Business

Wayfair tackles task of standing out in crowded marketplace

Things have gone pretty well for Wayfair Inc. lately. Revenues surged to nearly $1 billion last year. Its sales jumped about 50 percent in the first six months of the year from the same period in 2013. It just launched a successful initial public offering, raising $319 million .

But Boston’s biggest Internet retailer has a big problem. Nearly half of its target customers don’t know it exists.

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Brand awareness has proven a particular challenge for Wayfair, which sells home decor and furniture over the Internet. A survey in August found that only 52 percent of middle-class women between the ages of 35 and 65, Wayfair’s best shopper, were familiar with the company.

Wayfair says the reasons are twofold. First, the brand name is only three years old. Second, a one-stop shopping destination where you can buy everything for a home — from a new bedroom set to a frying pan to a mailbox — is a new concept for consumers.

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But now, with the IPO behind them, executives say they intend to focus on raising the company’s profile and making Wayfair a household name.

“We really want Wayfair to be a ubiquitous brand in the US and be the top-of-mind brand for home goods,” said Niraj Shah, chief executive and cofounder of Wayfair. “We think that’s a totally attainable goal and that’s what we’re working toward.”

Wayfair is confronting a challenge that many Internet-only companies have faced: standing out from the crowd. Since there are few barriers to entering the market, there are lots of e-tailers out there. And without signs and physical storefronts, it’s often hard for companies to distinguish themselves from their competition.

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Mary Cronin, a Boston College business professor, said Internet retailers must pull off a tricky balancing act when it comes to promoting their brands. To succeed, e-commerce companies must offer value to consumers, she said. But as they try to cut through the clutter to raise awareness of that value, they can’t spend so much that it eats up profits.

Cronin used Pets.com, an e-commerce business that debuted in 1998, as a cautionary tale. As a relatively unknown brand, the company spent more than $1 million on a Super Bowl commercial and appeared in the Macy’s Thanksgiving Day Parade. The advertisements drew traffic, but the company folded in 2000 because the small margins on dog food weren’t enough to cover the expensive marketing efforts, she said.

“You can’t pay more for marketing or advertising than your customer is going to generate in profit and revenue for you,” Cronin said.

Wayfair, however, built its business before its brand. The company was started more than a decade ago by Shah and Steve Conine, now the chief technology officer.

They introduced a series of niche websites offering goods that people had trouble finding on the Internet and gave those sites simple names, such as strollers.com and racksandstands.com. The idea was that such names would top search engine lists when people looked for them online.

Cronin, who taught a case study on Wayfair, said the strategy allowed the company to grow and become profitable without having to spend much on advertising. The downside: It didn’t create a recognizable brand.

In 2011, the founders began aggregating the products from their 250 e-commerce sites on a new site with a new brand, Wayfair.com, and started ramping up its marketing efforts about a year after they adopted that brand name. The company hired a creative director and an internal marketing team. The first television campaign launched in late 2012, and seven more have aired since.

But Wayfair has been careful in its spending. All of the ads are shot in-house to save money. Employees are often asked to act in the spots. The commercial airing now (“Wayfair you’ve got just what I need . . .”) features an intern’s grandfather.

The e-tailer has advertised online for a number of years and works with popular bloggers to review its products. Its furniture is featured through product placement deals in magazines such as Real Simple and Better Homes and Gardens, and on television shows.

Over the summer, the company launched a product placement deal with the HGTV channel to furnish homes featured on the shows “Flipping the Block” and “Brother Vs. Brother” exclusively with Wayfair products.

The company lost money in the first six months of the year and in 2013, which it attributes to increased spending on advertising.

Wayfair expects the market for its products to continue to grow. The US furniture and home decor markets, which include brick-and-mortar and e-commerce firms, hit $233 billion in 2013 and are expected to climb to nearly $300 billion in 2023, Wayfair said in regulatory filings.

While older generations may be uncomfortable buying big ticket items on the Internet, so-called millennials, who grew up with Internet and online shopping, may be more willing to bypass furniture stores and buy online. And they are just entering the ages — 30 to 35 — when people begin to buy homes and furnish them.

“Home and furniture are very underpenetrated online,” said Sucharita Mulpuru-Kodali, an e-commerce analyst at Forrester Research. “There’s no reason why it won’t continue to grow.”

Taryn Luna can be reached at taryn.luna@globe.com. Follow her on Twitter @TarynLuna.
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