Dive Brief:
- Wayfair is ending operations in Germany, effective immediately, CEO and Co-founder Niraj Shah said in a statement on Friday. About to 730 employees are affected by the restructuring. However, the company said it expects to relocate half of these positions to other corporate offices.
- The company plans to reinvest the cost savings from exiting Germany into its remaining international markets in the U.K., Ireland and Canada and other initiatives this year. Shah said the company is pulling out after failing to identify a path to long-term market growth.
- Wayfair will incur aggregate charges ranging from $102 million to $111 million to exit Germany. The costs include $62 million to $67 million in mostly non-cash charges for facility wind downs and closures and $40 million to $44 million in employee severance, benefits and relocation costs.
Dive Insight:
Wayfair began last year with 1,650 job cuts — about 19% of its corporate workforce — and the company’s financial performance lagged during the first three quarters of 2024. Overall, international revenue was flat year over year in Q3 at $372 million. The company’s total revenue for the quarter was $2.9 billion, a 2% decline from a year ago.
Along with the U.K., Germany was part of Wayfair’s inaugural international market expansion 15 years ago. However, Shah said its success in the U.K. eclipsed its performance in Germany.
Shah said several factors restricted Wayfair’s potential long-term success in Germany. They include limited scale, weak macroeconomic conditions for the furniture and home decor category and current brand awareness.
“We will continue to focus on operations and investments in our international markets — Canada, the U.K., and Ireland, where we have meaningful market share and which we believe hold significant potential to replicate the success we’ve achieved in the U.S.,” Shah said. All laid off employees will receive a support package that includes severance and access to the employee assistance program.
The company plans to reinvest cost savings from backing out of Germany into expanding its physical retail footprint, growing its Wayfair Rewards loyalty program, developing its Wayfair Verified marketplace program and improving technology.
Wayfair opened its first large-format store in May in Illinois. In October, it introduced a paid loyalty program to offer customers free shipping, early access to deals and 5% back on all purchases.
Wayfair’s sales “have consistently outperformed the market as it sharpened its value offering with price and service investments, but we see limited room to re-accelerate slowing share gains in 2025 without significant additional investments,” Wedbush analysts Seth Basham and Matthew McCartney said in a Monday note.
While there’s potential for modest industry growth this year, the analysts said there’s “a considerable amount of policy uncertainty, especially regarding tariffs, tax cuts, and immigration that could impact these projections.” The company has more potential challenges with its high level of imported products and price sensitive mass market customers, they said.
