Less than five years ago, Boston online retailer Wayfair was expanding like crazy, hiring hundreds of new staff a month and moving into new spaces, such as the massive Boylston Street office complex that once housed Houghton Mifflin Harcourt.
Counting its offices in Copley Place, the company was one of a handful in the city occupying over 1 million square feet, and it kept adding space around the Back Bay through early 2020. Then, when COVID-19 hit, locked-down consumers sent Wayfair’s growth into overdrive as they snapped up furniture for their homes and home offices.
But the “new normal” didn’t stick.
Over the past year Wayfair’s sales have tumbled, and on Friday chief executive and cofounder Niraj Shah announced he was cutting 1,750 jobs, or 10 percent of the company’s global staff. With the layoffs concentrated in managers, human resources, and engineers, the Boston operations lost 937 people, representing close to double the percentage hit in the company overall.
And that comes on top of the 870 jobs Shah cut in August, including 400 in Boston.
Even with a 20 percent jump in Wayfair’s stock price to $46.79 on Friday after the job cut announcement, the company’s shares remain 86 percent below their peak of $345.47 reached in March 2021.
Wayfair is hardly alone among tech companies that over-hired at the start of the pandemic and now face a reckoning. On Friday, Google announced it was cutting 12,000 jobs, joining Microsoft, Amazon, and Meta among many others that have turned to layoffs amid a slowing economy and lower stock prices.
The question is whether Shah can get Wayfair back on track as one of Boston’s biggest tech companies, or will the company face continued erosion of sales and jobs. Wayfair’s impact goes far beyond its own offices and industry, as its alumni have gone on to help found and staff other tech startups and its growth has fueled the local economy.
“Companies like Wayfair that were the biggest beneficiaries of the pandemic are coming back to reality,” Mohamad Ali, chief executive of Needham-based research firm IDG, said. But once the Federal Reserve’s interest rate hikes ease and the economy stabilizes, “they can come back pretty quickly,” he said.
The job cuts along with other cost-saving efforts, including putting hundreds of thousands of square feet of office space up for sublease, aim to get Wayfair back to profitability sooner, Shah said in an interview with the Globe.
“Hindsight is always 20/20,” he said. “But clearly we let our cost structure get too big and we let our corporate team get too big.”
Managing through the pandemic was complicated, he said. Wayfair’s revenue totaled $9.1 billion in 2019. Early in 2020, amid the pandemic-fueled online shopping surge, Wayfair was on pace to hit $20 billion in annual revenue. But by the middle of 2021, sales — and Wayfair’s stock price — started slipping. Still, 2022 sales are expected to total more than $12 billion when reported next month, and Shah said he is seeing signs of improvement.
Under Wayfair’s business model, the company doesn’t own furniture or other inventory but acts as the seller and distributor for thousands of manufacturers. That turned into a major weakness amid all of the supply chain glitches last year — a “tough stretch,” Shah said — but now may allow Wayfair to recover quickly as manufacturers and shippers get back to normal.
The company will also add to its small collection of physical stores and plans to expand sales in Europe this year, Shah said. “Frankly, we’ve figured out how we can be very successful in the future with the right-size team,” he said.
Analysts are divided on the company’s prospects. A study by MoffettNathanson found rival online sellers were increasingly poaching Wayfair’s best-selling items. “We see sustained competition and anticipate Wayfair’s market share declining,” the analysts wrote in a report last month.
But Wayfair has also built brand allegiance with more than 20 million shoppers, analyst Jonathan Matuszewski from Jefferies said. “It’s definitely been a roller coaster for the company over the past couple of years,” he said. “But big picture, they’re super focused not just on adding market share in the home furnishings industry, but increasingly doing it profitably.”
Even as the business recovers, the layoffs are taking a toll on former employees. US workers will get at least 10 weeks of severance and benefits coverage through March, the company said.
Supplier support specialist Alyssa Rovella, 29, based in Maine, said she was heartbroken to learn she was among those laid off on Friday.
“While severance packages are helpful, when you lose your income out of nowhere, it’s so hard not to think of all the upcoming bills and that looming feeling of wondering if I’ll be able to cover everything,” she said. “Thankfully, my family is so supportive.”
Hayden DeAngelis, who joined Wayfair as a software engineer in Boston after graduating from Northeastern last year, said his team was surprised by the layoffs. “It was pretty rough, but I took solace in the fact that it was more of an organizational change, not just that I specifically got laid off,” he said.
DeAngelis posted about the layoff on LinkedIn and has already received interest from some companies that are hiring.
“I’m hoping to get back on my feet soon,” he said.
Last year, when tech companies started cutting costs, the local economy was strong enough to absorb available workers quickly — sometimes at higher salaries. But the pace of hiring has slowed dramatically this year, according to Brent Kleiman, founder and chief executive of Boston recruiting firm Argosight.
“We have seen the market shift from the fall due to uncertainty,” Kleiman said. Job searchers are taking longer to find new positions, as companies are limiting hiring to “must-have backfills or to add capabilities and skills for very strategic initiatives,” he said.
Still, the layoffs could ultimately help fuel the startup economy, said venture capitalist Neeraj Agrawal, a partner at Battery Ventures in Boston who was an early investor in Wayfair.
“Wayfair executives will launch some very interesting companies over coming years,” he said. “What’s happening today is very difficult. But net-net, it could be good for the Boston market.”
DeAngelis, for one, said he would like to stay local with his next job. “Hopefully it’s in Boston, but obviously a job is a job, and depending on where I find luck, I may end up moving,” he said.
Source: Boston Globe