Will Racksandstands.com Disrupt the World of Ecommerce?

Way back in 2002, amidst the fallout of the dot-com bust, two college buddies turned serial entrepreneurs had a simple idea: utilize the internet to meet hyper-focused consumer demand for niche products. Amazon.com had a long ago established dominance in books and more recently moved into electronics, but what about everything else? Leveraging search engine optimization and a few ad words, these two founders connected suppliers to burgeoning ecommerce demand by creating an individual product oriented website. Thus was born racksandstands.com, an online store for the diehard sound enthusiast who could not hope to find similar variety for speaker system stands in her local brick-and-mortar retailer. About 270 stores tailored to oddly specific interests followed—allbarstools.com, everymirror.com, strollers.com, luggage.com to name a few. The umbrella business became CNS Stores LLC; a purposefully lame name intended to disguise the ecommerce nature of their business from would-be suppliers. CNS was hopefully not sexy enough to be another hapless ecommerce platform. Shah noted that back “…in 2002, manufacturers didn’t want to hear the word internet.”

Without external capital, co-founders Niraj Shah and Steve Conine quietly grew CNS to over $500M annual sales by 2011. About that time the founders decided to take some investor capital—$200M Series A to be exact—rebrand CNS to Wayfair.com and apply their learnings to the home furnishings market. Four years of rapid growth and an IPO later, Wayfair.com is well-positioned to capture a large chunk of the $233B home goods market—only 7% of which currently transacts online. Recent revenue data demonstrates their rapid growth: year-over-year sales for the first six months of 2015 grew at 56% to over $900M. But unlike a website for bar stools, home decor is a crowded space. How sustainable is this growth and how has Wayfair remained differentiated?

With a network of over 7,000 suppliers and something like 7,000,000 products, the two-sided platform should be a logistics nightmare. According to an interview with Alex Finkelstein from Spark Capital, Wayfair solves this complicated puzzle by “teaching of small, mid, and large manufacturers to do drop-ship…”—fulfilling orders by shipping directly to the customer. Greg Bettinelli from UpFront Venture gives credit in his blog to the traits that made racksandstands.com  the original success back in 2002—old-fashioned online marketing capabilities in the form of paid search advertising and search engine optimization coupled with dedication to providing unmatched product depth. Bettinelli apparently counted 17,000 accent pillows and 5,000 barstools on the site.

Will Wayfair.com become for home décor what Barstools.com was for… barstools? In a recent interview Co-founder and CEO Niraj Shah seems to have his sights a little higher this time aiming to become the “Amazon for the home.”

http://www.businessinsider.com/the-story-behind-wayfair-2014-10

http://blogs.wsj.com/digits/2011/06/20/home-goods-retailer-csn-stores-raises-165-million/

http://www.inc.com/magazine/201204/kasey-wehrum/the-road-to-1-billion-growth-special-report.html

http://gregbettinelli.com/my-wayfair-ipo-breakdown-when-an-s-1-doesnt-tell-you-everything/

http://investor.wayfair.com/investor-relations/sec-filings/default.aspx

 http://d1lge852tjjqow.cloudfront.net/CIK-0001616707/14c95c89-494c-4826-8d5b-3b43bccfc433.pdf?noexit=true

http://gregbettinelli.com/my-wayfair-ipo-breakdown-when-an-s-1-doesnt-tell-you-everything/ http://www.xconomy.com/boston/2015/08/17/wayfair-learning-e-commerce-lessons-from-amazon-zulily/

By: Ben Seipel


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