Wayfair’s EBITDA growth stalled as housing market freezes, but poised to rebound as demand recovers

Wayfair operates in the fragmented home furnishings market in North America and Western Europe (an $800 billion global opportunity), offering more than 30 million products from more than 20,000 suppliers. We believe its differentiation comes from its breadth of product range and logistics network, which enables faster delivery with fewer touchpoints and less product damage than competitors. However, we believe Wayfair lacks brand strength, as evidenced by its higher ad spend than peers and customer acquisition costs. Moreover, we believe that competitors will continue to try to speed up delivery, which will stimulate increased competition. Targeting a broad consumer base of customers ages 25-54 with median household incomes of $60,000-$175,000 means Wayfair competes with mass market retailers, specialty retailers and low-cost suppliers, making it difficult to maintain attention. This, along with the lack of switching costs, is the basis for our “no moat” rating.