home goods

Wayfair Leaves Germany, Cuts 730 Jobs

 

 

Wayfair is shutting down its German operations and will focus international ambitions on Canada, the U.K. and Ireland. The company says the decision, which Reuters reports will cost about 730 jobs, is due to multiple factors.

“Scaling our market share and improving our unit economics in the German market has proven challenging,” CEO and co-founder Niraj Shah wrote in a letter to employees. Those include weak macroeconomic conditions in Germany, Wayfair’s low brand awareness and the company’s limited scale. “We concluded that achieving market-leading growth in Germany remained a long and costly endeavor that is increasingly lagging the potential return we see in other areas.”

Wayfair first entered the German market and the U.K. 15 years ago. Sales in the U.K. have fared better, and Shah adds that Wayfair has a “meaningful” market share there, as it does in Ireland and Canada. Those markets “hold significant potential to replicate the success we’ve achieved in the U.S.”

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The news comes several days after Wedbush downgraded Wayfair to “neutral.” Seth Basham, an analyst who follows the category, sees some mass-market-focused retailers poised to benefit from a modestly improving demand backdrop. However, because Wayfair has consistently sharpened its value offering with price and service investments, “we see limited room to re-accelerate slowing share gains in 2025 without significant additional investments.”

Political uncertainty -- especially regarding tariffs, tax cuts, and immigration -- poses risks “given Wayfair’s high exposure to imports and a price-sensitive mass market customer base.” 

Jamie Katz, an analyst who follows Wayfair for Morningstar, writes that the e-ommerce company’s decision to leave Germany is a “minor change,” which will allow it to better focus company resources.

But she believes Wayfair -- despite its healthy breadth of products and established logistic networks – is vulnerable to competitors. “Wayfair lacks brand strength, evidenced by its elevated advertising spending relative to peers and customer acquisition costs,” she writes in her recent note.

“Moreover, we think peers will continue to attempt faster delivery, spurring rising competition. Targeting a wide consumer base of customers aged 25-54 years with an average household income of $60,000-$175,000 means Wayfair is competing with mass-market retailers, specialty retail, and low-cost providers, making it harder to stay top of mind.”

Besides Wayfair, Basham is more optimistic about what lies ahead for the home goods market. He forecasts slight growth in the coming year, even given market uncertainties. “Stabilizing interest rates, a return to existing home sales growth, real wage growth, positive wealth effects, and improving consumer confidence are positive for the category,” he says.

He anticipates sales to be between flat and 2% higher for the category overall.

 

 

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