Niraj: As an engineer, the idea of like building a brand felt like a very foreign idea to me. As learned more about it over the years, a lot of it does fit the same way you think about solving other problems. Welcome to the Logan Bartlett Show. On this episode, what you're gonna hear is a conversation I have with Neeraj Shah.
Niraj: Neeraj 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.
The best plans you're gonna create. Come out of thinking about your customers, understand what your customer wants, and doing the right thing. That's really how you're gonna determine what's smart. 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.
Supply chain, which includes having over 7 million skews on the Wayfair site and their decision to rebrand from 250 discreet stores to the Wayfair brand that we know today.
Niraj : You can learn great ideas from anywhere, including from your competitors. Whether a competitor does something or doesn't do something, doesn't necessarily make it right or wrong.
I think some companies get obsessed with their competitors. Then there's an implicit assumption that that competitor understands your customer population better than you do. Really interesting conversation with Neeraj that you'll hear now.
Logan: Right Neeraj. Thanks for doing this. Welcome
Niraj: Logan
Logan: our makeshift studio we have here.
Niraj: Thank you for Thank you for having me. We did. It's great to be here.
Logan: we cleaned it up, uh, decently for you. My wife was not thrilled, uh, this morning when we
Niraj: Well, you told me this coffee table's from Wayfair. That's exciting
Logan: know. Product placement right there.
Yeah. We'll list in the show notes where you can get the, the link back. Uh, well, thanks for doing this.
Logan: I, I normally don't try to tell a story in a linear fashion of like the company's journey, but I think. foundation of wafer such an interesting like, story and genesis of, of how it all came to be. So maybe we can go back in time.
2002. You and Steve. Yep. You guys were college classmates. You knew each other. Even going into Cornell, right? Uh,
Niraj: Yeah. We met at Cornell in the summer of 1990 at a summer program for high school students that they had And
Logan: You guys accepted both at the time or no?
Niraj: No, this was between our junior and senior years. Wow. Then, uh, you know, we ended up each un unknown to the other, applying early. We both got in and then randomly ended up three doors apart on our freshman year
Logan: So friends this one Friends all the way through, you started, uh, two companies together prior to Wayfair. Exactly. So it's 2002 and you're looking for a business idea. Is that fair to say?
Niraj: Yes. I think that's very
Logan: And so did you stumble on racks and stands.com? Like was that the, the, was it an independent operating entity or how did, how did the kernel of idea come to
Niraj: so we, um, one of the things we were doing is, we were trying to think of an idea is we were poking around it businesses that were out there, that were, the, the operators were looking to sell 'em, 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, uh, there's a woman selling birdhouses, there's dozens of these.
Niraj: And it was just growing fast, but it was like more than she could handle, you know, shipping these out of her garage or 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 basically came up with an approach on how to find categories good, and TV stands and speaker stands were both two of the top a hundred on, on Yahoo, on some So we created racks and
Logan: Oh, you did? Okay. Wait. And was there was no acquisition, you started it from
Niraj: 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. It was up and running. We bought it to see how it was operating, you know, they were dropshipping 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
Logan: and so the moment in time that allowed this to happen was basically Google search, uh, kind of popping up in e-commerce and all of that. Like what was the whine now of 2002?
Niraj: Yeah, so search obviously had been around and, uh, 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 That was quite new.
Logan: so uh, in in, in, 2002, uh, you, you see this and how do you actually get in touch with the, the business owners that, uh, 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?
Niraj: website at the time, it was called like, I think it was called Bizbuysale.com, something like that.
And it listed these like, you know, it lists business you could pay to list your business Then the person you contact would be the, the, you know, the operator. You just chat with 'em. 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 was no equity value, there weren't, there wasn't a repeat customer base, there was no brand. You know, there's nuance to all these categories. So the truth was we were better off coming up with our own approach to figure out, you know, we bought one and then what we learned through Rack's and Stan's is better off coming up with our own approach.
How do you pick a category, get into it, and, and, build that way?
Logan: Maybe explain drop shipping and how that works because you actually, people weren't taking inventory at the time. Right? It was it all these things were, were, for the most part, they were drop shipping
Niraj: Well, actually most of them, ironically, were taking inventory and that was one of their limiters.
Logan: Got it. So the woman was making the bird houses in her garage and shipping 'em herself.
Niraj: she was, yeah. Either making 'em, 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. Um, the idea of dropshipping, most, uh, suppliers, you know, manufacturers weren't set up to ship one at a time, and so they were not keen on doing that.
Niraj: And e-commerce was far from a proven pretty fresh after the.com crash. There's a lot of negative e-commerce and what its potential said to be versus what it turned out to be. Uh, if you remember said like, you know, there's a lot of skepticism that Amazon was gonna be successful.
I mean, it was not a boom
Logan: there were some magazine headlines like, uh, very dismissive of Jeff Bezos, uh, at the time that I don't think have stood, stood up, uh, over, over the last couple
Niraj: e-commerce has worked out okay. And Amazon has done fantastically
Logan: 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's microphones. And, uh, how do you go about convincing them that they should be doing one-off shipping to individuals?
Niraj: I mean, you'd, you'd basically approach them, you'd try to explain what the opportunity was. And honestly, the, the way it worked was that, so that first website racks and we basically, you know, we probably started with a, maybe third of the selection we would have six you could only, only so many of the folks would say that they were interested But that was enough to actually have a very good selection relative to others.
Niraj: 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. Um, and then what happens is the suppliers notice that you're growing, so then those suppliers are like, Hey.
You know, I remember, you know, we went, we launched it at the very end of August, I think like August thirty-first, and in the month of December, I think that month we did $250,000. And so these suppliers were geez, you know, you kinda came outta nowhere, but unbelievable how fast you're growing and all of a sudden they want to do more business with you.
So they, they, some of them would say, oh, hey, you know, some of the other online guys sell more my beds than my TV stands. Or the, you know, there's different guys sell more my desks than my TV 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 'em 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. So our whole approach initially was like, Hey, we're gonna 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, 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 'cause they knew exactly what was
Logan: 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, uh, you don't have any supplier relationships. You now you have supplier relationships and you say, okay, can we sell your other
Niraj: 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 course. So then when you wanted to go into rugs or you wanted to go into lighting, for example, we had to approach a whole new set of suppliers.
'cause 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 with 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, 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 'em. That's the moat. You
Logan: 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. Yeah. There's home. Can, can you break down like the different components of it and why home didn't have a big brand, uh, that was out
Niraj: Totally.
Niraj: Like, so the simple math that I think the thing about is if you think about the physical goods retail market, ex-automobile Automobiles, so automobiles, one market kind of unlike the rest of physical goods, inside physical goods, basically 60, 20, 10 and 10.
And what that is, is start with the 2020 is grocery, okay? Everyone buys grocery once or twice a week. Everyone knows what because it's so competitive. High frequency, it's, it's low margin. Well, sitting next to the 20 is the 60. That's general and general merchandise. Think of all the stuff you buy at Walmart or a Target or Costco.
What you'll think about, about the three I just mentioned is 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 eighties what they realized is, the way I can sell more general merchandise is to get into grocery. So they all got into grocery and over time they become the biggest grocers in the country.
Logan: as like a loss-leading or whatever, a low margin tough business because people were coming in with frequency and then go buy or paper towels or whatever
Niraj: need AA batteries, you know, you either need 'em on an emergent basis, so you buy 'em right around the corner or, or frankly, you just pick 'em up while you're buying your groceries, you know?
So it's like you, all those other categories can get added on, but you don't seek out the dish soap, but you don't seek out the paper towels. And so the idea was like, Hey, where are you going anyways? 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 So the two that are both large and super different, the 10 and the 10 are fashion and And they're really different for, for a few reasons. One is fashion. It's branded. The seasonal cycles are short. You know, you don't wanna wear the same exact stuff as someone else.
It's an expression of who you are. It's your identity. So you're gonna 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 and you know, and that, that 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 wanna be comfortable, they wanna be proud. There. The challenges are, these items are often big and bulky. They're bought infrequently. They're, 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, a who's gonna present me with a good 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, 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 or you know, if in in the US a lot of the brands have gone
Logan: Mm-Hmm.
Niraj: Zappos sort of ceased to be a platform for that. Um, you know, and then what we're doing 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,
Logan: Mm. 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, the, all the things that benefit e-commerce.
Niraj: Well, so I think the first thing that ended up making e-commerce sort of interesting for the consumer was access to selection. 'cause the one problem you had with going around the corner is, you know, there's just not a lot to pick from there
Logan: and your neighbors might have it or whatever.
Niraj: so 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, as a retailer, you're better off being near the others than being the one that's far away because you wanna be in the mix that they visit.
'cause obviously you're counting, Hey, we do a better job with merchandising. Our sales force is better, our pricing is better, whatever it is. And so we're gonna convince you to buy from us, but if we're not in the mix, how do we get you here? That, that's sort of the, the reality of 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 get by then spending all of your Saturday going from So 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, uh, solve ease of delivery? How do you solve problems? And that comes into all the, 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, uh, brands that we curate.
Those other problems are real problems. Um, but the initial draw in the early, early days, kind of where you are right now in the story is
Logan: And so, so this selection problem, uh, exists and you find a bunch of discrete opportunities, some from your supplier, some you go direct on yourself. Any other acquisitions or was it all organic that you built up?
Niraj: 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 another point we had a JV in Australia, which, which we bought and ultimately later we divested
Logan: both of us. And, and by 2012 you have 250 ish, uh, independent operating
Niraj: Exactly. We peaked at like two 50.
Logan: Do you, do you remember what the first couple ones were after racks and stands?
Niraj: Uh, we did an outdoor furniture one called T, quicker and More. Um, we had one called, uh, direct.com. Um, we did one called, uh, CSN office furniture.com.
All barstools Calm. The initial ones were all furniture. You,
Logan: did You didn't do birdhouses?
Niraj: We did have one. I think that came later when we were doing decor. I think it was every Birdhouse.com, I don't,
Logan: I wonder if all these, I just assume they still link back, uh, to Wayfair if there's
Niraj: I think they did. They all forward.
Yeah.
Logan: Birdhouse.com loyalists.
Uh, now they're, now they're on the Wayfair site, so twenty-twelve.
Logan: You built a business of 500 million in revenue and you make the decision that you're gonna consolidate all this stuff together into the Wayfair brand
Niraj: Exactly. So we, we started thinking about it in, uh, in 2000. Nine, 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 together.
And then, so then that led us to deciding that we wanted to launch a brand. We, we actually launched it in 2011.
Logan: 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
Niraj: we made the header on every site very similar. You know, the same we, 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 gonna read any, 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 Barstools, but I look at the header and it's got all the furniture categories and the tagline is a zillion things home. And you know. I'm gonna 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 Barstools.
Logan: Yeah. So CSN stores was the hold-Co. Uh, it was a, uh, amalgamation, I guess of, Steve Shaw, Neeraj, Konine,
Niraj: Yeah, yeah, exactly.
Logan: Uh, and you purposely picked a boring name. Uh, I think it's fair to call CSN stores, not the sexiest of names, uh, to appeal to suppliers.
Niraj: I mean, in those days when you'd go to a trade show, you'd go to like the High Point market and you wanna approach suppliers and talk to them about selling their goods.
You know, they weren't interested in e-commerce folks, so
Logan: they, they've heard about this Jeff Bezos guy. They, you know, they're, they, that was a big crash market. They
Niraj: and there's a bunch of, you know, the early incarnation of Furniture.com, you know, ramped and then went bankrupt during this period. There were some other folks that did that too, that raised a lot of money during the.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 with is to start to get into a conversation and let it be 15, 20 minutes into it. Um, by the time they realized that you're, uh, you know, selling online. And by that point, you know, and this is the piece that Steve did for years, was getting is, um, you know, they're like, well, the kind of distance for them is like, Hey, this guy sounds pretty bright, but he's selling this stuff online. maybe he'll figure something out.
Niraj: You know, it was, it was that you were hoping for that. Otherwise they were just like, Hey, you know, I, I don't wanna, I don't wanna deal
Logan: and the, the cashflow dynamics are interesting that you were able to bootstrap to 500 million, right? And so maybe talk through the, the dynamics of taking cash up front and then the ability to pay net out to your suppliers
Niraj: 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
Logan: you have to pay them for,
Niraj: you have to pay them for the goods. So from the time they ship an item, they wanna be paid, you know, on whatever those net terms are.
Number of days later. standard is 30 days, so, you know, we would get 30 day terms. Um, 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 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.
Logan: the benefits of drop shipping among other logistical complexities that you didn't have to deal with is that the, the working capital, uh, cycles were, were better for you to be able to bootstrap versus if you're taking inventory, not only did you need to store it somewhere, but you, you had to buy it upfront to be able to send
Niraj: So the working capital cycle also, you know, access to selection, there's no way we'd be able to inventory that breadth of So you're, you're accessing sort of this huge inventory pool.
Logan: So you get to 500 million, you probably have, are VCs reaching out to you across, like, do they know CSN stores as this big, uh, entity that owns all these independent businesses?
Niraj: Yeah. So by that point they did. 'cause along the way we had some mean, most notably would be one that was called Netshops at one point later renamed Hayneedle, and they had raised capital from some top tier venture firms. And so the. You know, that they had, they had done that, a couple others had raised money.
And so the, the mo you know, there was kind of, it became a category, became well understood. We were a leader in the category.
Niraj: The only one that hadn't some folks, you know,
Logan: so so you're getting phone calls and, uh, 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.
Niraj: 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 folks weren't paying enough And even to 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 was getting more the years went by. And, you know, we could really create a repeat base, which is sort of the lifeblood of any retailer. Mm-hmm. And so that, that, that, that was the, that was why we did
Logan: So so your pitch, you called, uh, I guess, or maybe got called on by my old boss mentor near Jaggerwall, who you also went to Cornell with.
So there was some trust there. I,
Niraj: Yeah, we knew each other a little bit at Cornell. Then we've known each other over the years. In
Logan: Yeah, in Boston. And so, uh, but, but the pitch to these folks was, Hey, we're going to pivot the business in some way. We're gonna 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?
Niraj: we took in, um, $165 million from, uh, battery Neeraj, Spark, great Hill and Harbor
Logan: And right after that, uh, the business. Tanks because you're not, may, 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 marshals and all these different things, uh, fell off pretty precipitously.
Niraj: Yeah, so we'd been working towards the launch of Wayfair and um, you know, we launched it probably within, you know, six months roughly after we had taken in the capital. The capital, uh, 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 outta cash flow.
Um, but as we were doing the redirects of these, uh, independent sites into the Wayfair domain, we just, the traffic was falling off far more than we, we
Logan: because you're changing all the links and the headers and so Google SEO is Punishing you for, for the newness and the, they don't wanna misrepresent things and you have to build up trust again with the the sites.
Right.
Niraj: that was a piece of it. We also, I. Trying to figure 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.
We started to come down a little bit. The technical issues got us back to that level.
Logan: how long did that take, by the way, to figure out the technical thing?
Niraj: Well, you know, it felt like about a hundred years, uh, at the time. Yeah. Um, but I think it probably took, it took many months. It approaching a year.
Logan: Was, uh, I mean, what's your 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 totally looks different. Like, did you, did you doubt it moments of time when you were up late at night?
Or did you know you would just be pushing through?
Niraj: We felt like we were gonna figure it out. Yeah. And, um. You know, in that sense we felt like we were gonna figure it out, but definitely nerve-racking.
Logan: I can imagine. Uh, so that took how long until you, you got back? It was a couple months on the technical side and Then the it
Niraj: 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, a home store, like what we have today, you know, what do you put on the home page?
How, 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 a brand, it took two years before we were willing to start the TV advertising.
'cause we finally felt like we'd gotten it to a point where it was worth starting to invest in
Logan: brand. And, and so what, what is a brand in your mind, like, as you're sort of thinking about this? Is it, is it a place that people trust to make purchase decisions? Like how did you sort of think about success of
Niraj: Well, so, 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, 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 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.
Niraj: Going to a trusted source is generally very, uh, you know, one of the things you wanna do, if you can.
Logan: So you had a plan for it. It sounds like it was measured initially that you were gonna take in this capital and not do TV right away. Not big splashy television advertisements. Uh, off the bat, how did you think about building the, the brand and the, the different ways you were gonna go about doing it?
Niraj: 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
Logan: Mm-Hmm.
Niraj: Mm-Hmm.
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. 'cause now we don't just have traffic that's high intent for a very narrow We actually have this Um, one of the things we launched, and it was three years after we first launched the Wayfair brand, was, um, kind of a concept that, that was just regular sale events. 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, date me as being way too old. But in the Sunday newspaper, tucked in the middle, used to be all these circulars. Mm-hmm. And you, you 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 you may see some other items, you know, but that actually, we could use that and it would be a reason. And to go to that store, in some cases, you actually had to cut out most of the circulars didn't have, but that was on some of 'em. So. The idea was like, Hey, how do you give someone that type of content, peaks curiosity gives 'em 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 about putting their. Most popular items off a fast delivery promise, that item would then get a badge online about the fast delivery Lifts conversion.
And I, to this day, faster delivery items have much conversion
Logan: so So it's an interesting theme and this is, uh, maybe in the minutia of supply chain, but it's, you know, 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? Yeah, that's right. And so, so how do you go about solving that? So there's, there was, uh, Castlegate and then the Wayfair Delivery Network, right
Niraj: 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 Optimize as Then once we got bigger, we were able to say, Hey, let's build our own transportation network. 'cause 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 is prohibitively today what we've built, what we call the wafer delivery network, is basically for those bulky items, we move all of them through our own transportation line haul, uh, 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.
And then what we did is we started in the popular markets building our own delivery terminal. So we, in the, in the US and Canada, we have 40 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 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.
Logan: And you picked originally two locations, right? Because you could reach some high percentage of the us uh, through those
Niraj: those two locations were for warehouses, for our fulfillment centers, and that was really focused on the items we could give to a, a carrier, for delivery. And so those were, yeah, we picked Utah and um, Kentucky because they covered the bulk of the US with And that's when we proved out the value of 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 far more two-day Um, but for the large items, we were still tendering them to these other carriers. Then taking that over, which is what the Wafer delivery network is really up to the quality
TLBS 94 Niraj Shah (final edit yt): Hey guys, this is Rashad. I work with Logan on the show, and I wanted to take a quick break to tell you about Red.
Point's other podcast, Unsupervised Learning. Unsupervised Learning is our AI podcast where we interview guests from companies like Perplexity, OpenAI, Adobe, and many others about the topical things that are happening in the very, very rapidly developing landscape of ai. So if you're interested in going deeper, uh, check out the link in this description.
For our YouTube channel, but also wherever you get your podcasts. So, back to the show.
Logan: So in some of those examples, you're actually not taking, I, I don't know the, the technical term, but you're not taking consignment of the, the item itself or RU went in those facilities.
Niraj: So, the, 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, uh, what you would think of as dropships.
So coming out of a supplier network, um, their, their W 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 gonna pick it up and we'll pick it up and we do pickups all over the country every day. Pull it into our transportation network and we'll move it
Logan: What did you find about speed? You talked about this, I assume that was a, uh, big driver of repeat purchase and building out all this logistics around is it is a decent-sized moat it seems like, of complexity around this, but what, what was the insight of speed? Obviously people get it faster, they buy more, I assume.
Niraj: Yeah. So love fast delivery, right? So, 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. 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 you're 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 in comparison to the savings on the way So all of a sudden you can hit lower retails for customers. So they love that. And 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, it's impossible to do just
Logan: Why is the final mile so difficult? Shopify bought Deliverer and then I think spun it back out to Flexport. And it seems like that's been a really, uh, difficult situation to figure out, like this last mile of logistics and all that. I mean, it makes sense that getting from warehouse to someone's house is a bunch of complexity in there, but why is it so uniquely hard?
Niraj: 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 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 And there's a lot of companies who either try to be like a software overlay on other physical operations, um, or there's folks who are in the physical operations business, which are a lot of these three PLs, but they've never really built the technology to add a lot of
Logan: so in building a brand now, you spend over a billion dollars a year on advertising marketing. Is that
Niraj: Yes, we do.
Logan: I can't imagine there's too many people listening that I built a brand at the scale, uh, 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 for
Niraj: you know, as an engineer, the idea of like building a brand 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. Um, which is, you know, you want this to stand for something. How do you help people understand what associations you want?
Niraj: 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 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. 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 found is like the power of having a brand is very substantial and, and 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. Um, 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.
Niraj: I mean, a great example will 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 it would say, okay, so now think about what their journey has been on, um, on the, you know, the glasses on the, the,
Logan: headsets,
Niraj: AR, VR product, the headset.
And, you know, they obviously waited a long time to release the one they did. 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, and, and kind of cover more ground with their base so they don't wanna release something too early, but they don't necessarily wanna 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 and building a brand, your journey's never done. And if you think about what I just said, the, the brand is, it's not just the marketing it's sort of how it ties into everything
Logan: Hmm.
Logan: In doing that, um, you, you have some independent brands still today. How many, uh, outside of Wayfair.com, how many other
Niraj: So we have five retail brands. So we have, we have Wayfair, which is, uh, the mass platform. We have three specialty retail brands. Uh, all modern Jocelyn, Maine, 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 Para Gold. These are all the brands you would find in like the design center, sell through the entire designers and the trade that are, you know, kind of premium products.
Logan: and how did you think about where the demarcation exists? What would go back to Wayfair versus what would have its own standalone brand? 'cause 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
Niraj: the truth is they're different segments of the market.
And, uh, 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, And so there, there's, you know, you, you could say, Hey, we're gonna do all of this in one it'll be very hard to do that because the customers get to know you.
For one thing, that's their association. Just saying, oh, and I also do this other thing. They're not necessarily gonna kind of view that as like sensible or it won't feel right to the customers who are looking for that, that this
Logan: and it's mostly, uh, I guess price point is, is one big distinction it sounds like. Are there any other ones that you think about, about where, where things slot into.
Niraj: price point is important. You can use it as a proxy for quality, but it isn't always a proxy for quality. So I say, you know, quality really is, is maybe the main demarcation, that tends to carry over into price point.
And then in the specialty retail brands, there's also a big access on because especially retail brand by definition is pretty tightly curated for a very specific aesthetic look lifestyle. And so by definition it, 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 rating and that's my look, and they want to go there and just immerse themselves in that environment, pick out their item.
Logan: there's I'm sure a million things, uh, that you've learned about building confidence and trust in, uh, purchasing a product online with individual customers.
Logan: One that there's a Harvard Business School case study on is the image catalog and, uh, how you go about scaling that. So once upon a time you had. Maybe, maybe still, maybe it's more 7 million skews across, uh, across the platforms.
Niraj: We probably have more than that today.
Logan: than that today. And all these things needed high quality images for confidence in purchasing.
Right? Is that a fair characterization?
Niraj: Yeah. I mean, you're telling the story of the item online, so you think about visual imagery.
Logan: 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, uh, photographs or trying to use technology to recreate elements of, of, uh, AR, I guess.
And these, these items, was it, is that a fair characterization?
Niraj: Yeah. So what it was, was like the early day of a rendering imagery, um, off a three-D model. And what we found was that you could much more economically render the imagery than, um, 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 kinda what these 3D models were effectively
Logan: capturing. 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 picked. They give you this option of, do they do it all in their studio or do they use the rendering?
And
Niraj: was, this was many years ago now, but, uh, yeah, the answer
Logan: years ago or whatever they pursued.
Niraj: Yeah, the, the, the, the rendering, the modeling and
Logan: was my answer. That's good. Yeah, that, that's what I was gonna, I guess I would've passed that class, uh, as well.
Logan: Um, I guess just 'cause you touched on it, generative ai, like where does that fit into your perspective on, you know, Wayfair as a business and the opportunity for you guys?
Niraj: 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
Logan: tackled a lot of internal operations related stuff.
Niraj: 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&D and d and where we think like the real interesting potential is, is, 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. And the, you know, the Holy Grails take, make it easy for them to intuitively and quickly get onto a journey when they start seeing super exciting 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.
Logan: Part of Wayfair's success in my mind has been building a culture of, um, just incremental improvements. Thousands, probably millions of lead bullets that you've just made the things a little bit better, right? Everything from the SEO in the early days to the, 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 move the needle 0.2%, but 0.2% on 10 billion revenue is a big, big delta,
Niraj: So I think, um. What we've always had is just amazing People who are, they're ambitious and driven, hard-working, they're collaborative. They're, you know, there are very bright, they're quantitative analytic. And so as a result, you know, when you give folks ownership over 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, 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 wanna have low retail prices, so how do I take out any inefficiency that just allows us to be sharper? Um, you know, that's in the ethos of the culture of the place.
And so I don't know that we do anything to like tell 'em, 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, you know, there's an old adage, you know, retail is a 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.
Uh, on conversely, and the reason I think it works for us is if you do have that culture, know, it's just happening all around you
Logan: I'm sure the answer's different for a bunch of different problems as they present themselves, but how do you balance the, um, the autonomy of empowering people to go make the changes they need to with the, 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 'cause you think it's a little bit better to, to do that.
How do you sort of empower people in that way?
Niraj: um, 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, and, and, and single individuals so that you create less kind of interaction points where you have to negotiate or priorities may differ.
Um, 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, 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, we decide what we want and that's whether it's a priority or not a priority as well as if there's a debate about, you know, direction. Um, and so that's kind of, it's sort of like to try.
Niraj: The goal isn't to say that there's never gonna be conflict, but the goal is to try to sort it out in the right answer fairly quickly.
Logan: How many, uh, people come to those six month, uh, the end?
Niraj: broken up into ninety-five areas. Each of the ninety-five areas kind of creates a plan. And then we do effectively twenty-minute
Logan: Every six months. And that was something, uh, I, I had heard you say at one point that there was this sprawling kind of conflicting cadence of meetings that, that just kind of got outta hand from an operational standpoint.
Can, was this the outgrowth of that, that everyone was kind of marching to their own drum and timeline?
Niraj: this was the outgrowth of two different things. So it was outgrowth that 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. second was that, you know, and by that what I mean is what you were describing is that certain teams, you'd meet with them quarterly, other teams, you meet with 'em 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 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, 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. 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 and
Logan: Hmm. 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 are aiming to as well. How do you think about the appropriate scoping?
Niraj: it varies by area, but a lot of, I would say generally there's a pretty good vision that goes out, may, maybe a reasonably tight version of it that goes out maybe a couple 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 on, so forth. Um, 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 were for a little while, and we found that that just forces unnatural activity 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. And in other areas it's like, well, you know, hey, it's pretty obvious what we need to do for the next end number of years.
And so writing that up, do we need to write that up in great detail, you
Logan: interesting. So building a culture of, um, I guess the accountability around all these things, it, it, 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, uh, for people to succeed, but also being willing to accept failures of different projects?
'cause that's a function of innovation, right? Is continuing to have both of
Niraj: 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 wanna see that you did get that 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 right? And you keep evolving it and you wanna evolve it rapidly. Um, 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?
Is, are the plans never really that well thought through? Is the execution not that well managed? But you know, you're never gonna get to your output goals if you're not getting done whatever you think the right
Logan: You, you've, um, you've gone through, uh, cycles of, of building this business, and I'm sure the culture has changed, uh, over the course of, you know, whatever the, uh, some odd years you've been doing this, um, recently there was you, there was an email, I don't know if it was actually. Released or, or leaked or, but about, um, getting back to some of the grittiness and ambition of the early days of, of Wayfair, how do you go about like, recalibrating people into obviously an email, you tell people that, but like, uh, you can do it on a podcast too, if anyone's listening.
Yeah. But, uh,
Niraj: so, you know, so the irony on that, that email, that, that, that one was an internal email, uh, to kind of the corporate team that was leaked. The irony on that email is, you know, basically during c.
We had all these like supply chain congestion and there's inflation. We had all these curveballs thrown at us that had, uh, 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'd gotten it 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. Um, 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 like, Hey, you know, we've a little bit lost our weight.
We need to get going. And by the end of last year we're like, Hey,
Logan: it's like mission accomplished on
Niraj: you know, just, you know, we're now on a good trajectory. Just keep going on that trajectory. Um, 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. What, um, some of the comments in the press, I think mis uh, misconstrued what I was trying to
Logan: Yeah. Got it. I mean, it, the, the point of it though, and I get, um, I'll get yelled at, uh, oftentimes if, when these things get cut up, uh, and they get posted on different social platforms and people get upset when you imply things about hard work, uh, or that, you know, think once upon a time working hard, uh, something that people collectively valued and recognized that, that often led to success.
But it seems like that's a, uh. Not something that people are quite as willing to say in, in earnest, which was one of the themes, I guess, of the, the, uh, the message that you sent out. Like what have you found about hard work, uh, in general and I guess that point you were trying to make?
Niraj: 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 wafer team, when I talked about the folks we have, I. 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 a 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's a big determinant of how successful you are over
Logan: uh, when it comes to hiring, uh, and managing large-scale teams and all that, if you could go back and tell your, uh, 2002, uh, 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?
Niraj: Well, not to be too repetitive, but I, I think what I was talking about a minute ago, I think does hold around culture really matters. And so figure out, I. You know what your culture is, and that is something you wanna 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.
Um, that leads to, you know, when, when it's not a fit, it, it generally doesn't work out. It doesn't mean the person won't be successful elsewhere, but it's unlikely it'll be, uh, a great fit together. Um, so I think that matters a lot. Um, and then I'd say over the years, you know, we've tried to think about, hey, can you, um, you know, what matters more like someone's background of exactly where they were or the traits.
And I think coming to the conclusion, the traits really matter. I. So what exactly they've done and where they've done it, um, you know, sometimes can be a signal to support that they have those traits, but honestly, you're better off just focusing on the traits because you can find those folks from any kind of
Logan: Hmm.
I wanna 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 Is that still true? And how does that actually play out?
Niraj: I think the way it manifests today is in, 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 And so they, they'll do a general, they'll, you know, they'll, 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 um, and so sort of, sort of, uh, people have like a side assignment together the interviewers, you know, that, that. Set a panel, uh, results gets shared with all of them, and then they discuss
Logan: I heard the four traits that you hire for are intelligence, hard work, analytical thinker, and teamwork, or the things that stand out.
Yeah. Collaborative. Collaborative. Uh, 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, or, um, yeah, things that you, you ask around when interviewing?
Niraj: you know, I think of this is also why we typically have multiple people, um, interview someone, is that everyone sort of, um, approaches trying to get a feel for the candidate in different ways.
Um, 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. 'cause that, I think that is something I probably talked about years ago and kind of fleshed it out more, um, into more detail.
So we're trying to tell candidates what our culture's about and what helps someone be successful here because, you know, you don't wanna waste a candidate's time if they're like, that's not a fit for me. Um, at the same time, that's what we're vetting Um, I don't know that we have a standard way to
Logan: um, I I heard you mention, uh, being a lifelong learner is actually like a really beneficial trait in, in employees. Uh, is that something that you're able to feel out by pursuits outside of work?
Or how do you sort of think about?
Niraj: Another way to think about someone being a lifelong learner is, um, is kind of, uh, you know, how curious they are. Curiosity is a great trait. Um, the danger often is if, um, 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, the risk you run is that if there's a better way to do it, that might not something that that person's pursuing. If you have someone who's always curious, what we found is like curious is like a general trait. People tend to have, they then apply it in they're sort of.
They're trying to do things better. They're curious what might be next. They're curious about the thing that's adjacent. Um, and so we want those types of And our view is that the world, whether it's obvious on the service or not, it's always fast changing. There's, you know, our market's gonna 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
Logan: I, I, I heard also, I guess on a similar vein, but uh, 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
Niraj: I think so
Logan: Yeah. It's interesting. Those are two, uh, 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 gonna 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, uh, you're, you probably get lapped. What altitude do you try to operate, uh, in as a CEO of a, of a big company? Like what, what details are you getting in versus, um, yeah, sort of staying out of Yeah.
Niraj: So, you know, as you can imagine over, you know, we're now in our 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 I, 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, uh, group of Um, 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 counting on you to kind of always be there with them, the truth is you're probably not gonna be there often enough with them to really make it work well.
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 wanna just help 'em 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, um, until they're sort of trajectory wise.
Headed, uh, the way we want and that there's a team around it and 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 Um, 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, board meetings, you know, it tends to add up to being a lot of
Logan: 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,
Niraj: 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 the 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.
Logan: you all have been fairly, um, I guess on the side of in-person work, is that a fair.
Niraj: Well, I mean, we worked from home for, you know, I. decent amount of time, I think, relative to certain other parts of the country or headquarter in Boston. But, um, what we started doing in the, uh, summer of twenty-two is we, we started trying to get folks back in, uh, three days a 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. Um, but that's, that's worked well for us getting people back
Logan: together, what do you think the benefit of getting people back together is? Like? Where have you sort of seen it play out?
Niraj: 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, uh, more novel solutions really good. Um, and then, um, 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 uh, uh, going member of the team and.
We wanna 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 and you're overhearing conversations or you ask them um, versus everything having to be scheduled, you know, Google meet
Logan: Yeah, it's interesting. I, I, I've sort of found that any. Individual is probably more productive working from home, plus or minus, depending on how your job is. Uh, but that doesn't mean the business is more productive 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, or alongside your colleagues
Niraj: Absolutely. And then if you think about your business, like how, how do you bring the next generation up and through? a lot of it, when they start, they don't necessarily know how to do And so how, 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
Logan: person. Yeah. There's a lot of, um, soft diplomacy or whatever, like lessons just, just that you intuit from being around someone on a, physically around someone that you don't.
Niraj: 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.
There sort of was always there historically, but now by knowing kind of, you know, what time is, uh, not necessarily together, it lets you schedule things in a way that maximizes the time you're together and kind of makes your schedule
Logan: managing, uh, uh, people and I guess hiring and then managing people out.
Um, is there anything you've, you've learned about, um, the managing out process, uh, that you would impart, uh, to different leaders of organizations how that plays out?
Niraj: 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 And so don't expect that everything's always gonna go perfectly, but be transparent and 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 Also, it's important to have that conversation because you don't want that person, you know, spending years somewhere where they're not gonna ultimately be successful and nor is it helping the business. And so I think like it starts by giving great feedback and then it, the, the next piece is in those cases where it's ultimately not gonna be a fit, it's like having that conversation rather than avoiding it
Logan: you were caught up in this very weird vortex of like social media and conspiracy theories and uh, 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.
Niraj: Well, I, you know, I think that, you know, the promise of the internet is that, you know, all this information's available to you at your fingertips.
And I think the downside of that is. disinformation can spread like wildfire and you know, in this case, there's no truth to it. I'd say, uh, you know, a learning we had is that, you know, we learned you can't ignore things like that at first 'cause just because you thought it was so far-fetched, it didn't make sense.
It's important to, 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, uh, both explain wasn't true and, uh, have it fully debunked and proven to not be true. But ultimately we did. And so I, I say being cognizant of the fact that information flies around the internet, it's not necessarily true, is an important learning lesson.
Logan: and just getting out in front of it and, and saying like, stamping, 'cause you're giving oxygen to it in some ways to, to say it's not true.
In some ways it's like validating, uh, that this is out there, but you're also cutting it off at the past. And so I, I don't know if there's any insight around that 'cause other companies go through, I I'm sure we'll have countless other examples of this and you guys happen to be on, you know, an early one.
Niraj: I don't know if there's a perfect example or perfect answer because it's very situation specific. Um, but I would say what we learned is you need to take these things seriously from the get-go because you, you just don't know what is going to somehow gain oxygen from whatever
Logan: Totally. And, 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, uh, 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, uh, take that video and now it looks like Neeraj and Logan are validating this conspiracy theory or something. And it, it's, I I think we're headed to a really weird world of, uh, of that stuff. And I guess you guys caught in early version of it,
Niraj: Obviously we can, you know, 'cause you've seen it with some of these, uh, generative ai, some of these movies that have been made. Um, so yeah, I mean obviously a challenging
Logan: world. Yes, yes, yes. I, I, in a weird way, we need validators, uh, more than ever in a time that all this stuff is kind of fraying and there's, I. 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, wa, wall Street Journal, I'm sure wrote a story of debunking conspiracy theory. New York Times, I'm sure wrote a story, debunking the conspiracy. You need those points of, uh, aggregators almost to validate things that aren't
Niraj: I, yeah, I think having ways for people to know what content is true
Logan: yeah, Yeah. Um, so there's this big, uh, 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 that you said something about watching competitors and being aware of them, but not focused on them.
Um, how do you think about, like for, for entrepreneurs or executives listening in, like how do you think about you know,
Niraj: so. Being cognizant of what your competitors are doing, I think is really But generally, the best plans you're gonna 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 gonna 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, understand what your customer wants, and doing the right thing, that's really how, how you're gonna determine what's smart.
So you can learn great ideas from anywhere, including from your co competitors. So that's part of why you wanna pay attention. Um, but I think some companies get obsessed with their 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.
Logan: Hmm. 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 were
Niraj: No, and I mean, in hindsight, I think, um, by not raising capital, it sort of forced to say discipline and frugal. We, we didn't focus on what the competitors were doing. We focused on what our customers, uh, wanted. I think ultimately that is a piece of why we ultimately, uh, succeeded.
Logan: Can you elaborate on that? That's bad for my business if, uh, not being VC backed is good for, uh, good for, uh, people, but there's constraints.
I, I, 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 It's like, if you go down the list of Amazon and Microsoft, Wayfair, Atlassian, you know, Salesforce now, 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?
I
Niraj: 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, um, 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 on a 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 Um, the having that constraint just by the nature that we were, uh, self-funding, bootstrapping the business, I think helped us.
Logan: And so now how do you, how do you set the, the dials for people on constraint versus, 'cause you do have access to capital if as needed, and I'm sure your, your balance sheet looks way better than it did in 2003. Um, so how do you sort of set the, the, those expectations and goals for
Niraj: 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, We're not the only one. There's a lot of other companies in the world that have figured this out. So what we did is we learned a lot from them.
And so some of it is, you know, before we, we viewed budgets as an anathema because we viewed budgets as you know. Artificially, they're either gonna be too small or too large in any given area. What we learned is budget's just a mechanism to create a constraint to then get the team to focus on the execution, you know?
And, um, same with like the joint planning. You know, we'd, we'd say, well, you know, priorities means that you're not gonna yearn to do more. Well, I think we've corrected that to say, you know, 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, uh, kind of put upon constraints and we've created a new set of things 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, and go after it. Um, uh, you know, that's worked really well. So that's kind of how we got, got it all back.
Logan: Has being public, uh, I'm sure stock price, volatility and earnings calls, uh, those two probably aren't your favorite, uh, 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 business in some ways. I don't know if that's a fair representation.
Niraj: know, 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 gonna take the long view and here's how we're gonna tackle things or are we gonna prioritize things. The two largest shareholders in the company are myself and 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 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've 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
Logan: So, you you've started three businesses, uh, first two with, uh, 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, um, 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?
Niraj: Well, I think, um. First, you gotta love what you, 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 so you need to really believe in what you're doing.
You need to love it. 'cause that's gonna be, that's gonna give you that drive when
Logan: You kinda learn to love this stuff though? It was, uh, Steve's mom a like in the furniture sales business or
Niraj: She, um, she had two, uh, stores in New Jersey that were, uh, sold outdoor furniture.
Logan: Oh, interesting.
Niraj: Patio furniture.
Logan: So, so it was in his blood, it wasn't in your, uh,
Niraj: don't know if the, the, the home goods category, maybe it was in his blood. I dunno if it was in our blood per se. this type of business, like a, you know, retail, which is a customer driven business details, a real opportunity with technology that was very exciting.
I would say the category is very addictive. So now that I've been in it for just love it. But, um. I think 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
Logan: about it. 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?
Niraj: 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 related to it. I, that's where all I think you get all the, a-has from.
Logan: How did you do that at scale? Were you calling up people in the early days to, to ask like where they were purchasing or?
It feels easier with like a BTB software company where you have a finite universe of potential buyers. You have an infinite universe of potential buyers.
Niraj: do I mean, there's certain things though. Obviously things on the internet are very measurable, so A-B tests and other things, you can, you can do different
Logan: Yeah.