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    Is Boston’s Wayfair the next Amazon?

    Wayfair cofounders Steve Conine (left) and Niraj Shah posed near their desks at the Internet retailer’s Back Bay headquarters.
    Suzanne Kreiter/Globe Staff
    Wayfair cofounders Steve Conine (left) and Niraj Shah stood near their desks at the Internet retailer’s Back Bay headquarters.

    Every Monday, new employees stream up the escalators of Wayfair’s Copley Place headquarters for orientation. On a mid-July Monday, the class of hires had hit 205, a record for the online seller of home goods. Row after row of mostly bright-faced twentysomethings, fresh with degrees in computer science or marketing, seemed to stretch on endlessly, as if they were caught between mirrored walls.

    Throughout the day a parade of executives would indoctrinate them in Wayfair’s customer-service ethos: They would be “innovating better together,” become “fast fixers and builders” and “manager-doers,” and help customers better “envision the spaces where they live their lives.” 

    It was high-minded rhetoric for a company that sells couches, lamps, cat condos, and other home furnishings — but it’s hard to argue with success. Wayfair has become a colossus since it was launched in a spare bedroom of cofounder Steve Conine’s Boston home in 2002: It has five popular branded websites stocked with some 10 million products, sales that are forecast to hit $6.6 billion this year, and a stock market value of $10 billion, making Wayfair one of the largest publicly traded companies in Massachusetts.

    Employees at work at Wayfair.
    Suzanne Kreiter/Globe staff
    Employees at work at Wayfair.

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    Wayfair is also on a shopping spree of its own — for people and for office space. It added about 2,000 employees in the first half of this year, and its headcount is approaching 10,000. The company is rapidly outgrowing its headquarters and next year will expand into a nearby building with space for another 4,000 employees.

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    Wayfair’s stock has made Conine and cofounder Niraj Shah billionaires. But they aren’t coasting, approaching work as if Wayfair was still in its early stages, charting a course to dominate the $600 billion global home furnishings market.

    “Over the first 10 years, we went from bootstrapping to going to half-a-billion dollars in sales,” Shah said, swiveling in his chair next to Conine to look out on a sea of employees. “But we knew we wanted to build a nationally known mass retailer.” 

    That they have done, but there is one important missing piece: profit.

    The more Wayfair sells, the more it loses money. The company reported a net loss of nearly $245 million in 2017, yet is doubling down on a business plan that emphasizes growth over profit.

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    “The company would say that they’re making investments and staffing up for growth,” said Daniel McCarthy, a marketing professor at Emory University who has calculated that Wayfair loses $10 on every new customer it acquires. “The big question is, how is that growth transferring into profitability?”

    .   .   .

    Now in their mid-40s, Conine and Shah met at a math and engineering camp in high school, then ended up in the same dorm as freshmen at Cornell University. They run the company together as cochairmen, each taking a nominal annual salary of $80,000. Shah is also chief executive and, as a rule, does more of the talking; friends say he fancies himself a bit of a design buff. With untucked shirts and tussled hair, Conine is more laid-back; he plays in bands and paddleboards on the Charles River. Shah has memorized the page numbers of investor presentations, while Conine is at heart a tech nerd and data geek.

    After college, they started two digital businesses before launching their first online store, a site that supplied furniture for stereo equipment that they called racksandstands.com. Eventually, their company, CSN Stores, would run a constellation of some 250 housewares sites that shipped orders directly from suppliers. 

    Nearly a decade in, CSN was doing $500 million in sales with zero inventory or outside investment. But Conine and Shah realized they needed a single brand to go toe-to-toe with Walmart, Target, or Home Depot. So in 2011, the duo consolidated everygrandfatherclock.com, allroosterdecor.com, and scores of other sites under one simple name: Wayfair.com.

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    Arguably, selling furniture online is unlike any other e-commerce transaction, said Steven Dennis, a former top executive at Neiman Marcus and now a retail adviser for SageBerry Consulting. Unlike apparel or groceries, furniture is big, bulky, and easily damaged during delivery. There are hundreds of anonymous manufacturers, and with so many products at every available price point, it’s hard for one retailer to stand out.

    “In a lot of ways furniture is a great online business because of the search and assortment characteristics” of Web browsing, Dennis said. “On the other hand, it’s a terrible online business, in that the purchase decision tends to still be dependent on the customer wanting to touch and feel. If you’re a buying a sofa, you still want to understand what you’re getting for your money.”

    Wayfair is one of the rare local tech companies to strike it big in the consumer world, but it didn’t get this far by hiring interior decorators or fashion designers. The company is full of data geeks whose metrics happen to be on the sales of couches, curtains and the like, and it recruits MBA graduates and PhD students in data science.

    A standing meeting at the headquarters of Wayfair.
    Suzanne Kreiter/Globe staff
    A standing meeting at the headquarters of Wayfair.

    Conine said a customer searching for a brown leather sectional, for example, is probably embarking on a renovation project and can become a more valuable customer whom Wayfair will target with ads. The company has built technology to allow customers to upload photos — of a green velvet sofa, for example — to find similar ones, and its augmented reality and virtual reality tools render furniture in 3-D or let a customer see how a love seat will fit in the living room.

    “When you walk around the halls of Wayfair, to me it feels like you’re walking around the halls of McKinsey or Boston Consulting — the aptitude of the people around you is at that level,” said Neeraj Agrawal, a college friend of Shah and Conine, whose firm Battery Ventures invested $40 million in Wayfair in 2011. “They hired almost nobody from the furniture world; they look for raw aptitude. It always goes back to: ‘What is the data telling us?’”

    .   .   .

    At Boston-based Wayfair, staff meetings often take place on furniture the company sells.
    Suzanne Kreiter/Globe Staff
    At Boston-based Wayfair, staff meetings often take place on furniture the company sells.

    Wayfair is increasingly vying against some of biggest names in retail: Home Depot last year purchased the Company Store, offering bedding and textiles to complement its vanities and hardware. Walmart’s home offerings online now feature virtual tours and “Buy the Room” options. Target acquired a shipping service for home deliveries, and Houzz, the home-design platform that connects customers with contractors, interior designers, and retailers, bulked up with $400 million in funding last year. 

    And then there is Amazon. The online giant more than tripled its furniture sales to $4 billion from 2015 to 2017, according to One Click Retail. It now has two private-label brands, Rivet and Stone & Beam.

    “Amazon Home has flown under the radar, but you can tell that they’re starting to put a lot more energy into the space,” said Meaghan Werle, an analyst with Kantar Retail. 

    By this stage in their careers, Shah and Conine have heard the Amazon comparisons so often they have a ready answer: Amazon, Shah sniffed, isn’t as dedicated to home goods as Wayfair is.

    “For us it’s a primary focus,” Shah said. “With logistics, fast delivery, accurate dates, high quality, and minimizing damage, we’re taking care of the customer, and that’s something we continue to do better and better as the years go by.”

    Yet Amazon serves as a helpful comparison for one of the main criticisms they face: that they lack profitability. Like Amazon, Wayfair is spending heavily on its growth plan, building out its warehouse and shipping capacity, expanding into more markets, and building its brand name with seemingly ubiquitous television ads.

    As Jeff Naylor, a Wayfair board member who is the former chief financial officer of TJX Cos., pointedly noted, Amazon didn’t make money for many of its early years.

    “We’re at a point in our history where it makes more sense to invest and grow,” Naylor said. “I would encourage you to go back and look back at the history of Amazon — our number one competitor — who faced that same question.”

    Wall Street certainly seems to agree: The company’s shares have appreciated about 42 percent a year, on average, since going public in October 2014, significantly better than the returns of major stock indexes.

    But a few in the investment community wonder about all those losses.

    “I think that this company is investing heavily and the returns on those investments are still not clear-cut,” said Seth Basham, an analyst at the investment firm Wedbush. “It’s very expensive to do what they’ve done. . . .  We should be seeing more revenues than we are at this point in time.”

    Still, the steady increase in revenue quarter after quarter has helped drive the stock ever higher, as many on Wall Street believe Wayfair is following the Amazon playbook for growth and will turn a profit within a few years. Some investors may also see Wayfair as a potential acquisition target, by Amazon or Walmart, while others believe Wayfair should be doing the buying, of a struggling bricks-and-mortar brand like Bed, Bath & Beyond, perhaps.

    .   .   .

    Inside Wayfair, they talk of what “she” wants. Whether designing a Web page, picking a product mix, building an online showroom, or planning an ad campaign, employees are exhorted to channel the mind of an archetypal customer: a home-obsessed woman.

    “She,” said Liza Lefkowski, Wayfair’s head of global branding, is actually one woman at different points of her life: a young working professional focusing on her growing family and home and an older woman “living her best life” and more focused on herself. Wayfair’s goal is to make the online experience for both as painless as possible — so that they will shop as often as possible. 

    “She loves her home, she loves shopping for her home, she loves building out her home, she loves being at home, so the category for her is super fun for her,” Lefkowski said. “But the process she goes through to do all those things is not really fun. That’s where we really enter the picture.”

    There is another “she,” one who has barely begun to shop. This is the big bet Shah and Conine are making: The huge losses incurred investing in the company will be repaid many fold when some 80 million millennials — women and men — settle into their own homes and begin shopping in earnest.

    “The millennials are about to age into the demographic. That’s part of the big upside,” Shah said. “When you start to think about how big the online opportunity is here, it’s huge,” he said. 

    There are other outstanding questions as Wayfair continues to scale up: Is the company doing enough to create loyalty — and spur repeat purchases — among customers? Will Wayfair open bricks-and-mortar stores? How would it fare during a recession? 

    Wayfair spent more than a half-billion dollars on advertising last year and is poised to blow past that amount in 2018. Ben Row, a former Apple executive who now works for the Boston-based retail software maker BigTinCan, said Wayfair’s ads remind him of “Kmart commercials two decades ago,” goofy, jingle-heavy pitches that aren’t much better or fresher today than they were back then. He said Wayfair needs to more seriously sell customers on its strengths: design taste, breadth of offerings, and prompt service.

    Lefkowski said Wayfair has new ads coming this fall that will feel more personal. Whether that personal touch will include a traditional store remains unclear. Wayfair plans to open an outlet store near its warehouse in Kentucky that will sell returned items in good condition, but otherwise has no immediate plans for a retail storefront. Conine and Shah said it would be impossible to have a store fully represent the breadth of Wayfair’s enormous product offerings. 

    As for a recession, Conine said Wayfair could even benefit during a downturn, as customers become more price-sensitive. “You actually capture market share faster,” Conine said.

    That kind of confidence from Conine and Shah is not new. Their friend and investor Neeraj Agrawal sounds slightly awed at how much the pair, who both have young children, juggle and have achieved.

    “It’s very unusual to have someone at Niraj and Steve’s success level at their age and stage in life,” Agrawal said. “At the end of the day, Wayfair is still early in its journey. They think like that. They think long-term.”

    Jay deVeer, a 3-D artist, was at work on images of furniture.
    Suzanne Kreiter/Globe Staff
    Jay deVeer, a 3-D artist, was at work on images of furniture.

    Janelle Nanos can be reached at janelle.nanos@globe.com. Follow her on Twitter @janellenanos.