As Wayfair Cuts Staff, Another Retailer Buckles

Wayfair Inc. (NYSE: W), a modest-sized online retailer, said it would cut 550 people. The company claimed that tariffs have hurt its sales, and the threat of an economic slowdown could hurt it more. More realistically, Wayfair competes in an increasingly crowded part of the sector. These cuts may be only the beginning.

Wayfair stock dropped 15% on the news. However, that is only the tip of the iceberg. The stock is down close to 30% in the past year. It collapsed in November, as the company posted a wider than expected loss in the third quarter. Wayfair lost $272 million on revenue of $2.3 billion. Its market value has sunk to a troubling $6.6 billion.

Wayfair’s excuse for layoffs was that the company wants to drive efficiencies. That is what most faltering retailers say when their losses are increasing. In reality, Wayfair has started to fall victim to the Amazon behemoth and the wildly crowded sector for home products. It cut prices as much as 70% for Presidents Day, which tells a great deal about its need to boost sales and eat through inventory.

Even a modestly close look at Wayfair’s website shows that it sells very little that is distinctive. It is a collection of furniture, lighting, and kitchen and bedroom products. Without a more diversified set of offerings, Wayfair is little different from its peers.

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