• by Sarah Mahoney , Staff Writer @mahoney_sarah, May 10, 2023

Wayfair, posting mixed financial results as it continues to hunt for a path to profitability, is testing a tech experience called the Digital Design Studio.

Available at its AllModern store in Dedham, Massachusetts, the tech is designed as a staging tool, allowing users to create and interact with many design layouts. users can experience the products in a digital, 3D room with photorealistic quality. The Boston-based company says the innovation is like experiencing a large digital catalog in "life-like quality."

Launched in 2002, Wayfair resisted the ecommerce trend of opening physical locations. Then last December, it announced the debut of two AllModern stores and one Joss & Main store. It said it intends to open physical stores in all its banners, including Wayfair and Birch Lane.

"Wayfair strongly believes in meeting our customers where they want to shop, whether online or in-person," says Fiona Tan, Wayfair's chief technology officer, in announcing the new tech. "The Digital Design Studio helps us execute this omnichannel experience by making it easier for customers to find what they are looking for and ultimately have greater confidence and satisfaction in their purchase."

The kiosk offers a glass surface, a collection of product cards and a screen, which prompts users to place the cards and arrange the products. They can switch backgrounds so the room resembles their home, then move and rotate the screen to change lighting, camera angle and seat heights.

A company spokesperson tells Retail Insider there is no advertising promoting the experiment. “For now the Digital Design Studio is in a testing phase,” he says in an email. “As we gain customer feedback and refine the experience, we will consider future deployment.”

The company says the Digital Design Studio is the latest iteration of the patio Playground it launched in 2016, which involved miniature furniture and a VR headset.

The innovation comes as the company pursues a transformation strategy, including massive layoffs.  

Wayfair just released first-quarter financial results that are something of a mixed bag. While revenue fell 7.3% to $2.8 billion, it beat expectations. And it continues to gain market share against its competitors.

Yet the number of active customers dropped 14.6% to 21.7 million. Repeat customers made 7.6 million orders, a decline of 6.2% from the comparable period.

Losses increased to $355 million, compared to $318 million in the same period a year ago.

"This was a strong quarter for Wayfair, and we are pleased to be seeing consistent market share gains and a significant improvement in cost structure," said Niraj Shah, CEO, Wayfair's co-founder and co-chairman, in the company's announcement.

Some observers see encouragement in the results, especially given the deceleration throughout the category. The company's forecast for the coming quarter was lower than expected. Still, "with still sizable cost savings opportunities remaining, improving customer unit economics, and ongoing share gains," Seth Basham, an analyst who covers the company for Wedbush, expects Wayfair to outperform competitors.

Other disagree. "If this is a strong quarter, we'd hate to see a weak one," writes Neil Saunders, managing director of GlobalData. "The worrying thing about Wayfair's sales is that after a period of improvement, the trend is now getting worse with the pace of decline accelerating across both the U.S. and international divisions."

Much of that trend is due to a sluggish housing market and consumers reining in discretionary spending, primarily online.

Saunders thinks Wayfair is especially vulnerable to rival Ikea, which recently announced its most significant expansion yet in the U.S.

"We remain broadly unconvinced that Wayfair has a sound business model," he adds. "It is certainly a big operation that has accrued significant sales; however, it remains operationally defective and is a long way from fixing its problems."