Why Wayfair could be a big winner with its new big box

Wayfair, the retailer that made a name for itself on the Internet as a pure e-commerce company, has just entered the retail market in the form of a mega-store that may be on the cusp of some new retail trends, or at least tell us something about what it checks out applies to people buying furniture and home decorative items.

Last week, Wayfair opened a two-story, 150,000-square-foot brick-and-mortar store in Wilmette, Illinois, the first physical store to bear the main banner’s name. In addition to a wide range of products, the location offers design services and home improvement advice from local experts, a mural by a local artist and a 90-seat restaurant, The Porch, offering indoor and patio dining.

Wayfair doesn’t see this location as a one-off. This was announced by a Wayfair representative Forbes in an email that the retailer expects to have a portfolio of big box stores over time and that it will test and learn from the first location to refine its offering and strategy.

While Wayfair was already involved in brick-and-mortar retail, with one small-format mall store under its main brand that opened in 2019 and closed in late 2020, as well as several current and expanding retail chains small-format for its banners of specialty brands like AllModern and Birch Lane — a large box with the Wayfair name may be a bit surprising given the type of store expansion that can be expected, especially for e-commerce companies that are launching physical operations. but large boxes from companies like this are something we may see more of.

Why is it worth exercising physically?

Wayfair isn’t the first e-commerce success story to spill over into retail; in fact, the whole concept of online-only brands has undergone something of a paradigm shift over the last few years. In 2019, when Warby Parker and Allbirds opened physical stores in preparation for their IPOs, it became clear that physical retail had customer acquisition advantages that could not be replicated online, especially as online advertising was becoming increasingly difficult as Apple phases out third-party cookies.

While the opening of physical stores has not been a magic bullet for online brands in all cases – Allbirds has been in trouble in recent years, recently having to close many of the stores it opened and facing such a sharp drop in inventory that it is now facing delisting . Retail fundamentals, desired product, etc., of course, remain crucial to a brand’s success in real or virtual storefronts. However, a physical location reliably supports companies where positive characteristics otherwise accumulate. Research has shown a “halo effect” associated with physical retailing in the sense that retailers with a physical presence increase online sales AND increased online basket sizes in the area where they have a physical presence. The impact is even greater for direct selling companies, and a younger cohort of customers – despite their reputation as a “digital-only” generation – are actually doing just that. more shopping in the store.

This push, whether it can be attributed to increased brand recognition, showroom customers shopping online, store experience as a sales and loyalty driver, increased chances of declining foot traffic, or some other phenomenon, makes a solid case for even a pure-play company in the e-commerce industry that have achieved success by launching physical locations. So a physical Wayfair store makes sense – the more interesting question may be why Wayfair is getting so big.

Is the small shop trend about to shrink?

Another big story over the last few years has been the entry of large retailers into cities with their small format store concepts. Instead of trying to create larger suburban-style boxes with tons of square footage and a huge selection to suit urban locations, we saw retailers like Target
Objective
develop stores with a much smaller area and a limited product range, adapted to the needs of the surrounding community. For some, such stores have proven to be an effective way for major retailers to do business in areas with more walking and cycling commuters.

But not all big boxes managed to stay small and stripped. IKEA’s mixed results in trying to bring its notoriously large and labyrinthine store experience into a smaller, more city-friendly package paint a more complicated picture of why the small store concept sinks or swims. At the end of last year, there were reports about the reconstruction of the city’s IKEA stores. Customers did not like the original layout of the urban concept, which was supposed to ensure neat and quick shopping for urban customers who care about time. Customers expected IKEA, large or small, to have a store that looked like IKEA, with a layout that encouraged walking around.

The implication of this is either that the IKEA brand image is inextricably linked to the IKEA big box experience – IKEA shoppers look for stores that are like IKEA – or that there is something that the IKEA big box has proven a long time ago that works in this category, regardless where the store is located.

Is retail about to breathe new life into big boxes?

The fact that the new Wayfair store, as described, has some IKEA-like features, such as a comprehensive product selection and an in-store restaurant (though it is half the size of the Swedish chain’s average big box) seems to reflect the latter observation; Big box stores with lots of attractions are the type of stores furniture buyers like. The fact that the new Wayfair is a suburban store rather than a trendy urban store may be a sign of banking on a population trend.

Recent history in USA today A discussion of the latest census data indicates that the shift away from major metropolitan areas toward smaller, more affordable cities and towns, which began during the Covid-19 pandemic and slowed in 2022, has gained momentum.

Even before the Covid-19 outbreak, some major retailers were anticipating a new wave, and perhaps a new breed, of customers shopping in the suburbs. In 2018 at Walmart
Walmart
toyed with the idea of ​​a new kind of small-town, pedestrian-friendly shopping district with Walmart as the “town center.” Target, which has seen so much success with its small, urban concepts, recently returned to big box stores with even larger stores outside cities, aiming to facilitate more shopping and fulfillment across multiple channels with improved ship-from-store capabilities.

So it seems that with its new concept, Wayfair plans to take advantage of the influx of people into small towns and create a shopping experience that has been successful for one of the longest-running and most successful players in this category. Such moves could herald a new kind of vibrant big-box shopping experience (which IKEA undoubtedly helped pioneer) that is more fun, digital, and focused on customer entertainment than the rigid, stereotypical big-box experiences of recent years.

It also makes sense to move away from an online retailer; the new location in the suburbs will not affect existing relationships. Big city fans of the Wayfair brand probably come back because they are satisfied with online shopping. It can even provide a faster order fulfillment path.