This morning, Wayfair CEO and Co-founder Niraj Shah shared the note below with the Wayfair team:
Hi everyone,
As you know, we’ve been making cost reductions across the organization to right-size our business and become more agile. We’ve made good progress, but today I need to share some difficult news. We will be reducing our team and saying goodbye to approximately 1,750 of our dedicated colleagues as we make some important changes to reshape our business for the future. We wish we could have shared this sooner, in light of the speculation these past few weeks, which I know has been hard.
Our colleagues in Europe have already begun to have conversations. In North America, all employees will receive an email shortly that will let you know if your role is impacted. All impacted employees will be part of conversations today to talk about next steps.
I’ll lay out more on what’s changing in a moment, but first I want to share how we’re supporting our people through this transition.
- We are offering severance based on each individual’s circumstances. It will vary by country, tenure and level and follow local regulations. To give an example, in the U.S., employees will receive a minimum of ten weeks pay from today, as well as have continued benefit coverage and vesting of existing equity through March 2023.
- We will also be providing other benefits and resources, including access to employee assistance program resources and opt-in Wayfair Alumni networking support.
- Impacted employees will receive individualized follow-up with more detail.
To those who will be departing Wayfair, I want to thank you for your contributions to the company and for the impact you’ve had on your colleagues. As co-founders, Steve and I have had an opportunity to work with many wonderful people over the years, and this group stands out for its depth of talent and experience, and we’re deeply saddened these changes will take us in different directions. We’re grateful for what you’ve done and you can be so proud of your accomplishments.
Focusing our energy
This is our second organizational reduction in less than six months and you rightfully have questions. Let me start with the changes we’re making and why. As a company, we need to simplify how we work - we want more of our energy to be focused on delivering against our priorities. Being focused and lean has been the bulk of our 20 year history. Our customer service department started as me and Steve taking shifts on his house phone – we thrive when we are scrappy and dedicated to customer outcomes. Unfortunately, along the way, we over complicated things, lost sight of some of our fundamentals and simply grew too big. There are a few ways to see this. On a financial basis, you can see how our operating expenses - roughly half of which are our corporate headcount - have grown relative to revenue. For most of our history, they have been about 10-11% relative to revenue, but this past year they climbed above 17%. On an operating basis, we can see and feel that we’re not as agile as we used to be or need to be. I’ve decided that we need to fix this, although I recognize how painful these steps will be for people we care about.
The changes today are largely about reducing management layers, right-sizing in certain places, and reorganizing to be more efficient. We want to reduce time spent in meetings and allow teams to own their remit. So we’re ensuring single owners in areas like marketing/creative, curated merchandising and supplier communication. We’re continuing to globalize functions like Supply Chain and Service and reducing the redundancies we find as we do. We’re adjusting the ratios of leaders to team members in areas like Talent and Technology and adjusting the Talent team to match the size of our organization. These changes will allow us to make decisions faster and allow those teams to focus on delivering the top priorities.
Streamlining for growth
You’re also asking what’s next for the business, and, to that end, I want to share a little more about the financial plan. First, it’s important to note that we are seeing nice green shoots in the business. Our core offering across the dimensions of availability, speed and price has improved and customers are responding. We have seen encouraging momentum in orders in Q4, and we are continuing to gain market share.
It is good to see the business strengthening, but that doesn’t change that we can and must be leaner. Overall, we are actioning against over $1.4 billion in costs. And, to be clear – the parts of that plan that impact our team members will be addressed through this announcement. We have also worked hard to find other savings, including refining our advertising costs and negotiating great outcomes for things like insurance policies, janitorial services, and software licenses. The bulk of what’s left is in other third party negotiations, and then in various operational cost savings areas, and these workstreams are well underway, with the savings expected to come throughout 2023. As a result of all of these efforts, we expect to return to adjusted EBITDA profitability earlier in 2023.
These changes streamline our business and enable us to drive even sharper retail pricing and assist growth. Importantly, we do not believe these changes reduce our addressable market or long-term opportunity, and we are continuing to invest in the future. We are not sacrificing tomorrow while we refocus today.
I know it can be hard to imagine how we can operate our large, complex business with a smaller team than we had yesterday. I expect that it will take a bit of time to see that in fact we will be more agile and get more done. While I believe that is true, I also think we need a good number of people in order to tackle the opportunity ahead, which is why I believe we now have the right size team for the next phase of our journey, and I think we have a very bright future.
For those who are leaving us, Steve and I again want to say thank you for being a part of Wayfair. We sincerely appreciate what you’ve done for the company and each other. For those who are staying, we know this is difficult for you as well, and we will come together this afternoon to talk more about all of this. You’ll receive an invite later today.
Thank you for everything you do to serve our customers and suppliers. And most of all, thank you for what you do to support one another.
- Niraj
FORWARD-LOOKING STATEMENTS
This letter contains forward-looking statements within the meaning of federal and state securities laws. All statements other than statements of historical fact contained in this letter including, but not limited to, statements regarding our future results of operations and financial position, including the achievement and timing of our financial outlook and adjusted EBITDA breakeven and positive free cash flow goals, our investment plans and anticipated returns on those investments, our business strategy, plans and objectives of management for future operations, including whether we will identify additional cost savings, become more agile or continue to see business momentum, positive revenue and order trends and improvements in market share, our future customer growth and expected consumer activity and behaviors, the expected reductions in costs resulting from our cost efficiency plan, the estimated costs resulting from the workforce reduction, as well as when we expect any such charges, costs or savings will occur, and the impact of macroeconomic factors, including economic uncertainty and any impact on consumer spending, fluctuations in inflation and interest rates, and our response to such events, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "anticipates," “continues,” "could," "intends," “goals,” "target," "projects," "contemplates," “returning,” "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other similar expressions.
Forward-looking statements are based on current expectations of future events. We cannot guarantee that any forward-looking statement will be accurate, although we believe that we have been reasonable in our expectations and assumptions. Investors should realize that if underlying assumptions prove inaccurate or that known or unknown risks or uncertainties materialize, actual results could vary materially from our expectations and projections. Investors are therefore cautioned not to place undue reliance on any forward-looking statements. These forward-looking statements speak only as of the date of this letter and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events or otherwise.
A list and description of risks, uncertainties and other factors that could cause or contribute to differences in our results can be found in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K and subsequent filings. We qualify all of our forward-looking statements by these cautionary statements.