Tell us a little bit about your leadership journey from founding and building a business to now overseeing a company with $12 billion in revenues. How has your leadership style evolved through the years?
Niraj Shah: We’ve had to continually evolve through many phases. When we started, obviously Steve and I were hands on with everything. Not only were we co-founders, but for the first 10 years, we bootstrapped it. Over a period of just a few years, we started taking in outside capital, launched the Wayfair brand and then went public.
Between 2014 and 2019, we grew from $1 billion to $9 billion, so that five-year period had tremendous growth. And during that period, we were executing on the things that mattered — building the brand, building out logistics, building up our technology organization. All of those investments paid off really well. But that was also a challenging period in the sense that we grew so fast that we were constantly outgrowing the team and the infrastructure that we had built. We were successful because we were able to catch a lot of inefficiencies and stay focused and aggressive in our proven, successful track, which was to be lean and efficient, execute on an ambitious agenda, leverage our strengths and technology, and differentiate the customer experience through investments in brand and logistics.
You learn a lot from ideas that don’t work out, and rationally you need to understand that failure is a potential outcome.”
When you look at leadership and management style, I think you have to be willing to evolve at a pretty fast rate. To be successful you have to keep changing how you operate and make sure that you're doing whatever makes sense for the business. Given all the changes — the increased scale, the increasingly global nature of business and the changes to the macroeconomic environment — you can’t afford to stick with the same approach.
One thing that's changed fairly dramatically is the competitive landscape. In theory, there are thousands of competitors today, but in practice, we’re competing against a much more finite list of some of the world’s biggest retailers — Amazon, Walmart, Home Depot and some others. A lot of the smaller companies effectively went out of business, and the middle range is struggling. To be a significant player today, you have to invest in brand and marketing, a large technology organization and a meaningful logistics operation. The problem is that those are all pretty expensive and complicated things. To have each one and to do each one well is not easy, and you need to have a certain level of scale to afford them. The reality is that among the companies we compete against, we're the only one focused solely on home goods, which allows us to carve out a good spot.
You’re in a unique position as a co-founder who has built something incredible with Steve Conine. What has enabled that relationship to thrive over such a long period?
Niraj Shah: We started as friends at Cornell, three doors apart on our freshman-year floor, part of the same friend group, and later roommates. We started our first business together right out of Cornell. The roles we thought we’d have ended up evolving quite a bit — Steve was drawn more to the technology side and I was drawn more to general management. That worked out very well, in that we had different but very compatible interests. I think one of the problems with partnerships is when you don’t want to do the different roles that you need to work, and you end up with overlap or contention over who does what. Steve and I were fortunate to have a great fit.
Steve and I tried to pick something that we thought was not only a great business opportunity but something that played to our strengths and skills. After Steve and I sold our first business, we started a software business we spent about a year on. It never really got off the ground — the timing just wasn’t right, and we went back to the drawing board. We considered doing different things, potentially taking different jobs and not necessarily staying together. But we got excited about working together again, so we started Wayfair and that of course now is 22 years ago.
One trait you'll find in entrepreneurs is they have some degree of irrational optimism. Statistically, when you look at the odds of whether a business will succeed, you don't get great numbers. But every entrepreneur who starts a business believes that they can make that business succeed. Right there you see a divergent reality. But that irrational optimism needs to be an embedded trait, otherwise, entrepreneurs wouldn't be pursuing their ideas when the odds are so stacked against them.
Part of the equation for us is that we believed that the business that didn’t work out could have been successful as much as we believed in the one that did work out. We wouldn't have pursued the one that didn't work without believing in it. So, you learn a lot from ideas that don’t work out, and rationally you need to understand that failure is a potential outcome.
Your explosion of growth from $1 billion in revenue to more than $10 billion happened right after you made changes to your board. How did the board help you in that stage of growth? What perspectives or skills best enabled that period of growth?
E-commerce is a business where your weaknesses will really weigh you down.... You’re limited by what you’re not good at; the well-rounded athlete wins.”
Niraj Shah: After we went public (in 2014), the financial investors rolled off the board one by one. As we were thinking about who to add to our board, we considered what really matters to our business. Finance matters, of course, but there’s also brand building, merchandising, supply chain, technology and retail acumen.
E-commerce is a business where your weaknesses will really weigh you down; it’s not like, say, pharmaceuticals, where if you’re amazing at drug development you can go a long way, even if you’re below average in the other functions. E-commerce is sort of the opposite. You’re limited by what you’re not good at; the well-rounded athlete wins. So, you need to be quite good at everything, and as a result, you worry disproportionately about your weaknesses, because addressing those will get you further than simply building on your biggest strength.
For our board, we wanted people with amazing experiences who were quite different from one another in terms of expertise and career arcs. And we wanted to get better at everything that matters in e-commerce. We wanted amazing people who would love spending time with each other, but whose depth of knowledge is quite different, and who bring a unique perspective to our company and on our biggest issues.
How are you thinking about AI and technology today? Where do you think AI will take the business going forward?
Niraj Shah: The value proposition for any large retailer is to offer a customer not just the right products, but also good prices. Prices matter. The best retailers do that and still make a good margin because they’re efficient operators, they spend money smartly on just the things that matter.
We’ve invested in AI and machine learning for over a decade, deploying solutions at scale across every aspect of our business. We use our large, proprietary first-party data set, which was built in-house over many years, to train and fine-tune foundational large language models for outcomes that are specific to our use cases.
One of the particularly exciting things about AI is that if you get good at it, you can dramatically improve your ability to be competitive with your margin. In retail, scale is what you typically use to bend the cost curve, but I think we're entering an era where technology will be a big piece of that going forward. If things are done well with AI, they’re done much faster and they’re done for a much lower cost. For any area — maintaining your product catalog, merchandising content, running marketing campaigns or managing customer inquiries — technology can provide a higher-quality customer experience at a lower cost and better margin.
I think the impact will be pretty dramatic. But it won’t be a commoditized set of solutions where every retailer benefits equally — I think it will be a distribution in outcomes. So, this offers a real opportunity to be a technology leader and to benefit greatly from it.