites.