Business Strategy and Outlook| Jaime M. Katz |
Wayfair should be able to restore market share growth in the fragmented home goods market when housing spend normalizes. The firm believes this is a more than $800 billion global opportunity between North America and Europe. Wayfair’s differentiation comes by way of product breadth and its logistics network, which permits faster delivery of both small and large parcels than many of its peers. Faster delivery is a function of fewer touch points, reducing damage and improving Wayfair’s brand equity with each positive delivery experience. However, we think peers will continue to attempt faster delivery, spurring rising competition. Targeting a wide consumer base with a customer age 20-64 years old (200 million domestic households) with income of $25,000-$250,000 also means Wayfair is competing with mass-market retailers, specialty retail, and low-cost providers, making it harder to stay top of mind. This, along with no switching costs, underlies our no-moat rating.